Personally, says Auditor-General John Ryan, he trusts public servants when he deals with them. But he understands those who don’t.
In an interview with Newsroom, he recounts the experience of one Māori person who complained that chief executives would front the media cameras to apologise for small data leaks and the like, yet none had ever apologised for leaving Māori at the bottom of most social and economic indicators.
The Auditor-General has won changes to Parliament’s standing orders so public agencies will face closer scrutiny – including regular three-hour grillings by MPs, at which the minister must also front.
And he is awaiting a decision from the new Parliament on the establishment of an ad hoc select committee to look at performance reporting.
Ryan acknowledges the coming years will be challenging for the public sector, with rising costs, government-imposed belt-tightening, and the increasing frequency of emergencies like pandemics and climate-induced severe weather events.
That makes it all the more important, he says, that government agencies are assessed not just on what they spend, but on what outcomes they deliver.
And those outcomes are about more than just their budgets and balance sheets – they must also set in place performance measures for less tangible standards, especially integrity.
“I’m not being alarmist, I’m being concerned. We should all be concerned about the integrity of the public sector, because it’s one-third of the economy, and it actually has to have the trust of the public to operate effectively,” Ryan says.
“Integrity is about more than following the rules. It is about consistently behaving within agreed or accepted ethical principles and doing what is right in any given circumstance.”
In a report this month, the Auditor-General finds three weaknesses that need to be “urgently” addressed: measures that aren’t meaningful or comprehensive; gaps in measuring what difference is being made; and poor measures for assessing the stewardship, oversight, and monitoring functions of departments.
“They told us about the pressure that they had felt from senior leaders … ‘get it done’ attitudes that led staff to feeling that they had to expedite processes and potentially compromise the integrity of the procurement process.”
Auditor-General’s report into emergency procurement
He’s paid particular attention to supporting integrity in emergency procurement, in another report prompted by the experience of Covid and weather events like Cyclone Gabrielle.
Auditors spoke to staff in six of the biggest government departments handling emergency procurements. “They told us about the pressure that they had felt from senior leaders … ‘get it done’ attitudes that led staff to feeling that they had to expedite processes and potentially compromise the integrity of the procurement process.”
His office found that public organisations did not always identify risks in emergency procurements. These included bypassing the required open and competitive tendering processes without good explanation, and failing to disclose who they’d granted contracts to.
“This lack of transparency negatively impacts the ability for the public and Parliament to scrutinise public spending,” the report says.
“Public organisations should only use the emergency exemption to open advertising in a legitimate emergency. Urgent situations that a public organisation creates through a lack of planning or risk mitigation, while inconvenient, do not constitute an emergency.”
The report looked at 122 emergency procurements across the six biggest departments, most related to Covid, with a combined value of $460m. It says senior managers and directors need more visibility of these, to ensure they are aware of “integrity risks” and can respond to them.
This comes after previous reports from the Auditor-General into Covid wage subsidies and the Provincial Growth Fund, finding a serious lack of accountability for the spending in both cases.
Those concerns are reiterated in the report on emergency procurement. “When transparency is limited, it is harder for the public to have confidence in the integrity of the decisions public organisations make when they spend public resources.”
The increased requirement for public servants to work under emergency pressures comes at the same time that chief executives are being told, by the new Government, to slash their budgets and lay of about 15,000 staff.
Trust and confidence in the public sector
Ryan doesn’t expect the Office of the Auditor-General to escape the cuts imposed by the new Government, even though it’s answerable to Parliament rather than to a minister.
He employs 70 people directly, and Audit NZ has another 250 employees answering to his office. They emerged from the Covid lockdowns with a big backlog of overdue audits, and a shortage of auditors to handle them.
The Office is responsible for commissioning audits of about 3300 Crown entities, including nearly 2500 schools.
It outsourced more audits to private sector accountancies. But even so, Ryan had to go cap-in-hand to Parliament this year for $16.7m in capital injections to upgrade IT and recruit auditors from overseas, as immigration laws finally loosened up again.
It’s catching up on the backlog now but still has arrears of 407 school audits from 2022, and 131 from prior years.
Now, he says, the headcount at the Office of the Auditor-General and Audit NZ is approximately 40 staff above their longterm baseline, and he accepts that may be difficult to maintain when public servants are being laid off everywhere else.
“As the Auditor General, I might be a little bit parsimonious already,” Ryan observes. “So I would say that we are resourced to do our work. And we are constantly looking at ways to save money when we need to.”
And what about the question of who audits the auditor? Parliament does appoint an auditor for the Office of the Controller and Auditor-General. But it can’t be one of the Big Four accounting consultancies. because that would create a perceived conflict when the office is contracting them to carry out many public sector audits.
So this year a smaller firm, PKF Goldsmith Fox Audit, was again asked to audit the Auditor-General.
The company’s audit partner Dawn Alexander delivered her findings last month – and concluded that the Auditor-General’s financial statements and performance information complied with generally accepted accounting practice, and presented fairly the office’s financial position, performance and cashflows.
Importantly, Alexander was satisfied that the office fairly presented what it had actually achieved with its appropriated Crown funding.
It would have been embarrassing from John Ryan and his team if that had not been the case.
