The role of the Auditor-General in public sector accountability
The Auditor-General is the auditor of about 4000 public entities, including government departments, Crown entities of all kinds, local authorities and their subsidiaries, state-owned enterprises, port companies, licensing trusts, community boards, cemetery trusts, as well as a long list of “miscellaneous” bodies. We audit everything from the Crown financial statements, Air New Zealand, and the Super Fund, through to the Patriotic and Canteen Funds Board and the Riccarton Bush Trustees.
The day to day work of the office therefore gives us a very broad view of public sector activities. Given the nature of auditing, it is also quite a deep and detailed view. A good auditor understands the entity, as well as its accounts. The process of giving an audit opinion on financial statements also involves forming a view on the health and reliability of an organisation’s governance and management systems.
That is even more so for the public sector auditor. As well as the ordinary work of providing assurance over the financial statements, Parliament has directed the public sector auditor to take on a broader set of assurance functions. The Public Finance Act, Crown Entities Act and Local Government Act all require us to audit the non-financial performance information included in annual reports – the information on how they are planning their work, organising resources, and measuring performance, over time. The Local Government Act 2002 also requires us to audit the information contained in Long Term Council Community Plans – the future financial projections that underpin the 10 year plans that local authorities must produce. And our own Act, the Public Audit Act 2001, gives us a performance audit function under which we can examine effectiveness and efficiency, compliance with statutory obligations, waste, probity and financial prudence. That Act also gives us capacity to carry out other audit services, and to inquire into any matter concerning an entity’s use of its resources.
This reference to inquiries reflects the long tradition of the office being asked to look into matters of public concern in public entities, particularly if there is a financial or probity aspect to the concerns. Examples from (relatively) recent memory include inquiries into Te Wananga o Aotearoa, Cambridge High School, Ross Armstrong’s expenses, Donna Awatere-Huata’s financial dealings, the ‘flak jackets’ inquiry, contracting practices in the Ministry of Health, and various parliamentary funding issues. We’ve also in the last year looked at the controls around the funding for the possible development of a new stadium in Dunedin, examined allegations of impropriety and dysfunction at the West Coast Development Trust, and reviewed the decisions made in relation to the purchasing back of regulatory service functions at Queenstown Lakes District Council.
The Auditor-General is not an avenue for formal legal review. But the office clearly has a significant role as a public sector accountability mechanism. Across all parts of our work, we regularly look at issues that have a public law dimension to them or which might equally be examined through a judicial review lens. And the general audit discipline also includes a standing professional requirement to assess the adequacy of an organisation’s compliance with legal obligations. This is part of the overall task of providing assurance over the health and reliability of management systems and is specifically covered in auditing standards produced by the Institute of Chartered Accountants of New Zealand and by the Auditor-General.
For public lawyers, the inquiry function is the most visible and is likely to be the most relevant part of the Auditor-General’s work. In practice we often function as a first port of call for people concerned about a decision-making process, particularly if it involves public sector spending or contract management, or questions about the management of conflicts of interest. Like the Ombudsmen, asking the Auditor-General to look at something is effectively free for the correspondent. We don’t carry out a full inquiry into every issue that gets raised with us, but we always do some preliminary work to see if there is a significant issue that warrants attention. It can therefore be a useful way of getting a quick independent view on the nature of possible problems. A review by the Auditor-General does not and cannot change what has happened, as the only powers of the office are to report and to recommend. But it can encourage entities to change future behaviour and sometimes to address possible failings in past processes. Public reporting can produce results.
The other functions of the office intertwine with the inquiry work, in a way that is often not very visible. When people write to us we try to make a strategic assessment about how best to respond. Sometimes we choose to look at the issue directly in a specific inquiry, and sometimes we refer the issue to the auditor to keep an eye on more generally or to do some additional work in the context of the annual audit. The pattern of issues being raised with us can also feed into the development of our ongoing programme of performance audits, and into the process of determining what we are going to ask auditors generally to look at in their annual audit work across a sector or a period of time. It also informs our decisions on which topics might benefit from the publication of a new or updated good practice guide.
There is no explicit function of producing good practice guides in our legislation, but it is a natural flow-on from the rest of our work. We put out these guides to give people easy access to the thinking and expectations that get developed, particularly in our inquiry and performance audit work – for example on conflicts of interest. It is basic to auditing that you should set out in advance the expectations against which you will be assessing performance, and good practice guides therefore provide us with a valuable benchmark for assessing performance in areas that do not have formal standards elsewhere. They also, most importantly, are designed to help public entities do the right thing.