CHAPTER 34 Reporting and Audit - New Zealand Parliament · 1 Public Finance Act 1989, s 2(1). 2 For example: Conservation Act 1987, s 5 (Department of Conservation). 3 Legislation

CHAPTER 34

Reporting and Audit

The spending of public funds by public entities gives rise to reporting obligations. They require every entity that expends such funds to make a report on the operational and financial consequences of its work, and to submit to audit. Public reporting and public audit are among the means by which the State sector accounts for its operations, first internally and then externally, to an auditor, to the House of Representatives and, through the House, to the public.

The Government, departments, Offices of Parliament, Crown entities, State enterprises and other publicly owned organisations and companies produce reports for transmission to the House each year. Their reporting obligations may be discharged in a single annual report or, for example in the case of the Government, in a number of reports over the course of the year. The reports present information on financial and operational performance. Generally, a reporting entity is obliged to present financial statements that conform to legally prescribed standards, while the way it reports on operational performance is largely at its own discretion. Reporting requirements are an essential tool for holding an entity accountable for its actions and performance. But it is only one such tool, and is supplemented by independent assessments made as a result of auditing and reviewing the entity.

TYPES OF REPORTING ENTITYThe precise accountability obligations of an entity depend upon its status and the specific terms of any statute applying to it.

Six broad types of entity are required to report to the House on their financial and operational activities: the Government itself, Government departments (including departmental agencies), Offices of Parliament, Crown entities, State enterprises and mixed-ownership model companies, and some other miscellaneous organisations and companies. Apart from the miscellaneous organisations, common financial reporting models apply to each of the types of entities.

This chapter describes the various reporting and audit obligations obtaining in the State sector. (Chapter 35 describes how the House considers the results of this reporting and auditing in the process of annual review.)

GovernmentThe Government is defined as a separate reporting entity in New Zealand law. For this purpose the “Government reporting entity” is the Sovereign in right of New Zealand, and the legislative, executive and judicial branches of the Government

Parl.Prac.pp04.indd 569 9/01/17 8:54 am

Parliamentary Practice in New Zealand570

of New Zealand;1 in a broad sense, central government (that is, it does not include local government). (See p 536 for a more detailed description of the Government reporting entity.)

DepartmentsThe principal administrative units into which the executive branch of government is divided are known as departments of State. These are bodies staffed by public servants, funded by appropriations made by Parliament and under the political direction of a Minister (the portfolio Minister), who in turn answers to the House for the department’s activities. Departments are the core of the public sector. The detailed organisation of each Government into departments is essentially a matter for the Prime Minister to determine. While there remain some departments that are created by statute,2 strictly speaking this is unnecessary.3 The practice today is to create and abolish departments under the Crown’s prerogative or common law powers rather than by statute. However, some departments are expressly listed in legislation (particularly in the State Sector Act 1988), so administrative reorganisations usually entail consequential legislative amendments to these references. In many cases these amendments can be effected by Order in Council and do not require primary legislation.4

Relatively few departments actually have the word “department” in their titles. Many are known as ministries. Others, such as the Treasury, include neither “department” nor “ministry” in their titles. These differences in nomenclature have no legal significance. Three departments (the Treasury, the State Services Commission and the Department of the Prime Minister and Cabinet) have co-ordinating functions in respect of all departments. They are often called the “central agencies”. The official who heads each department is known as its “chief executive”, though the chief executives of certain departments may (by convention or by law) have another title in addition. For example, the chief executive of the Treasury is known as the Secretary to the Treasury.

The functions and powers of each department are determined by a mixture of legal provisions (statutory and common law) and political and administrative decisions taken by the Government. In particular, statutes such as the State Sector Act 1988 and the Public Finance Act 1989 impose an overall framework of powers and accountability responsibilities on departments.

The definition of “department” is set out in the Public Finance Act.5 It includes the departments that are listed in Schedule 1 of the State Sector Act 1988—the departments of the New Zealand Public Service.6 But there are other departments or instruments of the Government that are not part of the public service—for example, the New Zealand Defence Force and the New Zealand Police. They are also subject to the departmental reporting requirements of the Public Finance Act. In addition, the Office of the Clerk and the Parliamentary Service are deemed to be departments for the purposes of the Public Finance Act. An Office of Parliament is not a department.7

Each department has a “responsible Minister”8 who is accountable for the financial performance of the department. This is reflected in the Estimates. The Prime Minister determines which Ministers perform these roles for Government departments. The responsible Minister does not need to be the pertinent portfolio

1 Public Finance Act 1989, s 2(1). 2 For example: Conservation Act 1987, s 5 (Department of Conservation). 3 Legislation Design and Advisory Committee, guidelines on process and content of legislation

(October 2014) at 69–70. 4 State Sector Act 1988, s 30A. 5 Public Finance Act 1989, s 2(1). 6 State Sector Act 1988, ss 27 and 27A. 7 Public Finance Act 1989, s 2(1). 8 Public Finance Act 1989, s 2(1).


571Reporting and Audit

Minister, but will usually be. For the Office of the Clerk and the Parliamentary Service, the Speaker is the responsible Minister.9

Departmental agenciesChanges made to the State Sector Act 1988 and the Public Finance Act 1989 in 2013 allow the formation of a departmental agency as a unit within a host department. The agency remains operationally separate from the host department, however. The activities to be undertaken by a departmental agency must be clearly defined and accounted for separately from those of the host department. A departmental agency has its own chief executive, who is directly responsible to the relevant Minister (not necessarily the same Minister as that responsible for the host department) for the agency’s activities.

Departmental agencies fall within the definition of “department” in the State Sector Act 1988 and the Public Finance Act 1989. They are required to present annual reports on their operational performance, but do not report separately on their financial performance. This information is reported in the financial statements of each agency’s host department.

The Canterbury Earthquake Recovery Authority was the first departmental agency. The authority had been a stand-alone department, but from 1 February 2015 it became a departmental agency within the Department of the Prime Minister and Cabinet.10 It was disestablished on 19 April 2016.11

Offices of ParliamentThe Offices of Parliament are the Parliamentary Commissioner for the Environ-ment, the Office of the Ombudsmen, and the Controller and Auditor-General.12 The Speaker is the responsible Minister for,13 and is therefore responsible for the financial performance of, each Office of Parliament. (But the Speaker is not responsible for the performance of the statutory duties imposed on each Officer of Parliament.) (See Chapter 7 for a discussion of Offices of Parliament.)

Crown entitiesCrown entities were first created as a financial reporting model in 1989 (they were then known as Crown agencies). In the 1990s, a Crown entity was any body that was legally separate from the Crown, but was owned or controlled by the Crown and was not a State enterprise. By 2002 almost 100 types of body were described as Crown entities, some of them (such as district health boards, boards of school trustees and reserves boards) comprising many individual Crown entities, making some 3,000 individual entities in total. As legislation created new bodies or abolished old ones, the number of Crown entities altered accordingly. Their heterogeneity, and the fact that no common governance principles applied to them (except for the purposes of financial reporting), led in 1998 to the commencement of a review of the principles underlying the roles and structures of Crown entities. This review culminated in the Crown Entities Act 2004, which was designed to provide a consistent framework for the establishment, governance and operation of Crown entities and to clarify their accountability relationships.14

Crown entities fall into five main categories.15

o Statutory entities are bodies corporate established under legislation. They are listed in a schedule to the Crown Entities Act.16 Statutory entities in

9 Public Finance Act 1989, s 2(1). 10 State Sector Act 1988, s 27A and sch 1A. 11 Greater Christchurch Regeneration Act 2016, sch 8, Part 2. 12 Public Finance Act 1989, s 2(1). 13 Public Finance Act 1989, s 2(1). 14 Crown Entities Act 2004, s 3. 15 Crown Entities Act 2004, s 7(1). 16 Crown Entities Act 2004, sch 1.



turn are of three types, depending upon the degree of control that may be exercised by the Government over their policy.

I Crown agents must give effect to Government policy when directed to do so by the responsible Minister. Bodies of this type include the Accident Compensation Corporation, district health boards, and the New Zealand Transport Agency.

I Autonomous Crown entities must have regard to Government policy when directed to do so by the Minister, but cannot be required to give effect to it. The Arts Council of New Zealand Toi Aotearoa, Guardians of New Zealand Superannuation and the New Zealand Symphony Orchestra are entities of this kind.

I Independent Crown entities are generally entirely independent of Government policy and often perform quasi-judicial regulatory functions. They include, among others, the Broadcasting Standards Authority, the Commerce Commission, the Electoral Commission, the Human Rights Commission and the Law Commission.

o The second category of Crown entities consists of Crown entity companies. These companies are incorporated under the companies legislation and are wholly owned by the Crown. They are listed in the Act.17

o The third category is Crown entity subsidiaries—companies controlled by a Crown entity. They are not listed comprehensively in the legislation.

o The fourth and fifth categories are respectively school boards of trustees and tertiary education institutions (universities, colleges of education, polytechnics, special colleges and wananga). Only some of the governance rules set out in the Crown Entities Act apply to these last two categories of Crown entity.18

In respect of statutory entities, Crown entity companies and Crown entity subsidiaries, the provisions of the Crown Entities Act, as supplemented or expressly modified by any other legislation applying to them (such as a parent Act), govern their activities.19 If there is any conflict between the legislation establishing an entity and the Crown Entities Act, the latter prevails.20 Thus a common legislative structure now prescribes the basic governance of Crown entities and their general financial reporting.

For the purposes of annual review, the Standing Orders define a Crown entity as an entity named or described in Schedule 1 or 2 of the Crown Entities Act 2004 (which includes the five categories described above), any Crown entity subsidiaries, and any entities named in Schedule 4A of the Public Finance Act 1989.21 Schedule 4A companies are non-listed companies in which the Crown is the majority or sole shareholder. The Public Finance Act applies various sections of the Crown Entities Act to these companies, including the reporting requirements.

Ministerial responsibilityThe responsible Minister for a Crown entity is the Minister who is given express responsibility by any Act, or who is appointed by the Governor-General by warrant to have responsibility, or who is otherwise assigned responsibility by the Prime Minister. Essentially, responsibility is a matter for the Prime Minister to determine in allocating portfolios. But in the case of a Crown entity company, the Minister of Finance and any other shareholding Minister are statutorily declared to be the responsible Ministers.22

17 Crown Entities Act 2004, sch 2. 18 Crown Entities Act 2004, ss 5 and 6. 19 Crown Entities Act 2004, s 4(1). 20 Crown Entities Act 2004, s 4(2). 21 SO 3(1). 22 Crown Entities Act 2004, s 10(1).



Responsible Ministers have a number of uniform duties and powers in respect of reporting by Crown entities. In respect of some Crown entities the Minister is expressed to be statutorily responsible to the House for the performance of the functions conferred on the Minister under the legislation.23 But the precise legal powers and responsibilities (if any) of the Minister for a particular Crown entity depend upon the terms of the legislation or other instrument under which the entity was created. The categorisation of Crown entities according to their different obligations regarding Government policy sought to resolve ambiguities in this area. The State Services Commission has issued guidance for Ministers on their interactions with statutory Crown entities.24

The Government has the right to direct Crown entities, through the Minister of State Services and the Minister of Finance acting jointly, to comply with specified requirements so as to support a whole of government approach to a particular area.25 These directions, known as “whole of government directions”, may be intended to improve public services, secure economies or efficiencies, develop expertise and capability, ensure business continuity, or manage risks to the Government’s financial position.26 Directions may be given to one or more categories of Crown entity (all statutory entities, all Crown entity companies or all school boards of trustees, for example), to one or more types of statutory entity (for example, all Crown agents), or to groups of at least three Crown entities with at least one significant characteristic in common that is pertinent to the direction.27 Directions may not be given to Crown entity subsidiaries.28 For example, a whole of government direction might be given requiring all Crown entities to comply with e-government requirements. Before giving a direction, Ministers must first consult the entities to be affected by it, and must present it to the House after it is given.29

Once presented to the House, a direction stands referred to the Finance and Expenditure Committee,30 which decides, on the basis of its own and the other select committees’ terms of reference, whether to consider it itself or refer it to another committee.31 The Finance and Expenditure Committee or any other committee to which the direction is referred must report on it to the House no later than 12 sitting days after it has been referred.32

A whole of government direction does not require the approval or endorsement of the House. It comes into force 15 sitting days after it is presented to the House unless the House resolves within that time to disapply it.33 Crown entities are obliged to give effect to a whole of government direction as soon as it comes into force.34

Regardless of the Minister’s legal responsibilities in any particular case, the Minister’s responsibility to answer questions in the House in respect of Crown entities is clear, although, as there are with State enterprises, there will always be complaints about how forthcoming Ministers have been in particular cases.

State enterprisesState enterprises came into existence on 1 April 1987. They are popularly referred to as State-owned enterprises or SOEs, although the State-Owned Enterprises Act 1986 itself refers to these entities as State enterprises from section 2 onwards.35

23 See, for example: Crown Research Institutes Act 1992, s 6(1); Southland Electricity Act 1993, s 5. 24 State Services Commission Statutory Crown entities: a guide for Ministers (June 2014). 25 Crown Entities Act 2004, s 107(1). 26 Crown Entities Act 2004, s 107(1). 27 Crown Entities Act 2004, s 107(2). 28 Crown Entities Act 2004, s 107(3). 29 Crown Entities Act 2004, s 108. 30 SO 393(1). 31 SO 393(2). 32 SO 393(3). 33 Crown Entities Act 2004, s 109. 34 Crown Entities Act 2004, s 110. 35 State-Owned Enterprises Act 1986, s 2.



Originally 14 organisations were made subject to the State enterprises regime. They were designed to take over a large proportion of the Government’s trading activities, which had hitherto been run by Government departments, ad hoc corporations or other bodies. The concept of a State enterprise represents a standard-model public trading organisation, which may be registered as a company under the companies legislation,36 and can undertake the State activities that Governments wish to corporatise. The governmental activities corporatised in this way in 1987 included airlines, airways, banking, coal mining and supply, electricity generation and supply, forestry, postal services, property services, shipping, telecommunications and tourism. There have been considerable changes in the kinds of State trading activities undertaken since then; many of the original State enterprises have been privatised and removed from Government ownership entirely, and new entities made State enterprises.

At 30 June 2015, State enterprises held total assets of $56 billion, or approximately 20.2 per cent of all Crown assets.37

The principal objective of every State enterprise is stated to be:38

… to operate as a successful business and, to this end, to be—(a) as profitable and efficient as comparable businesses that are not

owned by the Crown; and(b) a good employer; and(c) an organisation that exhibits a sense of social responsibility

by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so.

State enterprises, as public entities established by statute that take decisions that may affect the rights and liabilities of private individuals, are in principle amenable to judicial review.39 However, the courts have consistently held that the overriding consideration for a State enterprise is to act as a commercial entity; in pursuing the principal objective of operating a successful business, State enterprises must have regard to the other three criteria. But in the absence of fraud, corruption or bad faith on the part of a State enterprise justifying judicial review, the relationship between a State enterprise and its customers is similar to that between a commercial entity and its customers.40

As a commercial enterprise, a State enterprise is subject to receivership, and in 2001 a receiver was appointed for the first time in respect of a State enterprise.41 More recently, in September 2013 the Government placed Learning Media Limited in liquidation.42 There is no Government guarantee for State enterprises.43 But State enterprises, as public entities, are subject to the jurisdiction of the Ombudsmen and to official information disclosure, and they are audited by the Auditor-General.

The rules of a State enterprise that is a registered company are found in its constitution. If the State enterprise is not a registered company, the rules of the State enterprise are any documents comparable to the constitution of a company.44

36 State-Owned Enterprises Act 1986, s 30. 37 Financial Statements of the Government of New Zealand (14 October 2015) B.11 at 40. 38 State-Owned Enterprises Act 1986, s 4(1). 39 Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 2 NZLR 385 (PC). 40 Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 2 NZLR 385 (PC); Auckland

Electric Power Board v Electricity Corporation of New Zealand Ltd [1994] 1 NZLR 551 (CA). 41 Finance and Expenditure Committee, report on 2001/02 Estimates (Vote State-Owned Enterprises)

(23 July 2001) [1999–2002] AJHR I.19B at 450 (Terralink NZ Limited). 42 Hon Bill English, Minister of Finance, and Hon Hekia Parata, Minister of Education “School

resources to continue after wind down” (media release, 4 September 2013); see also (12 December 2013) 167 New Zealand Gazette 4523 at 4533.

43 Finance and Expenditure Committee, report on 2002/03 Estimates (Vote State-Owned Enterprises) (17 October 2002) [2002–2005] AJHR I.19A at 337–338; Public Finance Act 1989, s 49.

44 State-Owned Enterprises Act 1986, s 2.



The rules (and any changes to them) must be presented to the House within 12 sitting days of their adoption.45 A State enterprise’s statement of corporate intent is drawn up in consultation with the shareholding Ministers, and the statements relating to the current and next two years must be presented to the House within 12 sitting days of being delivered to the responsible Minister.46 The shareholding Ministers may, by written notice, require the board of a State enterprise to include in or omit from a statement of corporate intent matters relating to the objectives and policies to be followed by the enterprise. Whenever any such direction has been given, a copy of it must also be presented to the House within 12 sitting days.47 Such statements have been described as essentially internal constitutional documents designed to ensure accountability to the shareholding Minister, rather than external constraints on their operations.48 Contracts for the transfer of State assets to a State enterprise must be presented to the House within 12 sitting days of being entered into.49

Ministerial responsibilityThe Minister of Finance and the Minister responsible for each State enterprise are together the shareholding Ministers for that enterprise.50 Different Ministers may be made responsible for different State enterprises. Invariably a Minister for State Owned Enterprises is appointed to be responsible for State enterprises not specifically assigned to any other Minister.

The shareholding Ministers are responsible to the House for the performance of the functions given to them by the State-Owned Enterprises Act 1986 or the rules of the State enterprise.51 There are examples in other legislation of statutory recognition of a Minister’s responsibility to the House, but it is questionable whether such a provision is useful. The statute does not make Ministers responsible to the House for all of the activities of a State enterprise, only for the limited range of functions that are conferred on Ministers. The statutory provision could therefore be used as a means of denying responsibility entirely for activities of State enterprises that do not fall within its terms. In fact, Ministers have not denied such a responsibility to the House, in the sense that they have accepted the responsibility to answer to the House for activities for which they, strictly, have no legal responsibility.

Principally, this exercise of ministerial responsibility to answer to the House arises regarding questions addressed to Ministers about the actions of State enterprises. Questions about the activities of State enterprises have not been challenged as outside ministerial responsibility, and have been accepted consistently ever since State enterprises were created.52 The fact that a Minister does not have legal control over a certain action does not mean that the Minister has no responsibility to answer to the House for it.53 Questions to Ministers about the activities of State enterprises are in order even when they fall outside the Ministers’ legal responsibilities.

Mixed-ownership model companies and publicly listed companies Two other types of relevant entities are mixed-ownership model companies, and publicly listed companies in which the Government has a controlling interest. The mixed-ownership model was developed to allow the Government to reduce its ownership of certain State enterprises while retaining and protecting its controlling

45 State-Owned Enterprises Act 1986, s 17(1). 46 State-Owned Enterprises Act 1986, ss 14 and 17(2)(a). 47 State-Owned Enterprises Act 1986, s 13. 48 Transpower New Zealand Ltd v Meridian Energy Ltd [2001] 3 NZLR 700 (HC) at [67]. 49 State-Owned Enterprises Act 1986, s 23(2). 50 State-Owned Enterprises Act 1986, s 2. 51 State-Owned Enterprises Act 1986, s 6. 52 (1987) 483 NZPD 617–618 Burke. 53 (1990) 509 NZPD 2705–2706 Burke.



interests. Such companies are subject to statutory controls on their ownership, as well as certain provisions of the State-Owned Enterprises Act 1986. However, mixed-ownership model companies are subject to the accountability provisions in the Companies Act 1993 and the Financial Markets Conduct Act 2013, rather than those of the State-Owned Enterprises Act 1986. Both mixed-ownership model companies and publicly listed companies in which the Government has a control-ling interest are public entities for the purposes of the Public Audit Act 2001.54

The first instance of a publicly listed company in which the Government has a controlling interest arose in 2002, when the Government recapitalised the publicly listed Air New Zealand Limited and acquired an 85 per cent shareholding in the company. The ownership percentage has since been reduced, but the Crown still holds a majority interest.

The mixed-ownership model was introduced in 2012 by way of legislation amending the Public Finance Act 1989.55 There are three mixed-ownership model companies, each of which was formerly a State enterprise: Mighty River Power Limited, Meridian Energy Limited, and Genesis Energy Limited. They are listed in Schedule 5 of the Public Finance Act and are subject to Part 5A of the Act. The Crown may not reduce its holdings in these companies below 51 per cent, and no person other than the Crown may hold more than 10 per cent of the shares or voting rights in any one mixed-ownership model company.56 The Minister of Finance and the Minister for State Owned Enterprises are accountable to the House for these companies. The companies are not subject to the Official Information Act, but the Government’s policy decisions as majority owner remain subject to the Act.

Since 2003, the House has consistently resolved that Air New Zealand Limited be considered a public organisation for the purposes of Standing Orders, so that it can be subject to annual review.57 This has also been done for the mixed-ownership model companies.58

Other organisations and companiesThere are organisations and companies that are not departments, Offices of Parliament, Crown entities or State enterprises, but are nevertheless required to prepare reports on their activities, which are submitted to Parliament.

A handful of organisations and companies that are not defined as Crown entities under the Crown Entities Act 2004 are nevertheless subject to some of the financial reporting and controlling provisions of the Act. They are specified in two schedules to the Public Finance Act, and are subsequently referred to as Schedule 4 organisations and Schedule 4A companies.59 The Crown entity provisions that apply to these organisations and companies may vary from one to another. Schedule 4 organisations may be required to prepare or be exempted from preparing a statement of intent, annual report, or statement of performance. They may also be subject to the provisions regarding the acquisition of securities, borrowing, giving guarantees and engaging in derivatives transactions.60 They are not defined as Crown entities for the purposes of the Standing Orders, and are not subject to the annual review procedures, although they are public entities for the purposes of audit.61 Schedule 4A companies, which are non-listed companies in which the Crown is the majority or sole shareholder, are subject to most of the governance and accountability provisions (including reporting requirements) that

54 Public Audit Act 2001, s 5(1)(c), (f) and sch 1. 55 Public Finance Act 1989, pt 5A. 56 Public Finance Act 1989, ss 45R and 45S and sch 5. 57 (2 December 2003) 614 NZPD 10330–10336; (24 November 2005) 628 NZPD 470; (16 December 2008)

651 NZPD 1039; (1 March 2012) 677 NZPD 761; (21 October 2014) 701 NZPD 25. 58 (26 September 2013) 693 NZPD 13790–13803; (6 March 2014) 696 NZPD 16421–16433; (22 July 2014)

700 NZPD 19271–19281. 59 Public Finance Act 1989, schs 4 and 4A. 60 Public Finance Act 1989, ss 45M and 45N and sch 4. 61 Public Audit Act 2001, s 5(1)(c), sch 1.



apply to Crown entity companies.62 For the purposes of the Standing Orders they are considered to be Crown entities.

The Reserve Bank of New Zealand and the Abortion Supervisory Committee are unique organisations. The Reserve Bank was specifically excluded from the reporting regime adopted for Crown entities when that was devised.63 The bank has its own specific reporting obligations.64 The Abortion Supervisory Committee reports directly to the House on its activities65 although it is not classified as a Crown entity.

The House has, by resolution, consistently ordered that its annual review pro-cedures should apply equally to the Reserve Bank and the Abortion Supervisory Committee as to departments, Offices of Parliament, Crown entities and State enterprises.66

Many other organisations are statutorily obliged to report to a Minister so that he or she can present the report to the House. These organisations may not be publicly owned (they are often owned by their members) or administer public money (though they may have received some public funding). In these cases the requirement to report to the House is seen as a useful means of disseminating information about the organisation’s activities, rather than as an aspect of public accountability.

REPORTING STANDARDSFinancial reporting Financial statements must be prepared in accordance with “generally accepted accounting practice” (known as “GAAP”). This means any applicable financial reporting standards approved by the External Reporting Board or, regarding matters for which no provision is made in such reporting standards, an authoritative notice issued by the board.67 Reporting standards, authoritative notices, and any amendments or revocations must be issued only after consultation has been undertaken on them.68 Any such issuances are to be presented to the House, and may be disallowed.69 The Auditor-General has supported the changes made to financial reporting standards in 2013, particularly those that allow many public entities to report in a way that reflects their size and scale.70

Non-financial reporting In the case of departments, statute prescribes the types of information that must be included in each department’s annual report. Information that is necessary for an informed assessment of the department’s performance during the year in review must be presented. This includes an assessment of the department’s operations, an assessment of the department’s progress in relation to its strategic intentions, and information about the department’s management of its organisational health and capability, as well as any other information on any other matters the department is required, has undertaken, or wishes to report on.71 Offices of Parliament must prepare similar reports.72

62 Public Finance Act 1989, s 45OA and sch 4A. 63 Finance and Expenditure Committee, report on inquiry into reporting by the Crown

and its subentities to the House (23 July 1991) [1991–1993] AJHR I.4A at [5.7]. 64 Reserve Bank of New Zealand Act 1989, s 163. 65 Contraception, Sterilisation, and Abortion Act 1977, s 39. 66 (1999) 581 NZPD 37; (2002) 602 NZPD 237. 67 Public Finance Act 1989, s 2(1); Financial Reporting Act 2013, ss 8 and 12. 68 Financial Reporting Act 2013, s 22. 69 Financial Reporting Act 2013, s 25. 70 Controller and Auditor-General Reflections from our audits: our future needs—is the public sector

ready? (27 May 2014) NZPP B.29[14e] at 12. 71 Public Finance Act 1989, s 45. 72 Public Finance Act 1989, s 45F.



The legislative obligation on departments to report on these aspects of their operations does not specify exactly the form that such reports must take. However, regulations may be made or the Minister of Finance may issue instructions to departments, departmental agencies, Offices of Parliament, organisations named in Schedule 4 of the Public Finance Act and companies named in Schedule 4A of the Act as to the non-financial reporting standards that they must apply and the form in which the information must be presented to the House.73 Before any such instructions are issued or regulations made, the Minister must provide a draft of the instructions or regulations to the Speaker. The Speaker presents the draft to the House and it is considered by the Finance and Expenditure Committee (in the case of departments and other organisations) or the Officers of Parliament Committee (in the case of Officers of Parliament). The respective committees are responsible for co-ordinating comment on the proposals from other committees and communicating this to the Minister.74 The Minister must consider any comments received from the Speaker or any committee before the instructions are issued or the regulations are made.75 Any such instructions are disallowable instruments, but not legislative instruments.76

In addition, in the case of regulations or instructions applying to Offices of Parliament, the regulations or instructions can be made or issued only after having been approved by resolution of the House.77 For this purpose a notice of motion to approve the regulations or instructions stands referred to a select committee (likely to be the Officers of Parliament Committee).78 The committee must report on the notice no later than the first working day 28 days after it is referred.79 The motion to approve the regulations or instructions may not be moved until the report has been made or 28 days have elapsed, whichever is earlier.80

While the form of departments’ non-financial reporting is largely at each department’s discretion, Treasury has issued guidance on the preparation of annual reports and performance reporting on appropriations.81

Crown entities are also required to prepare annual reports in accordance with statutorily prescribed standards, whether of a general nature82 or in their own parent Acts. In addition, the Minister of Finance may prescribe non-financial reporting standards for Crown entities (except for school boards of trustees and tertiary education institutions). These instructions may be made in respect of Crown entities generally or certain categories or types of Crown entities.83 However, before issuing an instruction to Crown entities on non-financial reporting standards, the Minister must submit the instruction in draft to the Speaker. The Speaker presents it to the House and it is referred to the Finance and Expenditure Committee. That committee co-ordinates comment on it from other select committees and communicates it to the Minister.84 The Minister may issue the instruction only after considering any comments on the draft received from the Speaker or any committees that considered it.85 The Minister may amend the draft before issuing it, in the light of these comments. Any such instructions are disallowable instruments, but not legislative instruments.86

73 Public Finance Act 1989, ss 80A, 81 and 82. 74 Standing Orders Committee Review of Standing Orders (23 June 2005) [2002–2005] AJHR I.18C at 41–42. 75 Public Finance Act 1989, s 82(4). 76 Public Finance Act 1989, s 80A(6). 77 Public Finance Act 1989, s 82(2)–(5). 78 SO 322(1). 79 SO 322(2). 80 SO 322(3). 81 Treasury Year end reporting: departmental annual reports and reporting against appropriations

(June 2015) at 22. 82 Crown Entities Act 2004, ss 150–155. 83 Crown Entities Act 2004, s 174(1), (2). 84 Standing Orders Committee Review of Standing Orders (23 June 2005) [2002–2005] AJHR I.18C at 11, 42. 85 Crown Entities Act 2004, s 175. 86 Crown Entities Act 2004, s 174(5).



Performance reporting on appropriations The 2013 changes to the Public Finance Act 1989 increased the emphasis on reporting performance information on appropriations. There is now a statutory requirement to set specific measures at the start of the financial year against which the effectiveness of the appropriated spending can be tested at the end of the year. The information supports the Estimates, which for each appropriation must provide details of what is intended to be achieved with the spending and how performance of the spending will be assessed, and specify who will be the performance reporter providing the achievement information, and the document in which this will be presented to the House. For multi-category appropriations,87 this information must be provided for each category as well as for the appropriation as a whole.88 These requirements represent an evolution from reporting on outputs obtained from spending to reporting on results achieved. They also reflect select committees’ long-standing expectation that departments will report on what has been achieved with appropriations, using measurable indicators of performance.

At the end of the financial year, performance information must be prepared that includes an assessment of what was achieved with the appropriation in the past year, using the previously specified measures, and a comparison of the actual expenses or capital expenditure for the appropriation with the amounts that were forecast or appropriated in the Estimates for the year.89 Because different entities may be best placed to report on different spending, departments, departmental agencies, Offices of Parliament, or Crown entities can all act as performance reporter for appropriations. For multi-category appropriations, the department administering the appropriation must provide the performance information, while the Minister responsible for the appropriation must provide the performance information for non-departmental appropriations where resources are provided to a person or entity that cannot be a performance reporter.

There is no prescribed way of presenting this information. The supporting information in the Estimates must specify which documents will include reports on the performance of each appropriation. This leaves flexibility to present this performance information in the best way for the particular appropriation. This information might be included in an annual report, a sector report, a stand-alone report, or presented in some other document.

The Minister of Finance may grant exemptions from the requirement to provide end-of-year performance information for a departmental appropriation that relates solely to outputs provided to other departments, or about a non-departmental appropriation if the performance information is otherwise available to the House or is unlikely to be informative given the nature of the expenditure, or if the amount of the appropriation is small.90

FINANCIAL STATEMENTS OF THE GOVERNMENTThe Treasury is responsible for preparing the annual financial statements of the Government of New Zealand at the end of each financial year.91 These are combined financial statements, presenting a picture of the Government as a single reporting entity that includes the legislative, executive and judicial branches of government. The statements show the net worth of the Government and allow changes in that net worth over time to be traced. The statements consolidate the revenues, expenses, assets and liabilities of all departments (including the activities they undertake on behalf of the Crown, such as making benefit payments),

87 Public Finance Act 1989, s 7A(1)(g). See Chapter 31. 88 Public Finance Act 1989, ss 15A and 15C(1). 89 Public Finance Act 1989, s 19C(1). 90 Public Finance Act 1989, s 15D. 91 Public Finance Act 1989, s 27.



Offices of Parliament and the Reserve Bank. Since the 2003/04 financial year, new financial reporting standards have also required them to consolidate the revenues, expenses, assets and liabilities of Crown entities and State enterprises instead of just combining their net results.92

The Treasury must forward the annual financial statements to the Auditor-General by the end of August.93 The Auditor-General must provide an audit report on the statements within 30 days of receiving them.94 The annual financial statements are accompanied by a statement of responsibility signed by the Minister of Finance and the Secretary to the Treasury. This attests to the Minister’s responsibility for the integrity of the statements and the Treasury’s responsibility for establishing and maintaining a set of internal controls to ensure the statements can be used with confidence as to their accuracy.95

The audit report on the annual financial statements is generally issued on the date when the Minister and the Secretary to the Treasury sign the statement of responsibility. The audit report is therefore published along with the financial statements.96

The annual financial statements and the audit opinion must be presented to the House by the Minister not later than 10 working days after they are returned to the Treasury by the Auditor-General.97 The Finance and Expenditure Committee is required to examine and report to the House on the Government’s annual financial statements. The Standing Orders require this to be done within one week of the first sitting day in each year.98 However, this has been extended in recent years by the Business Committee in arranging the annual review debate.99

A set of monthly financial statements must also be prepared, for all but the first two months and the last month in each financial year. They give less detailed information than the annual statements and are not formally audited.100

DEPARTMENTAL REPORTINGDepartments and Offices of Parliament are obliged to present information on their strategic intentions, as well as reports on their financial and operational activities.

Departmental strategic intentionsDepartments and Offices of Parliament must regularly prepare information on their strategic intentions, outlining the objectives that they intend to achieve or contribute to over the next four years.101 The information must cover the nature and scope of the department’s or office’s functions and operations, and explain how they will be managed to ensure it meets its strategic intentions. Departments and offices are expected to specify the challenges they face, in terms of external factors, such as the international, national and sectoral outlook, and internal factors, such as their capability in terms of staff and other resources. They must also set out and explain any matters that their responsible Minister wishes to include in order to explain the department’s strategic intentions and capability.102

92 Government Budget Policy Statement and December Economic and Fiscal Update (19 December 2002) NZPP B.1 & B.6 at 101–102.

93 Public Finance Act 1989, s 30(1). 94 Public Finance Act 1989, s 30(2)(b). 95 Public Finance Act 1989, s 29. 96 See, for example: Financial Statements of the Government of New Zealand (14 October 2015)

NZPP B.11 at 27–30; Controller and Auditor-General Central government: results of the 2014/15 audits (8 December 2015) NZPP B.29 [15r] at 12.

97 Public Finance Act 1989, s 31(2). 98 SO 345(1). 99 See Chapter 35, “Annual review debate”. 100 Public Finance Act 1989, s 31A. 101 Public Finance Act 1989, ss 38–41. 102 Public Finance Act 1989, s 40(d)(ii).



When the requirement to prepare information on strategic intentions was introduced, departments were initially required to provide a “statement of intent” every year, and these statements were presented to the House as information supporting the Budget. However, after amendments to the Public Finance Act 1989 in 2013, this information is required only once every three years, unless there is a significant change in a department’s or office’s functions or the responsible Minister requires new information.103 In addition, the information is now presented either as a stand-alone document or in the same document as the entity’s annual report, rather than as a Budget document. This was intended to move away from a compliance approach, and encourage departments to focus more strategically on the role of the entity when preparing the information.

Financial reportingThe chief executive of a department is responsible to the responsible Minister for the financial management, financial performance, and financial sustainability of the department, and for complying with any financial reporting requirements.104 The chief executive must sign and include in the department’s annual report a statement of responsibility for, among other things, the preparation and accuracy of the department’s financial statements.105

Departments and Offices of Parliament must also prepare annual financial statements setting out their financial positions at the end of each financial year. These statements contain the information that is consolidated into the Government’s annual financial statements. They must be prepared in accordance with generally accepted accounting practice. They must specifically include any information or explanations needed to reflect the department’s financial operations and financial position, and the department’s forecast financial statements prepared at the beginning of the year, for comparison with the actual financial statements.106

The annual financial statements are audited by the Auditor-General. An audit report on each statement must be issued within three months of the end of the financial year.107

Since 2014, departments and Offices of Parliament have been required to include in their annual reports statements of expenses and capital expenditure, separate from their financial statements. These statements must include statements on any unappropriated expenses or capital expenditure that has been incurred. They must also include, for each appropriation administered by the department, details of the document in which the end-of-year performance information for the appropriation for the previous financial year (if required) is presented to the House of Representatives.108

Operational reportingAll departments of the public service and departmental agencies are under a general obligation to give to their Ministers an annual report on their operations.109 Departments may also be required by specific legislation to prepare reports on their operations or particular aspects of them. These reporting obligations can be discharged in the same report.110 All such reports are presented to the House by the Minister. The Speaker presents the reports on the operations of the Office of the Clerk, the Parliamentary Service and each Officer of Parliament to the House.

103 Public Finance Act 1989, s 38(4). 104 Public Finance Act 1989, ss 34 and 36. 105 Public Finance Act 1989, s 45C. 106 Public Finance Act 1989, s 45B. 107 Public Finance Act 1989, s 45D. 108 Public Finance Act 1989, s 45A. 109 Public Finance Act 1989, ss 43(1) and 43A(1). 110 Public Finance Act 1989, ss 43(3) and 43A(3).



The annual reports stand referred to the select committee that has been allocated the task of carrying out the annual review in each instance.111

NON-DEPARTMENTAL REPORTINGCrown entitiesCrown entities are obliged to present statements of intent and performance expectations, as well as reports on their financial and operational activities.

Statements of intent and performance expectationsCrown entities are obliged to prepare a statement of intent at least once every three years, or at the request of their responsible Minister.112 The statement must relate to the forthcoming year and at least the three following financial years.113 These statements are intended to enable the Crown to participate in the process of setting the entity’s strategic intentions and medium-term undertakings, set these out for the House, and provide a base against which the entity’s performance can be assessed.114 To these ends each statement must set out the strategic objectives that the entity intends to achieve or contribute to, as well as explaining the entity’s functions and operations and how they will be managed to meet its strategic intentions, performance measures for assessing its operations, and how it intends to perform and manage the tasks that it undertakes.115 A responsible Minister is entitled to participate in the drawing up of a statement of intent by specifying its form, commenting on drafts of the statement and directing the entity to amend provisions of the draft.116 These processes can delay the finalising of a statement until any differences between the Minister and the entity have been resolved.117

Crown entities are also required each year to produce a statement of performance expectations, specifying the classes of outputs to be produced in the next financial year, and to explain what each class of output is intended to achieve, its expected revenue and expenses, and how its performance will be assessed.118 Classes of outputs can be exempted by the Minister of Finance from this reporting requirement if they are not material to the statement or will be adequately reported on to the House by another party, or if the exemption would not compromise the Crown entity’s performance accountability.119 Forecast financial statements for the next financial years are also included in the statement of performance expectations.120 For Crown entity groups, a statement of performance expectations is usually only required for the group as a whole, although the Minister of Finance can require the parent or subsidiary to provide separate additional reporting.

In preparing the statement of performance expectations, the Crown entity must send a draft to the Minister for comment. The Minister may also agree with the entity on the inclusion in the statement of information additional to the legislative requirements, and may specify the form of disclosure of any information in the statement.121 After the final statement is provided, the Minister can direct the Crown entity to amend provisions in the statement, and the Crown entity may choose to amend its own statement.122

The final statement of intent and final statement of performance expectations

111 SO 344(2). 112 Crown Entities Act 2004, ss 139(3) and 139A. 113 Crown Entities Act 2004, s 139(2). 114 Crown Entities Act 2004, s 138. 115 Crown Entities Act 2004, s 141. 116 Crown Entities Act 2004, ss 145–148. 117 See, for example: “TVNZ delays financial forecasts” The Independent (2 February 2005). 118 Crown Entities Act 2004, s 149E. 119 Crown Entities Act 2004, s 149F. 120 Crown Entities Act 2004, s 149G. 121 Crown Entities Act 2004, ss 149H and 149I. 122 Crown Entities Act 2004, ss 149J and 149K.



must be presented to the House by the Minister, either in the same document as the entity’s annual report, or in any other document presented before the annual report. The statements must also be published on the entity’s website as soon as practicable after they are provided to the Minister, even if they have not yet been presented to the House.123

Financial reportingAll Crown entities are required to prepare financial statements at the end of each year setting out a range of financial information.124 These statements must be forwarded to the Auditor-General for audit within 90 days of the end of the financial year.125 Schedule 4A companies are also covered by these requirements,126 despite not being Crown entities in terms of the Act. However, they are considered so for the purposes of the Standing Orders,127 and are also public entities for the purposes of audit.128

The Auditor-General is required to issue an audit opinion on all of their financial statements within four months of the end of the financial year.129 The annual financial statements of each entity are included in the entity’s annual report, which is presented to the House by the responsible Minister and is subject to annual review by the House.

The interests of the Government in Crown entities, Schedule 4 organisations and 4A companies are included in the Government’s financial statements.130

State enterprisesThe State-Owned Enterprises Act 1986 requires each State enterprise to present to the House, through the responsible Minister, a number of documents on the future plans and past performance of the enterprise.

Within three months of the end of each financial year, the board of a State enterprise must give a report to its shareholding Ministers on the operations of the enterprise and its subsidiaries and also deliver to them audited financial statements for the year.131 This report is expected to provide clear comparisons of the State enterprise’s performance with its statement of corporate intent.132 The annual report is presented to the House. The report of the operations of the State enterprise must include the value of any dividends payable to the Crown for the financial year. State enterprises are also required to give shareholding Ministers half-yearly reports on their operations.133

The mixed-ownership model companies, set out in Schedule 5 to the Public Finance Act 1989, are subject to the accountability provisions in the Companies Act 1993 and the Financial Markets Conduct Act 2013, rather than the State-Owned Enterprises Act. But because they are controlled by the Crown they are included in the Government’s financial statements. They are public entities under the Public Audit Act 2001 and are therefore subject to audit by the Auditor-General, along with any New Zealand-based subsidiaries.

The House has resolved that the mixed-ownership model companies be considered public organisations and therefore subject to an annual review of

123 Crown Entities Act 2004, s 149(1), (3) and (4). 124 Crown Entities Act 2004, s 154. 125 Crown Entities Act 2004, s 156(1). 126 Public Finance Act 1989, s 45OA. 127 SO 3(1). 128 Public Audit Act 2001, sch 1. 129 Crown Entities Act 2004, s 156(2). 130 Public Finance Act 1989, s 27(3)(a). 131 State-Owned Enterprises Act 1986, s 15. 132 Transport and Environment Committee, report on 1996/97 financial review of Airways Corporation

of New Zealand Limited (6 April 1998) [1996–1999] AJHR I.21B at 23. 133 State-Owned Enterprises Act 1986, s 16.



their performance and current operations, under the Standing Orders.134 Their annual reports are therefore presented to the House, and stand referred to a select committee allocated by the Finance and Expenditure Committee.135

Other organisations and companiesAll organisations listed in Schedule 4 of the Public Finance Act 1989 must prepare annual financial statements. Whether a Schedule 4 organisation is required to produce statements of intent and performance expectations or an annual report is specified in the schedule.136 Schedule 4 organisations are also public entities for audit purposes, but only four of them are required to produce annual reports. They are not subject to annual review unless the House specifically orders them to be.

All companies listed in Schedule 4A of the Public Finance Act 1989 are subject to the reporting obligations that apply to Crown entity companies, as set out in the Crown Entities Act 2004.137

The board of directors of the Reserve Bank must prepare a report each year setting out the board’s assessment of the performance of the bank and the Governor. The report stands referred to the House.138 The Reserve Bank is also required to make an annual report to the Minister on its operations. This stands referred to the House too.139 The Abortion Supervisory Committee is required to make an annual report to the House.140 This report is forwarded to the Speaker, who presents it to the House.

AUDITThe Auditor-General is by statute the auditor of every public entity.141 The latter term includes the Government itself,142 and a very wide range of entities set out in Schedules 1 and 2 of the Public Audit Act, including all departments, Crown entities, Schedule 4 organisations and Schedule 4A companies, State enterprises and mixed-ownership model companies.143 It also includes a number of other entities not falling into these general categories, such as the Office of the Clerk, the Parliamentary Counsel Office, the Parliamentary Service and the Reserve Bank of New Zealand.144 The House may also appoint the Auditor-General to be the auditor of the other Offices of Parliament.145 The House appoints, on the recommendation of the Officers of Parliament Committee, an independent auditor for a three-year term to audit the Auditor-General.146 State enterprises may, after consultation with the Auditor-General, appoint a qualified person to be an additional auditor of the enterprise or of a subsidiary of the enterprise. Such an appointment must also be approved by the responsible Minister.147

At least once every three years, the Auditor-General must publish, by way of a report to the House, the auditing standards that he or she applies or intends to

134 (21 October 2014) 701 NZPD 25. 135 SO 344. 136 Public Finance Act 1989, s 45M and sch 4. 137 Public Finance Act 1989, s 45OA; Crown Entities Act 2004, ss 136–157A. 138 Reserve Bank of New Zealand Act 1989, s 53A(1), (3). 139 Reserve Bank of New Zealand Act 1989, s 163(1), (3). 140 Contraception, Sterilisation, and Abortion Act 1977, s 39. 141 Public Audit Act 2001, s 14(1). 142 Public Finance Act 1989, s 29B. 143 Public Audit Act 2001, sch 1. 144 Public Audit Act 2001, sch 2. 145 Public Finance Act 1989, s 45F(1); (2001) 596 NZPD 12580; Officers of Parliament Committee

Recommendation of auditors to audit the financial statements of the Offices of Parliament (18 October 2001) [1999–2002] AJHR I.22B at 1232–1234.

146 Public Audit Act 2001, s 38(1); SO 395(1)(b). See, for example: (3 December 2015) 710 NZPD 8555; (11 December 2012) 686 NZPD 7408–7409.

147 State-Owned Enterprises Act 1986, s 19(2).



apply to the conduct of audits and inquiries.148 Currently the Auditor-General’s auditing standards incorporate (but are not limited to) the auditing standards issued by the External Reporting Board.

The Auditor-General is required to audit the information that a public entity is required to have audited.149 What information an entity is required to have audited is determined by statute, or the founding documents of the entity. It may include the entity’s annual financial statements and annual performance information (for example a statement of performance prepared by a Crown entity). In addition, the Auditor-General may audit information an entity is not required to have audited, with the agreement of that entity.150 Preparing and auditing financial statements are distinct tasks, the former performed by the reporting entity and the latter by the Auditor-General.

Audits are carried out by the Auditor-General or by auditors appointed by the Auditor-General.151 These auditors may be staff of the Auditor-General from Audit New Zealand, which is a separate business unit within the Auditor-General’s office, or suitably qualified private-sector auditors (both known collectively as “appointed auditors”). The Auditor-General and the appointed auditors must act independently in the performance of the Auditor-General’s functions, duties, and powers.152 The Auditor-General has the power to obtain information, to take evidence on oath and to inspect bank accounts, for the purposes of the Auditor-General’s functions, powers and duties, including carrying out an audit.153 The Auditor-General may authorise the appointed auditors to exercise these powers, apart from the power to take evidence on oath.154 The chief executive and the governing body of the entity being audited are under an obligation to ensure that the Auditor-General has access to relevant documents at all times.155 The Auditor-General has a discretion to disclose information received in the course of an audit, as he or she considers is appropriate in the exercise of his or her functions, duties or powers.156 The Auditor-General is not subject to the Official Information Act.

The Auditor-General must report to the House at least once each year on matters arising from the performance of the Auditor-General’s functions, and may report also to the Government, select committees and other persons as he or she sees fit.157

audits of financial statements and performance informationAudits aim to obtain all the information and explanations necessary to provide reasonable assurance that an entity’s financial statements and performance information are fairly presented.

The audit opinion is published along with the entity’s financial statements and other audited information. In forming the opinion the Auditor-General assesses if the information presented in the financial statements is supported by sufficient and appropriate evidence, and evaluates the overall adequacy of the information presented. The opinion may be modified where in the auditor’s opinion the financial statements or other information being audited are not fairly presented or where the auditor has been unable to obtain sufficient and appropriate audit evidence. For example where a material transaction shown in the financial statements has been recorded in a way that does not comply with generally accepted accounting

148 Public Audit Act 2001, s 23; Controller and Auditor-General The Auditor-General’s auditing standards (18 March 2014) NZPP B.28(AS).

149 Public Audit Act 2001, s 15 150 Public Audit Act 2001, s 17 151 Public Audit Act 2001, s 32. 152 Public Audit Act 2001, s 9. 153 Public Audit Act 2001, ss 25, 26 and 27. 154 Public Audit Act 2001, s 34. 155 Public Audit Act 2001, s 24. 156 Public Audit Act 2001, s 30. 157 Public Audit Act 2001, ss 20 and 21.



practice, this may result in the audit opinion being qualified, if it means that the financial statements are not fairly presented.

The Auditor-General may also (without qualifying the audit opinion) draw readers’ attention to a matter that is considered to be significant to the readers’ understanding of the audited information.

Performance audits and inquiriesThe Auditor-General may audit the performance of public entities.158 Such audits may examine whether the entity is operating effectively and efficiently, for example, by inquiring whether its outputs are produced as efficiently as possible at the least cost to public funds and whether they are delivering their anticipated benefits. In this regard if an entity is required to adhere to a policy, the audit examination is confined to establishing how effectively and efficiently the activities are being carried out consistently with that policy.159 Thus the Auditor-General must accept the policy as a given in evaluating the entity’s performance. But this constraint on performance audits applies to policies imposed on the entity by statute, by the Government or by a local authority. It does not apply where the policy is set by the entity itself being audited.

The Auditor-General cannot carry out a performance audit examining whether the Reserve Bank or any registered bank is carrying out its activities efficiently and effectively;160 the Minister of Finance is empowered to initiate an assessment of the Reserve Bank’s performance.161

Performance audit is an increasingly important aspect of public audit work and is seen as a way to improve organisational performance. The Auditor-General’s annual plan usually identifies possible subjects for such audits. The draft plan is presented to the House for comment before being finalised.

Finally, the Auditor-General is empowered to inquire into how a public entity uses public resources, even outside the annual audit of the entity.162 This power is typically used for investigating high-profile allegations of impropriety or poor governance or management involving public entities or public money. Such inquiries are sometimes initiated at the request of select committees or individual members of Parliament.163 This type of work is not a feature of the mandate of Auditors-General in most other jurisdictions.

Parliamentary and ministerial reportingWhen the Auditor-General reports annually on the results of the audits of public entities or where the Auditor-General reports to the House on a performance audit or an inquiry, the reports are presented to the House by the Speaker and stand referred to the Finance and Expenditure Committee for consideration. The committee may consider the report itself or refer it to another committee with whose terms of reference it is more closely related.164 This is an important mechanism for eliciting the Government’s response to such reports. When presented to the House, the committee reports are set down for consideration as members’ orders of the day and may be selected by the Business Committee for debate.165

158 Public Audit Act 2001, s 16(1). 159 Public Audit Act 2001, s 16(4). 160 Public Audit Act 2001, s 16(3). 161 Reserve Bank of New Zealand Act 1989, s 167; Public Audit Bill (9–2) (commentary, 17 October 2000)

at 6–7 ([1999–2002] AJHR I.22A at 321–322). 162 Public Audit Act 2001, s 18. 163 See, for example: Controller and Auditor-General, report on certain matters arising from

allegations of impropriety at Transend Worldwide Limited (16 December 2002); Controller and Auditor-General, report on inquiry into public funding of organisations associated with Donna Awatere Huata MP (5 November 2003); Controller and Auditor-General Inquiry into decision by Hon Shane Jones to grant citizenship to Mr Yang Liu (8 March 2013).

164 SO 396. 165 SO 250(4).



The Auditor-General’s appointed auditors provide advice to select committees on the results of their audits of the financial and, where audited, non-financial information of the entities that they have audited. They may also provide advice on matters such as the financial and non-financial management systems used by entities.

Each year, the Auditor-General provides responsible Ministers with reports summarising the results of the audits of the significant entities for which the Ministers are responsible. These entities include State enterprises, mixed-ownership model companies and other publicly listed entities. Particular care is taken to ensure that confidential information relating to publicly listed entities, or information that if publicly known may affect the entity’s share price, is not inadvertently disclosed to the market through these reports. The practice is for these entities to be given opportunity to consider such reports for factual accuracy and to confirm that they do not contain any market-sensitive information that may not be publicly disclosed.166

PUBLICATION OF REPORTSThe annual reports, financial statements, and the end-of-year performance information on appropriations prepared by the Government, departments, Offices of Parliament, Crown entities, State enterprises and other organisations and companies are submitted to the appropriate Minister, who is responsible for presenting them to the House within the prescribed deadlines—within 15 working days after the audit report is provided by the Auditor-General for departments and Offices of Parliament,167 within five working days of receipt by the Minister in the case of Crown entities,168 and within 12 sitting days of receipt in the case of State enterprises.169 If Parliament is not in session, in the case of departments, Offices of Parliament, and Crown entities, the Minister must present the annual report as soon as possible after the commencement of the next session of Parliament.170 In the case of State enterprises, the Minister must have the report published within a given time and have a note inserted in the Gazette advising the public where copies of it may be obtained.171 Failure on the part of a reporting entity to prepare its report in accordance with the deadlines may attract parliamentary criticism, not least because the lack of a report to the House will hold up the House’s work of annual review.172 The Office of the Clerk, the Parliamentary Service, Offices of Parliament and the Abortion Supervisory Committee submit their reports to the Speaker, who presents them to the House. Most, but not all, are published by order of the House as parliamentary papers (State enterprises’ and mixed-ownership model companies’ reports, for example, are not parliamentary papers). Individual reporting entities are responsible for publishing their reports and making them available to the public. Electronic publication is not, on its own, regarded as satisfying the statutory requirement to publish copies of the annual report.

In the case of financial statements of reserves boards, the Minister of Conservation forwards copies of the statements to each member of Parliament in

166 Controller and Auditor-General State-owned enterprises: results of the 2012/13 audits (30 July 2014) NZPP B.29[14h] at 48.

167 Public Finance Act 1989, s 44(2)(a). 168 Crown Entities Act 2004, s 150(3). 169 State-Owned Enterprises Act 1986, s 17(2). 170 Public Finance Act 1989, s 44(2), (3); Crown Entities Act 2004, s 150(3). 171 State-Owned Enterprises Act 1986, s 17(2A). 172 Social Services Committee, report on 1990/91 financial review of the Ministry of Pacific Island

Affairs (19 March 1992) [1991–1993] AJHR I.23B at 157–158; Health Committee, report on 1997/98 financial review of the Health Research Council of New Zealand (10 June 1999) [1996–1999] AJHR I.21C at 233; Health Committee 1998/99 financial review of Health Care Hawke’s Bay Limited (31 March 2000) [1999–2002] AJHR I.21A at 177.



respect of boards managed in that member’s electoral district.173 Copies must be sent no later than a month after the date on which the Auditor-General provides an audit report on the financial statements. The annual report of the Department of Conservation must include information on the financial performance of reserves boards.174 The Minister of Education must make available to a member of Parliament any annual financial statement of a school board of trustees, within one month of receiving a request from the member.175 The Minister of Education must also prepare and present to the House an annual report on the performance of the schools sector, which includes information on the supply of outputs by that sector.176

173 Public Finance Act 1989, s 45O(1), (2). 174 Public Finance Act 1989, s 45O(4). 175 Education Act 1989, s 87C. 176 Education Act 1989, s 87B.


Documents

CHAPTER 34 Reporting and Audit - New Zealand Parliament · 1 Public Finance Act 1989, s 2(1). 2 For example: Conservation Act 1987, s 5 (Department of Conservation). 3 Legislation