Auditor-General's overview

Central government: Results of the 2018/19 audits.

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

Government spending in New Zealand is about 37% of gross domestic product. How the Government manages its finances is therefore a significant determinant of the financial state of our nation.

The Government's financial statements draw on the financial information of more than 2000 public organisations. Together, they provide an account of what the Government collected in revenue (largely, people's taxes), what it spent, and how much we collectively own (the Crown's assets) and owe (the Crown's debt).

The accountability of the Government is critical to Parliament and to the people of New Zealand for the taxes it collects and spends. Independent audit assurance is fundamental to this accountability.

Importantly, behind the numbers are matters that make a real difference in all our lives – the taxes we pay, hospitals, schools, and the highways on which we drive. In the Government's financial statements, there is a line called "Transfer Payments and Subsidies", which covers New Zealand Superannuation, working benefits, and accommodation assistance. These government expenses have real implications for the New Zealanders entitled to them, because they help with day-to-day living costs and affect the quality of life for these New Zealanders.

When we report on the Government's financial statements, we also highlight the main judgement areas as key audit matters. For example, my auditors examine the valuation of the state highway network. It matters, not because it is a complex accounting question (although it certainly is), but because it compels those in charge of the network to tell the public what they have assumed about required life spans and when components of our state highways will need to be replaced or rebuilt.

The key audit matters that we have highlighted also involve issues that directly affect people. The Government's financial statements include salaries paid to New Zealanders employed in the public service. I draw attention to ongoing problems with calculating and paying people what they are entitled to under the Holidays Act 2003. I acknowledge the amount of work done on this matter, and that the provisions of the Holidays Act are complicated, but all public employees deserve to be paid their legal entitlements when they are due. This has not been the case.

Although New Zealand operates a sound and transparent financial management system, we need to always look for improvements. I would, for example, like to see more performance-related information reported together with the Government's financial statements. This would tell a richer overall story of what the public are receiving for the taxes they pay.

I want New Zealanders to have assurance that the money Parliament allocated to particular activities has been spent as intended. In my role as the Controller, I work with the Treasury to provide that assurance. It is a strength of our financial management system that breaches to what has been approved by Parliament are very much the exception. For 2018/19, there were few breaches. These amounted to 0.2% of government expenditure. However, when they did happen, such as the Winter Energy Payments, they remind us of important rules for sound financial management. Parliament approves funding – it is not for public organisations to decide whether they can go beyond or outside Parliament's approval.

It is important, as Parliament considers future changes to the public management system, that accountability of government to Parliament for the money it has approved to spend remains a central focus.

I thank those involved in preparing and auditing the Government's financial statements. They are a significant and important component of the financial management system of our country, and they remain, in many ways, world leading.

Nāku noa, nā

Signature - JR

John Ryan
Controller and Auditor-General

11 December 2019