The Auditor-General is an officer of Parliament. He is independent of executive government and answerable to Parliament.

The person holding the office of Auditor-General is recommended for the position by the House of Representatives and is appointed by the Governor-General. The person can hold the office for a once-only term of no more than 7 years.

The current Auditor-General is Kevin Brady.

There has been a person carrying out the role and functions of an auditor-general in New Zealand since the 1840s.

Why is there an Auditor-General?

In New Zealand’s system of government, Parliament is supreme – all authority for governmental activity ultimately stems from Parliament. Public sector organisations are therefore accountable to Parliament for their use of public resources and powers conferred by Parliament.

As part of its accountability requirements, Parliament seeks independent assurance that public sector organisations are operating, and accounting for their performance, in accordance with Parliament’s intentions.

There is also a need for independent assurance at the local level. Local authorities are accountable to the public for using the resources they fund through rates.

The Auditor-General provides this independent assurance to both Parliament and the public.

How is the Auditor-General independent?

To be effective and credible in providing assurance to Parliament, the Auditor-General must be independent of the public entities being audited. To secure independence, the Auditor-General:

• is an officer of Parliament (legally, a corporation sole with perpetual succession and a seal of office);
• is appointed by the Governor-General on the recommendation of the House of Representatives, for a once-only term of not more than seven years;
• has a Deputy who is also a statutory office-holder and officer of Parliament and can exercise all the functions and powers of the Auditor-General;
• can report directly to Parliament and anyone else;
• is remunerated by standing authority from Parliament, with the amount determined independently by the Higher Salaries Commission; and
• makes requests for funding directly to the House of Representatives (rather than through the executive government), after which the House commends the sum required to the Governor-General for inclusion in an Appropriation Bill.

The auditors appointed by the Controller and Auditor-General to carry out audits on his behalf must also be independent – both in fact and appearance. There are strict constraints on auditors, covering matters such as:

• personal involvement with an audited entity (such as between family members);
• financial involvement with the entity (such as financial investments);
• provision of other services to the entity (such as undertaking valuations); and
• dependency on fees from one source.

What does the Auditor-General do as the Auditor-General?

The Auditor-General is the auditor appointed by Parliament to audit all types of public entity:

• The Crown: The financial statements that show the financial state of the Government and all its entities.
• Government Departments: A total of 43 departments – such as the Department of Corrections and the Ministry of Education.
• Crown Entities: A total of about 3000 entities – such as the Commerce Commission, district health boards, and New Zealand Tourism Board (and including over 2600 school boards of trustees).
• State-owned Enterprises: A total of 16 entities – such as Airways Corporation, Genesis Power, and Television New Zealand.
• Local Authorities and their Subsidiaries: A total of more than 300 entities – including city, district, and regional councils, and LATEs.
• Statutory Boards and Other Public Bodies: A total of about 200 entities – such as Maori Trust Boards, licensing trusts, airport authorities, and producer boards.

In being the auditor of those entities, the five key concerns central to the role are:

• Performance: Have public entities undertaken activities in accordance with Parliament’s intentions, and in an effective and efficient manner?
• Authority: Have activities, resourcing and accountability requirements been undertaken within the authority granted by Parliament?
• Waste: Have resources been obtained and applied in an economical manner? Are taxpayer’s dollars being wasted?
• Probity: Are entities meeting Parliament’s and the public’s expectations of an appropriate standard of behaviour in the public sector?
• Accountability: Have entities given full and accurate accounts of their activities? Are governance and management arrangements suitable to address any concerns?

What does the Auditor-General do as the Controller?

The Controller provides independent assurance to Parliament that expenses and capital expenditure of departments and Offices of Parliament have been incurred for purposes that are lawful, and within the scope, amount, and period of the appropriation or other authority.

(The Public Finance Amendment Act 2004 made a number of significant changes to the Controller function to modernise and strengthen the function. These changes took effect from 1 July 2005 and are explained in our report Central Government: Results of the 2003-04 audits.)

Who does the Auditor-General report to, and how?

The Auditor-General reports in a variety of ways.

Audit and assurance reports to audited entities

The audit of the yearly financial reports of every public entity results in two kinds of report. One is the audit report that is attached to the published financial report; the other is a report to the entity’s management on matters arising from the audit.

Reports to Parliament

Reports are presented to Parliament arising from performance audits and inquiries, and on matters emerging from annual audits. The Auditor-General also reports to Parliament on proposed activities in an Annual Plan, and on performance against the plan in an Annual Report.

Most of our reports are available on this website.

Reports and assistance to others

Reports and assistance on a range of matters are provided to:

• Parliament and its committees, for such purposes as Estimates examinations, financial reviews, and inquiries.
• The Government, and particularly central agencies, on matters such as financial management and accountability.
• Related professional bodies, including professional and sector organisations and overseas audit offices, on auditing, financial management and accountability matters.

What does the job involve?

Performing the controller function

The Public Finance Act 1989 sets out the authority that the Government must have in order to spend money. This authority – referred to as supply – has the following key elements:

• the purpose of the expenditure must be lawful;
• there must be an appropriation voted by Parliament; and
• there must be a warrant from the Governor-General.

The Act also says that, before any money can be issued from the Crown Bank Account, the Auditor-General must be satisfied that the money will be applied for purposes which are lawful and are within the appropriations voted by Parliament.

In checking whether the Government has supply, the “controller” function preserves the important constitutional principle that the Government cannot spend, borrow, or impose a tax without the authority of Parliament.

Carrying out audits and inquiries

Under the Public Audit Act, the Auditor-General can carry out:

• financial report audits;
• performance audits; and
• inquiries (either on request or on the Auditor-General’s own initiative) into any matter concerning a public entity’s use of its resources.

The Auditor-General can also perform other auditing or assurance services, at the request of a public entity.

Financial Report Audits

Financial report audits involve the audit of the financial statements, accounts, and other information (for example, performance information) that a public entity is required to have audited. The Auditor-General undertakes these audits annually.

In a financial report audit, the objective is to:

• examine the representations of the entity’s management as set out in the financial report;
• compare those representations with a recognised framework (usually generally accepted accounting practice); and
• form and report an opinion on the results of that comparison.

The audit report – including the audit opinion – on a public entity’s statements of financial and service performance gives readers information to help them understand the accuracy of those statements. Accordingly, the audit report from a financial audit is usually reproduced with a public entity’s financial report in its annual report.

Most public sector agencies provide their audited annual financial statements to Parliament. However, in the case of local authorities each authority’s ratepayers and other residents are the intended audience for the audited financial report, so that they can see how their authority has managed the public resources for which it is accountable.

Performance Audits

A performance audit examines one or more of the aspects of performance listed below:

• effectiveness and efficiency;
• compliance with statutory obligations;
• waste;
• probity; and
• financial prudence.

The findings, opinions, and recommendations from that examination are usually reported to Parliament.

There are two constraints on examining effectiveness and efficiency:

• the effectiveness and efficiency of the Reserve Bank or a registered bank cannot be examined; and
• it is not the Auditor-General’s role to question the applicable government or local authority policy.

Issues to be examined by performance audits are chosen through a strategic audit planning process. This involves examining each sector that the Auditor-General operates in, and identifying key areas of actual and potential concern, which would benefit from being examined by a performance audit. The Auditor-General’s Annual Plan includes a list of proposed performance audits.

• More about performance audits

Inquiries

The Auditor-General can decide to inquire into any matter concerning a public entity’s use of resources.

In general, an inquiry can involve:

• looking into a matter of concern raised with the Auditor-General by a member of the public, a member of Parliament, or another organisation about a financial, accountability, or governance issue in a public entity; and/or
• conducting a formal inquiry into, and reporting to Parliament on, a matter of high public interest.

In conducting an inquiry the Auditor-General is subject to the same constraints as when examining effectiveness and efficiency.

Many inquiries are conducted simply and at minimal cost, and are followed by a brief report back to the inquirer. However, others address complex matters and assume a high public profile.

• More about inquiries

Working with Parliament

The Auditor-General’s role involves regular interaction with Parliament, particularly through reporting on public entities’ activities.

However, the Auditor-General and his staff can also assist select committees and members of Parliament in their own related roles of holding each individual department, Office of Parliament, Crown entity, public organisation, or State enterprise to account.

This assistance will be for one or more of five purposes:

• select committee Estimates examinations;
• select committee reviews of public entities’ performance and current operations (the so-called “financial reviews”);
• select committee inquiries;
• select committee consideration of the reports of the Auditor-General tabled in the House; and
• members’ inquiries or requests made directly to the Auditor-General.

In the first four of the categories, assistance is provided in an advisory capacity, under the Standing Orders of the House of Representatives.

The Officers of Parliament Committee has approved a protocol that provides guidance for managing each of the main ways in which the Auditor-General may interact with the House of Representatives, its select committees, and members (as outlined above).

Working with local authorities

The Auditor-General’s relationship with local authorities is very important. In this regard, the Auditor-General is responsible for assuring local communities that their local authority is operating, and accounting for its activities and performance, in the manner required.

Being the auditor of all local authorities, the Auditor-General has a national perspective, and can:

• conduct audits of, and provide reports to, individual local authorities, which are supported by sector-wide knowledge; and
• speak authoritatively on matters of financial management and accountability in local government.

The Auditor-General also has responsibilities under the Local Authorities (Members’ Interests) Act 1968, which applies to local authorities and a range of statutory bodies. The Act:

• regulates financial dealings between members and their authority; and
• precludes members from participating at meetings in matters in which they have a pecuniary interest.

How does the Auditor-General do the job?

The Auditor-General employs staff and engages private sector auditing firms to carry out his functions in relation to public entities.

The Auditor-General’s employees are organised into two business units.

The Office of the Auditor-General – which is responsible for:

• carrying out performance audits, special studies, and inquiries;
• strategic audit planning;
• Parliamentary reporting and advice;
• setting auditing standards;
• allocating audits to Appointed Auditors; and
• overseeing auditors’ performance.

Audit New Zealand – which is responsible for:

• carrying out annual financial report audits on the Auditor-General’s behalf; and
• providing other auditing and assurance services to public entities.

Page last updated: 27 February 2007