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Part 4: Reporting against appropriations

Annual Report 2015/16.

In this Part, we report on the services that we were funded to deliver in 2015/16 and how well we delivered those services.

Reporting against appropriations

The Office is funded through Vote Audit, which has five appropriations:

  1. Audit and Assurance Services RDA (revenue dependent appropriation);
  2. Audit and Assurance Services (related to audits of small entities funded by the Crown);
  3. Statutory Auditor Function MCA (multi-category appropriation);
  4. Remuneration of Auditor-General and Deputy Auditor-General PLA (permanent legislative authority); and
  5. Controller and Auditor-General – Capital Expenditure PLA.

In the pages that follow, we set out (where relevant) for each appropriation:

  • the scope and what is intended to be achieved;
  • an assessment of our performance, standards, and results;
  • an explanation of our performance; and
  • financial performance.

Appropriation: Audit and Assurance Services RDA

Scope of appropriation and what is intended to be achieved

This appropriation is limited to audit and related assurance services as authorised
by statute. It is intended to provide for audit services to all public entities (except smaller public entities such as cemetery trusts and reserve boards) and other audit-related assurance services.

Assessment of our performance, standards, and results

Figure 6
2015/16 results and previous performance for Audit and Assurance Services RDA

Measure Performance standard 2015/16 result 2014/15 result
Key recommendations our auditors include in management reports are accepted and acted on. At least 70% Achieved*
82%
Achieved
73%
Public entities’ audited reports are signed by the statutory time frame. At least 75% Achieved
76%
Achieved
83%
Audit reports not signed by the statutory time frame are because of inaction on our part. Less than 30% Achieved
7%
Achieved
15%
Management reports are issued within six weeks of issuing the audit report. 100% Not achieved
96%
Not achieved
94%
Long-term plan (LTP) audit opinions are signed by 30 June (unless held up by the local authority). 100% Not assessed, as not an LTP year Achieved
100%
Long-term plan (LTP) management reports are issued within six weeks of issuing the LTP audit opinion. 100% Not assessed, as not an LTP year Not assessed, as measure requires review
Annual independent review confirms the probity and objectivity of the methods and processes we use to allocate and tender audits, and monitor the reasonableness of audit fees. Confirmation by annual independent review Achieved
Confirmed by independent review
Achieved
Confirmed by independent review
Percentage of respondents from our satisfaction survey of public entities who are satisfied with their audit (including the expertise of audit staff and the public entity’s relationship with those staff). At least 85% Not achieved
84%
Achieved
87%
Appointed auditors who have a quality assurance grade of at least “satisfactory”, based on our most recent quality assurance review. 100% Not achieved
97%
Not achieved
95%

* For the years ended 30 June 2016 and 30 June 2015, a sample of 45 entities were assessed against this measure

Explanation of our performance

We explain below the 2015/16 results for Audit and Assurance Services RDA.

Annual audits

We audit all public entities3 that are required, or choose, to prepare general purpose financial reports – from large government departments and district health boards to every state school and local authority. In 2015/16, our annual audits and other assurance services accounted for 88% of our total expenditure.

Annual audits provide independent assurance about the reliability of financial statements – and, in many instances, performance information – that public entities are required, or choose, to report. The Auditor-General, as the auditor of all public entities, has a statutory duty to audit the information that public entities are required to prepare. Our audit report includes our opinion about the fairness of the presentation of the financial statements (and performance information, where relevant).

We use information about public entities gathered from our annual audits to help us advise Parliament and others, and to assist our other work. To have a trusted public sector, public entities must fairly report their performance and respond to audit recommendations to improve their systems and controls. They must also prepare their reports within statutory time frames. Reliable and timely information is an important indicator of one of our main outcomes – public entities that demonstrate responsible behaviour.

In 2015/16, 76% of public entities met their reporting obligations in a timely manner. The 24% that did not were mostly subsidiaries of public entities or small public entities such as schools. Although we achieved our target of at least 75% of our audit reports being signed by the statutory time frame, we note the 7% decline from 2014/15. Schools transitioning to new accounting standards and ongoing delayed production of year-end payroll reports contributed to this decline. Our target for audit reports not signed by the statutory time frame due to our inaction is 30% or less. This year, only 7% of the audit reports not signed by the statutory time frame were due to our inaction, which is a very pleasing result.

The Auditor-General has a statutory duty to issue audit reports on local authorities’ long-term plans (LTPs), which are prepared every three years. We last audited LTPs in 2014/15. The next audits will be carried out in 2017/18.

We measure the timeliness of our auditors’ feedback on the final phase of the long-term planning process. After we adopted this measure in 2014/15, the Local Government Act 2002 was amended to include changed requirements for preparing LTPs. The changes shifted the focus on to consultation documents. We intend to review the measure to focus on the audit of the consultation documents and preparation of information to support the LTPs in time for the next round of LTP reporting.

Appointing auditors and monitoring audit fees

The Auditor-General appoints auditors from Audit New Zealand and private sector accounting firms to carry out the annual audits of public entities. When appointing these auditors, the Auditor-General follows principles that are designed to ensure that auditors are independent, audits are of a high quality, and audit fees are reasonable. We continually monitor the allocation of audits to Audit New Zealand and private sector accounting firms to ensure that these principles are followed.

Each year, an independent reviewer examines the probity and objectivity of the methods and systems we use to allocate and/or tender audits, and to monitor the reasonableness of audit fees. For 2015/16, the Auditor-General appointed a new independent reviewer, John Strahl, to carry out that work. This year’s independent review confirmed the probity and objectivity of those methods and systems. Appendix 2 contains the review report by John Strahl.

We regularly monitor audit fees to ensure that they are fair to public entities and provide a fair return to auditors for the work required to meet The Auditor-General’s Auditing Standards. In 2015/16, fees were increased for various reasons.
These were:

  • changes in the scale of operations of some entities;
  • the variable quality of the financial statements and performance information prepared by some entities;
  • small changes in auditor charge-out rates (the average hourly cost of carrying out audits); and
  • in the case of schools, the new financial reporting standards.

Figure 7 summarises the movements in audit fees from 2013/14 to 2015/16, based on the audit fees that had been agreed at the time our analysis was prepared. It shows how changes in the time spent on audits and the average hourly cost of carrying out audits have affected fees. The large increase for schools reflects the additional audit work required as a result of the transition to new accounting standards. Additional audit fees for the transition of the Canterbury Earthquake Recovery Authority’s responsibilities and balance sheet to other departments are included in the central government entities’ fee increase.

The figures exclude additional audit fees negotiated with public entities as a result of unforeseen problems arising after audit fees were agreed. These are usually the exception, and each case is considered on its merits. For example, in 2015/16, some auditors, including those for a significant number of schools, incurred additional audit costs because the public entities were not fully prepared for the transition to the new accounting standards.

Figure 7
Changes in audit fees, 2013/14 to 2015/16

2013/14 to 2014/152014/15 to 2015/16
SectorIncrease
in total
fee
Because
of
changes
in time
Because
of
changes
in
charge-out
rate
Number
of
entities
Increase
in total
fee
Because
of
changes
in time
Because
of
changes
in
charge-out
rate
Number
of
entities
%%% %%%
Central
government
2.4 0.2 2.2 409 3.6 3.3 0.3 358
Local
government
2.3 0.3 2.0 455 2.0 (0.1) 2.1 443
Schools 2.7 0.3 2.4 2404 11.0 11.2 (0.2) 2401
Total 2.4 0.2 2.2 3268 4.3 3.5 0.8 3202

Maintaining auditors’ independence

Maintaining our independence is fundamental to our work. The Auditor-General’s staff (including Audit New Zealand) and appointed auditors and their staff from private sector accounting firms must meet the high standards of independence required under The Auditor-General’s Auditing Standards. The Office has processes in place to monitor compliance with the Auditor-General’s independence requirements. We discuss more about our independence standards and processes in Part 2.

Publishing The Auditor-General’s Auditing Standards

The Public Audit Act 2001 requires the Auditor-General to publish her auditing standards in a report to the House of Representatives at least once every three years. The Act also requires that each annual report include a description of any significant changes to those standards.

We last published The Auditor-General’s Auditing Standards in March 2014. Following recent legislative changes, we have since updated two standards:

  • AG-2: The appropriation audit and the controller function (issued in August 2015); and
  • AG-4: The audit of performance reports (issued in November 2015).

An updated version of The Auditor-General’s Auditing Standards is available on our website.

Carrying out quality assurance reviews

We carry out quality assurance reviews of all appointed auditors to ensure that they have complied with The Auditor-General’s Auditing Standards. During a three-year period, we review the quality of the work of all our appointed auditors. As a result, every appointed auditor is reviewed at least once every three years. We expect all our auditors to achieve at least a “satisfactory” grade. This year, 97% of our auditors met this target. The 3% who did not achieve a “satisfactory” grade were auditors of schools from small audit firms. A follow-up review of auditors who do not achieve a “satisfactory” grade is carried out in the year after their review.

Public entities’ satisfaction with our auditing services

Each year, we survey public entities to assess their satisfaction with the services our auditors provide. We expect at least 85% of the entities we survey to be satisfied with their audit and the expertise of our auditors. This year, we fell just short of our target, with 84% of those surveyed confirming their satisfaction. We plan to follow up with the entities who indicated a low level of satisfaction with their audit service, along with those who indicated a high level of satisfaction, to ensure that we understand where changes need to be made.

Responding to regulatory and external reporting changes

The External Reporting Board (XRB) is an independent Crown entity, which is responsible for developing and issuing accounting and auditing and assurance standards in New Zealand. The XRB’s new accounting standards for public sector public benefit entities came into effect for the period beginning 1 July 2014. Except for the schools sector and a small number of other public entities, the transition to the new standards has gone relatively smoothly. Considerable work was required by public entities and our auditors to assess the effect of the changes in the standards. In some cases, this work continues.

Figure 8
Financial performance for Audit and Assurance Services RDA

 Actual
2015/16
Actual
2014/15
Main
Estimates
2015/16
Supplementary
Estimates
2015/16
Main
Estimates
2016/17
 $000$000$000*$000*$000*
Income from third
parties
78,335 78,164 75,222 75,864 75,295
Expenditure (77,436) (76,353) (75,222) (75,864) (75,295)
Surplus/(Deficit)** 899 1,811 - - -

* All Estimates information is unaudited.
** Note 13 in the notes to the financial statements provides more information about transfer of the surplus to the
Office's memorandum account as part of calculating the repayment of the surplus to the Crown.

Audit and Assurance Services RDA revenue was $2.4 million higher than budgeted. Revenue for the year includes the estimated value of the work to date on audits that were under way at 30 June 2016. This was higher than budgeted, particularly for audits undertaken by contracted audit service providers. School audit fees were also higher than budgeted because extra work was required for auditing payroll controls that are now based at each school and the transition to new accounting standards. Costs were $1.4 million higher than budgeted. This reflects the additional costs associated with the work carried out by contracted audit service providers, partially offset by lower personnel costs in Audit New Zealand.

Appropriation: Audit and Assurance Services

Scope of appropriation and what is intended to be achieved

This appropriation is limited to the performance of audit and related assurance services as required or authorised by statute. It is intended to provide for audit and related assurance services of smaller entities such as cemetery trusts and reserve boards funded by the Crown. This appropriation also provides for when costs exceed revenue under the Audit and Assurance Services RDA. These deficits are funded by prior year surpluses from this output class which are held in the Office’s memorandum account.

Our performance

We have no specific performance measures relating to this appropriation. However, performance for this appropriation can be inferred through the performance measures for Audit and Assurance Services RDA.

Figure 9
Financial performance for Audit and Assurance Services

Actual
2015/16
$000
Actual
2014/15
$000
Main
Estimates
2015/16
$000*
Supplementary
Estimates
2015/16
$000*
Main
Estimates
2016/17
$000*
Income 150 150 150 150 150
Expenditure (150) (150) (450) (650) (1,800)
Surplus/(Deficit) - - (300) (500) (1,650)

* All Estimates information is unaudited.

The budgeted deficits in this output class represent the appropriations that enable the use of prior year surpluses from this output class. This funding is held in the Office’s memorandum account, enabling the Office to manage audit costs and revenue over multiple years.

Appropriation: Statutory Auditor Function MCA

Purpose of the appropriation

The overarching purpose of this appropriation is to support Parliament in ensuring accountability for the use of public resources.

Scope of the appropriation and what is intended to be achieved

Performance Audits and Inquiries

This category is limited to undertaking and reporting on performance audits and inquiries relating to public entities under the Public Audit Act 2001 and responding to requests for approvals in relation to pecuniary interest questions regulated by the Local Authorities (Members’ Interests) Act 1968. This category is intended to provide Parliament with assurance about how well public entities use resources and manage a range of matters and programmes, making recommendations where we consider improvements can be made.

Supporting Accountability to Parliament

This category is limited to reporting to Parliament and others as appropriate on matters arising from audits and inquiries, reporting to and advising select committees, and advising other agencies in New Zealand and abroad to support Parliament and governing bodies in holding their executives to account for the use of public resources.

This category is intended to provide advice and assistance to Parliament and our other stakeholders to assist them in their work to improve the performance and accountability of public entities. Our Controller function provides independent assurance to Parliament that public money has been spent appropriately and lawfully.

Assessment of our performance, standards, and results

Figure 10
2015/16 results and previous performance for Statutory Auditor Function MCA

Statutory Auditor Function
MeasurePerformance standard2015/16 result2014/15 result
Quality standards are consistently met: stakeholders surveyed who confirm the relevance of our work to users, and reports independently reviewed that are assessed of high quality. At least 85% for stakeholders and 100% for reports Achieved
92% for stakeholders
100% for reports
Achieved
92% for stakeholders
100% for reports
Process standards are consistently met: external review and internal quality assurance review confirm our performance audit process standards are consistently complied with and our policies and procedures for statutory auditor functions meet relevant standards. Confirmation by external and internal review Achieved
Confirmed by external review
Confirmed by internal review
Achieved
Confirmed by external review
Confirmed by internal review
Performance Audits and Inquiries
MeasurePerformance standard2015/16 result2014/15 result
Entities accept the key recommendations made in our reports, and the recommendations influence improvement. As assessed in follow up reports Achieved for performance audits
Achieved for inquiries when last assessed in 2013/14
Achieved for performance audits
Achieved for inquiries when last assessed in 2013/14
Findings on inquiries reported to the relevant parties within three months for routine inquiries, six months for significant inquiries, and 12 months for major inquiries. At least 80% Achieved for routine inquiries 86%
Not achieved for significant inquiries 60%
Not achieved for major inquiries 0%*
Achieved for routine inquiries 91%
Not achieved for significant inquiries 67%
Not assessed, as no major inquiries completed in 2014/15
Local Authorities (Members’ Interests) Act 1968 (LAMIA) matters that are completed within 30 working days. At least 80% Achieved
85%
Achieved
85%

* One major inquiry (Massey North town centre development) was due to be completed in 2015/16. We did not meet our timeliness target for this inquiry.

Supporting Accountability to Parliament
MeasurePerformance standard2015/16 result2014/15 result
Stakeholders we survey who confirm that our advice assists them. At least 85% Not achieved
83%
Achieved
96%
Select committees and other stakeholders are satisfied with the proposed work programme (as indicated by feedback on our draft annual work programme). Stakeholders are satisfied Achieved
Stakeholders satisfied
Achieved
Stakeholders satisfied
Projects in the programme of work under this output class that are delivered within their planned time frames. At least 75% Not achieved*
32%
Not achieved**
17%
Briefings given to select committees at least two days before an examination, unless otherwise agreed. 100% Achieved
100%
Achieved
100%
Controller function: monthly statements provided by the Treasury are reviewed for the period September to June inclusive. Advice of issues arising and action to be taken is provided to the Treasury and appointed auditors within the five working days of receipt of the statement. All procedures are followed and agreed time frames met Achieved
All procedures followed and agreed time frames met
Achieved
All procedures followed and agreed time frames met

* 32% of projects (8 out of 25) were delivered within their planned time frames. We provide more information about the projects that were not completed on time on page 32.
** 17% of projects (4 out of 23) were delivered within their planned time frames.

Explanation of our performance

We explain below the 2015/16 results for Statutory Auditor Function MCA.

Statutory Auditor Function

Overall, we are satisfied that in 2015/16 we met our quality and process-related targets for our work to support Parliament in ensuring accountability for the use of public resources. For example, this year, 92% of our stakeholders confirmed the relevance and usefulness of our work, and an independent assessment of a sample of our reports concluded that they were of high quality. The Australian National Audit Office’s most recent review of our performance audit methodology found that it was largely in keeping with the Office’s processes and practices. Our most recent quality assurance review confirmed that our policies, procedures, and standards were applied appropriately and that they met relevant standards.

Performance Audits and Inquiries

Performance audits

Our core business is carrying out annual audits. Alongside annual audits, the Public Audit Act 2001 allows the Auditor-General to carry out performance audits, to inquire into how a public entity uses resources, and to study other matters affecting the public sector.

Each year, we publish reports on the results of our annual audits, performance audits, and major inquiries. Through this reporting to Parliament and other stakeholders, we consider matters in greater depth than is possible within the statutory scope of an annual audit and examine ways that public entities can perform better.

Performance audits are comprehensive examinations of effectiveness and efficiency that the Auditor-General chooses to carry out. We plan our work programme carefully to provide Parliament with assurance about how well public entities manage a range of matters and programmes, making recommendations where we consider that improvements can be made.

We bring together matters arising from our annual audits in our sector reports and carry out other studies that result in a range of published reports and information on topical matters affecting public sector accountability and performance.

In 2015/16, we completed reports on a range of matters. Appendix 3 lists these reports, which are available on our website.

Our reports often highlight complexities to be managed and factors that support good decision-making. Where appropriate, they make recommendations for improvement. Each year, we assess the progress public entities make in
implementing the recommendations from some of our previous performance audits and discuss this in articles we publish on our website. The articles we published in 2015/16 showed that, overall, entities were making improvements by acting on our recommendations. In some instances, progress had been faster and improvements had been greater than previously. We will continue to monitor how our recommendations are acted on to achieve the intended improvements.

Our work programme

Our annual audit work gives us direct interaction with, and insight into, how the public sector is operating. We use our unique view of the public sector to inform our work programme. We extract even greater value from this information by applying a theme across our work and by signalling future themes. After consulting with Parliament on our proposed programme of work, we publish the work we intend to carry out in our Annual Plan.

Achieving our 2015/16 work programme

Our 2015/16 work programme was the fourth in our multi-year themed work programme. The Auditor-General selected Investment and asset management as the theme for our 2015/16 work programme because of its importance to New Zealand’s future. The significant investments and assets that the public sector manages are essential to the provision of public services. We examined aspects of how well the public sector plans for, funds, manages, and maintains infrastructure and other assets to support long-term delivery of public services. We plan to publish a reflections report on our work under the Investment and asset management theme in 2016/17.

During 2015/16, we looked at future themes for our work programme. The Auditor-General has confirmed that the theme for audits and other work in 2016/17 is Information. We also explored the content of our proposed themes for 2017/18, Water, and for 2018/19, Sustainable development.

Our progress with the performance audits and other work in our 2015/16 work programme is outlined in Appendix 4. Progress with the performance audits and other work that was carried over from 2014/15 is outlined in Appendix 5.

Timeliness of completing the projects within our work programme has improved but remains a challenge. In 2014/15, we introduced a new measure to report on the timeliness of project completion. We aspire to deliver 75% of our projects within their planned time frames. We plan an ambitious work programme, so we consider this is a fair but challenging target.

In 2014/15, 17% of projects (4 out of 23) were delivered within their planned time frames, well below our target of 75%. During 2015/16, we placed greater focus on managing the timeliness of project completion, including more realistic planning and increased management of dependencies and risks. This year 32% of projects (8 out of 25) were delivered within their planned time frames.

We will continue to seek further improvements to the timeliness of our project completion.

Consultation on our 2016/17 work programme

Consultation with Parliament and other stakeholders helps ensure that the Office's work is relevant and useful to Parliament, public entities, and the public. Select committees endorsed our proposed 2016/17 work programme and its theme ‒ Information. This year, the Finance and Expenditure Committee suggested that we include an additional piece of work, which we considered would add further value to our work programme. We will examine how the Overseas Investment Office collects and manages information relevant to decision-makers.

We selected information as a focus for our work in 2016/17 because of its increasing importance to the effective and efficient delivery of public services now and in the future. This year, we also sought the views of citizens to help inform our work programme. Our two-day online forum and group discussion with members of the public highlighted the importance of accurate and secure information for users of public services.

Inquiries

In contrast to our planned programme of work, our inquiries work is more reactive to matters of current public concern. This year, we established a dedicated inquiries team, which was operating at its full complement of four staff by March 2016. The team's focus has been on managing existing inquiries and inquiry requests while reviewing the way the Office carries out its inquiries work. The improved capacity and processes for our inquiry work are expected to assist with our timeliness of completing inquiries.

In 2015/16, we completed work on 185 inquiry and other issues. When we decide to inquire into an issue, we determine whether that inquiry will be a "routine", "significant", or "major" inquiry. The primary distinction between the three is scope. We expect to complete a major inquiry within 12 months, a significant inquiry within six months, and a routine inquiry within three months. We met our timeliness targets for routine inquiries for central and local government.

This year, we worked on five significant inquiries. They included how the Queenstown Lakes District Council and its chief executive managed the chief executive's interest in a proposed special housing area, the costs and benefits of Health Benefits Limited's work in the health sector, and the involvement of Defence Force personnel in a commercial entity (Miltech). We did not meet our timeliness target for significant inquiries.

Our timeliness target for major inquiries was also not met. Our inquiry into the Massey North town centre development was under way at the beginning of the year, and has yet to be completed. We started a major inquiry into the Saudi Arabia Food Security Partnership, which is due to be completed in 2016/17.

We follow up on the recommendations from our inquiry reports. Inquiry reports do not always include recommendations. In 2015/16 and in 2014/15, no assessments were necessary because there were no recommendations that needed to be followed up.

Local Authorities (Members' Interests) Act 1968

The Auditor-General also administers the Local Authorities (Members' Interests) Act 1968 (LAMIA), which regulates pecuniary interest matters in local government. Each year, we usually receive about 50 to 100 enquiries under that Act. This year, we again met our timeliness targets for LAMIA matters.

Supporting Accountability to Parliament

Our advice and support assists Parliament in its scrutiny of the performance and accountability of public entities. We use information from our annual audits and from our performance audits to advise and inform Parliament and our other stakeholders. Our reporting and advice to Parliament identifies and addresses issues and risks in the public sector.

Our advice and support includes:

  • reports and advice to select committees to help their annual reviews of public entities and their examination of the Estimates of Appropriations; and
  • reports to Parliament on matters arising from our annual audits.

We also advise Ministers of the results of the annual audits for entities in their portfolio.

In 2015/16, high demand from select committees for our advice continued. We provided advice in support of 83 annual reviews, 41 Estimates of Appropriation examinations, and nine sector briefings.

A joint project with the Office of the Clerk of the House of Representatives to improve Parliamentary scrutiny has been a special feature of our work in advising select committees this year. The project has made a very real difference to committees' uptake of our reports. It is now more common for committees to report to Parliament on the matters we raise than it was two years ago. All except one of our 2015/16 performance audits were the subject of a specific briefing by us to a select committee.

During 2015/16, we also provided advice to the Regulations Review Committee in its hearing into a complaint concerning the Shipping (Charges) Amendment Regulations 2013 and the Marine Safety Charges Amendment Regulations 2013.

To help assess the impact of our work, each year we commission an independent survey of a sample of our stakeholders about how they perceive the quality and usefulness of our work. In 2015/16, this involved interviews with 12 select committee chairs and 12 senior public servants. This year, 92% of our stakeholders agreed that our advice is relevant and useful. All select committee chairs agreed that our advice assists their select committee in its work. There was a more mixed picture with senior public servants. Eight of the 12 interviewed agreed that our advice assists their organisation.

The interview results indicated that, overall, the Office is highly regarded as an organisation of great integrity, professionalism, and expertise and is staffed by a strong team of proactive communicators. The Office is credited with improving public trust in government agencies and driving better performance across the public sector.

All those interviewed agreed that we act with integrity and independently of government. We thank the respondents for their considered and thoughtful input.

Controller function

The Controller function provides independent assurance to Parliament that expenditure by government departments and Offices of Parliament is lawful, and is within the scope, amount, and period of the appropriation or other authority.

The OAG and appointed auditors carry out standard procedures for the Controller function in keeping with The Auditor-General's Auditing Standards and a Memorandum of Understanding with the Treasury. We review monthly reports that the Treasury provides. We inform the Treasury of any problems and advise the action to be taken.

Each year, we report to Parliament on any significant matters related to the Controller function. Our report on the results of the 2014/15 central government audits showed that there were 19 instances of unauthorised expenditure. Most of these were associated with uncertainties arising from the Canterbury rebuild, and they equated to 0.07% of the total funding approved through Budget 2014.

International contribution

Each year, we make a significant international contribution. We aim to strengthen public sector accountability and promote good governance by sharing our skills, information, and advice with other audit bodies throughout the world, particularly in the Pacific region.

We support accountability, transparency, and good governance in the Pacific through our commitment to the Pacific Association of Supreme Audit Institutions (PASAI). PASAI is the regional organisation of 28 audit institutions in the Pacific. The Auditor-General is Secretary-General of PASAI and represents PASAI on the governing board of the International Organisation of Supreme Audit Institutions (INTOSAI). This year, our focus was on supporting PASAI to implement PASAI's 2014-24 strategy.

We supported PASAI's technical programme, which included the development of an approach for auditing procurement in the Pacific region and the use of specialist audit computer applications. As part of PASAI's Pacific region support initiatives (known as the twinning programme), we assisted the Cook Islands Audit Office to improve its performance audit function and the Samoan Audit Office to plan the implementation of its strategy. 2016 was the final year of our five-year contract with the Ministry of Foreign Affairs and Trade (MFAT) to support PASAI. We negotiated a further contract with MFAT for supporting PASAI from 2016-19. This funding is provided as part of New Zealand's Official Development Assistance programme.

Hosting international delegations provides opportunities to exchange information and build professional networks. This year, we were pleased to assist visiting representatives from the Parliaments, Treasuries, and/or Audit Offices of the Indonesian Ministry of Finance, the Australian Joint Committee of Public Accounts and Audit, the Timor-Leste Ministry of Finance, the Singapore Ministry of Finance, the Australian Government and National Audit Office, the Republic of South Africa's National Treasury and Department of Defence, and the Korean Board of Audit and Inspection.

We are also well positioned for our chairing of the professionalisation theme at the December 2016 International Congress of Supreme Audit Institutions. We expect a robust discussion in this international forum about how to strengthen INTOSAI's global voice and influence for the benefit of citizens all over the world.

Our significant ongoing involvement in INTOSAI activities continued in 2015/16. We are a member of the INTOSAI Professional Standards Steering Committee, which is charged with developing international public sector auditing standards. We have also been a member of the project team revising the INTOSAI code of ethics. We continue our membership of the working group on environmental auditing.

In addition, the Deputy Auditor-General has been a member of the Forum for INTOSAI Professional Pronouncements. The Forum has a mandate to review all of INTOSAI's professional pronouncements as part of a review by INTOSAI of its standard-setting arrangements.

Our three-year term as expert panel member on the Organisation for Economic Co-operation and Development's Audit Committee finishes at the end of 2016.

Figure 11
Financial performance for Statutory Auditor Function MCA

Actual
2015/16
$000
Actual
2014/15
$000
Main Estimates
2015/16
$000*
Supplementary Estimates
2015/16
$000*
Main Estimates
2016/17
$000*
Income
Crown 9,627 9,047 9,627 9,627 9,627
Other 167 199 230 230 230
Expenditure (9,758) (9,012) (9,857) (9,857) (9,857)
Surplus/(Deficit)** 36 234 - - -

* All Estimates information is unaudited.
** Note 13 in the notes to the financial statements provides more information about transfer of the surplus to the Office's memorandum account as part of calculating the repayment of the surplus to the Crown.

Statutory Auditor Function MCA costs were close to budget because of ongoing high volume of work during the year.

Appropriation: Remuneration of Auditor-General and Deputy Auditor-General

Scope of appropriation and what is intended to be achieved

This appropriation is limited to remuneration expenses for both the Auditor-General and the Deputy Auditor-General as authorised by clause 5 of the Third Schedule of the Public Audit Act 2001.

This permanent appropriation provides payment to the Auditor-General and Deputy Auditor-General as determined by the Remuneration Authority.

Our performance

The Auditor-General and Deputy Auditor-General lead the performance of the Office. The performance of the Office's activities, including this appropriation, is reflected in the information provided in this report.

Figure 12
Financial performance for Remuneration of Auditor-General and Deputy Auditor-General PLA

Actual 2015/16 $000Actual 2014/15 $000Main Estimates 2015/16 $000*Supplementary Estimates 2015/16 $000*Main Estimates 2016/17 $000*
Income 972 950 950 972 958
Expenditure (972) (950) (950) (972) (958)
Surplus/(Deficit) - - - - -

* All Estimates information is unaudited.

Appropriation: Controller and Auditor-General – Capital Expenditure PLA

Scope of appropriation and what is intended to be achieved

This appropriation is limited to the purchase of assets by, and for the use of, the Controller and Auditor-General, as authorised by section 24(1) of the Public Finance Act 1989. It is intended to achieve the renewal and replacement of assets that support the delivery of the Controller and Auditor-General's operations.

Our performance

Figure 13
Financial performance for Controller and Auditor-General – Capital Expenditure PLA

Actual 2015/16 $000Actual 2014/15 $000Main Estimates 2015/16 $000*Supplementary Estimates 2015/16 $000*Main Estimates 2016/17 $000*
Property, plant and equipment 531 407 355 500 375
Intangibles 179 236 480 403 220
Other 390 330 342 512 190
Total capital expenditure 1,100 973 1,177 1,415 785

* All Estimates information is unaudited.

Our capital expenditure programme provides for the purchase of facilities and tools to enable our staff to carry out their work – for example, hardware and software for information systems, vehicles, building fit-out, and furniture and fittings. This year, we met our objectives for maintaining these assets. Expenditure on software was lower than planned, mainly because of the timing of projects.

Appropriation statements

The following statements report information about the expenses and capital expenditure incurred against each appropriation administered by the Office for the year ended 30 June 2016.

Statement of budgeted and actual expenses and capital expenditure incurred against appropriations

for the year ended 30 June 2016

This statement reports actual expenses incurred against each appropriation administered by the Office.

End of year performance information for all appropriations is reported in this annual report.

Annual and permanent appropriations for Vote AuditActual 2015/16 $000Actual 2014/15 $000Main Estimates 2015/16 $000*Supplementary Estimates 2015/16 $000*Main Estimates 2016/17 $000*
Output expenses
Audit and Assurance Services RDA (revenue dependent appropriation)† 77,436 76,353 75,222 75,864 75,295
Audit and Assurance Services 150 150 450 650 1,800
Total appropriations for output expenses 77,586 76,503 75,672 76,514 77,095
Other expenses
Remuneration of Auditor-General and Deputy Auditor-General PLA (permanent legislative authority)†† 972 950 950 972 958
Capital expenditure
Controller and Auditor-General – Capital Expenditure PLA††† 1,100 973 1,177 1,415 785
Multi-category appropriations
Statutory Auditor Function MCA
Performance Audits and Inquiries 6,442 5,888 6,987 6,587 6,587
Supporting Accountability to Parliament 3,316 3,124 2,870 3,270 3,270
Total Statutory auditor function 9,758 9,012 9,857 9,857 9,857
Total annual and permanent appropriations 89,416 87,438 87,656 88,758 88,695

* All Estimates information is unaudited.

† The Office is permitted to incur expenditure up to the amount of revenue earned for this appropriation. In 2015/16, revenue under this appropriation was $78.376 million – see Note 3 to the financial statements.

†† Costs incurred pursuant to clause 5 of Schedule 3 of the Public Audit Act 2001.

††† Costs incurred pursuant to section 24(1) of the Public Finance Act 1989.

Statement of expenses and capital expenditure incurred without, or in excess of, appropriation or other authority

for the year ended 30 June 2016

The Office did not incur any expenses or capital expenditure without, or in excess of, appropriation or other authority for the year ended 30 June 2016 (2015: Nil).

Statement of capital injections without, or in excess of, appropriation or other authority

for the year ended 30 June 2016

The Office did not receive any capital injections without, or in excess of, appropriation or other authority for the year ended 30 June 2016 (2015: Nil).


3: In accordance with section 19 of the Public Audit Act 2001, we also audit some organisations that are not public entities. See Appendix 1.

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Report details

CoverAnnual Report 2015/16

ISSN 1179-8963