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Offices of Parliament; and any additional information and explanations needed to fairly reflect the financial operations of government. The annual financial statements must include the government reporting entity’s interest in all Crown entities, organisations, and SOEs (as named in schedules to the PFA or the SOEA), all offices of Parliament and the Reserve Bank of New Zealand.

The Treasury is required to forward the annual financial statement to the Auditor General no later than 31 August following the end of the financial year (s. 30). The PFA places a responsibility on the Treasurer and Minister of Finance to ensure that the financial statements fairly reflect the performance and position of the government (s. 28). The PFA further requires the Minister of Finance to table the annual financial statements, together with the audit report and the statement of responsibility before the HR not later than 10 working after the statements are returned by the Audit Office to the Treasury (s. 31).

The PFA also requires each department to prepare annual financial statements, which are required to be forwarded to the Audit Office no later than 31 August following the end of each financial year (s. 35).

The FRA (s. 13) requires the Minister of Finance to publish a half-yearly economic and fiscal update in December. The report includes economic and fiscal forecasts for the current and following three years, updated with new information received since the main budget forecasts were prepared.

The FRA (s. 14) requires the Minister of Finance to publish a pre-election economic and fiscal update not earlier than 42 days, nor later than 28 days, before the polling day of any general parliamentary elections.

4.5. External audit

The OCAG is a statutory office created by the Public Audit Act 2001 (PAA). The office exists as a constitutional safeguard to maintain the financial integrity of New Zealand’s parliamentary system of government. The CAG provides independent assurance to Parliament that public sector organisations are operating and accounting for their performance in accordance with Parliament’s intentions.

4.5.1. Managerial, financial and operational independence

The PAA clearly states that the CAG must act independently in the exercise and performance of his functions, duties, and powers. To be credible, the OCAG must be independent of the public entities being audited. To secure independence, the CAG:

●Is an officer of Parliament (ss. 7 and 10). The CAG’s draft annual plan is provided to the Speaker of the HR for consideration. After considering

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comments, the CAG may amend the plan but indicates in the plan the nature of the changes to work programme priorities requested by the Speaker or any committee of the HR, but not made.4

●Is appointed by the Governor General on the recommendation of the HR (s. 7), for a once-only term of not more than seven years (s. 1, schedule 3).

●Has a Deputy who is also an officer of Parliament and can exercise all the functions and powers of the OCAG (ss. 11 and 12).

●Can report directly to Parliament and anyone else.

●Is remunerated by standing authority from Parliament; the amount is determined independently by the Higher Salaries Commission (s. 5, schedule 3).

●Makes requests for funding directly to the HR, after which the House recommends the sum required to the Governor General for inclusion in an appropriation bill (s. 17, PFA).

Auditors appointed by the CAG to carry out audits on his behalf must also be independent. There are strict constraints on auditors, including on: personal involvement with an audited entity (such as between family members); financial involvement with the entity; provision of other services to the entity (such as undertaking valuations); and dependency on fees from one source.

4.5.2. Institutional coverage of audits

The CAG has wide audit responsibilities for public entities (ss. 5, 11 and 19), including for:

●The Crown’s financial statements that show the financial state of the government and all its entities.

●A total of 41 departments and ministries.

●About 3 000 Crown entities, including over 2 600 school boards of trustees.

●A total of 15 State-owned enterprises including those in transportation, utilities and television.

●All local authorities and their subsidiaries including cities, district, and regional councils.

●About 200 statutory boards and other public bodies, including trust boards and airport authorities.

4.5.3. Types of audit

Under the PAA, the CAG can carry out:

●Financial audits involving the audit of financial statements, accounts, and other information that a public entity is required to have audited (s. 15).

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●Performance audits examining one or more aspects of performance: the extent to which a public entity is carrying out its activities effectively and efficiently; compliance with statutory obligations; whether waste has resulted or may result; and whether there is a lack of probity or financial prudence by a public entity (s. 16).

●Enquiries, either on request or on the CAG’s own initiative, into any matter concerning a public entity’s use of resources (s. 18). The CAG can also perform other auditing or assurance services at the request of a public entity (s. 17).

The 2004 amendments to the PFA strengthened the pre-audit, or controller, function of the CAG. The PFA set outs the authority that the government must have in order to spend money: 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 states that, before any money can be issued from the Crown bank account, the CAG 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 complied, the controller function preserves the important constitutional principle that the government cannot spend or borrow without the authority of Parliament.

4.5.4. Powers of investigation

The PAA requires the chief executive and the governing body of a public entity to ensure that the CAG has access at all times to the documents of the entity relating to the performance and exercise of the CAG’s functions, duties, and powers (s. 24). The CAG also may:

●Require the entity audited to produce to the CAG a document in the entity’s or person’s custody, care, or control and to provide the CAG with information or an explanation about any information (s. 25).

●Require a person to give evidence either orally or in writing, and for the purpose of examining a person, the CAG may administer an oath in accordance with s. 108, Crimes Act 1961 (which relates to perjury) (s. 26).

●Examine or audit the account of any person in any bank (s. 27).

For the purpose of obtaining documents, information, or other evidence relevant to any matter arising in the exercise or performance of the his/her duties, the CAG may, at all reasonable times enter into and remain on a public entity’s premises; or carry out a search for a document, examine a document, and make copies of a document or parts of a document (s. 29).