Update on 2021 school audits

18 November 2022

Iona Holsted
Secretary for Education and Chief Executive | Te Tumu Whakarae mō te Mātauranga
Ministry of Education | Te Tāhuhu o te Mātauranga PO Box 1666
Wellington 6140

Tēnā koe Iona


This letter provides a high-level overview of the 2021 school audits, and briefly discusses work to be carried out on the future of school financial reporting. The accompanying appendices outline the status of our 2021 school audits (Appendix 1), details of the two main challenges faced during the audits (Appendix 2), and the Ministry’s progress with our previous recommendations (Appendix 3).

We will provide our usual full report during the first quarter of 2023. We have decided to publish that report later than usual to incorporate the results of as many completed school audits as possible. We note that the rate of audit completion has not been as good this year as in previous years, which is because of reduced productivity due to Covid-19-related illness, continued auditor shortages, and more audit work required in certain areas.

Our full report will include details about our 2021 audit reports, an analysis of the important matters we identified during our audits, a description of the financial health of schools, and another update on Ministry progress with our previous recommendations.

Overview of 2021 audits

Many schools and audit teams were significantly affected by the Omicron outbreak during 2022. Even though we have dealt with lockdowns and other disruptions in previous years, the high levels of sickness and ongoing resource pressures meant we completed only 57% of our 2021 school audits by the 31 May 2022 deadline. This compares with 70% completed by the deadline in the previous year.

Since 31 May 2022, we have made steady progress in completing the 2021 school audits, with 84% completed by 31 October 2022. This is still much lower than last year, where 92% of audits were completed by 31 October 2021 (see Appendix 1).

Two other matters contributed to the delays in completing the 2021 audits. More work was required on payroll in many audits due to complications that arose from a change in the school payroll system (from Novopay Online to Edpay). A key report that many schools used to check payroll changes was not available with the change to Edpay. In addition, we had to refine our audit work on cyclical maintenance provisions due to a change in auditing standards, which meant we often had to ask schools for additional information. Schools without a maintenance plan struggled to provide the information we required. Both matters are discussed in Appendix 2.

Since the onset of Covid-19, we have been concerned that more schools than usual might get into financial difficulty because of the reduction in revenue from international students and fewer opportunities to raise funds locally. However, from the audits we have completed for 2021, this has not been the case.

We will carry out further analysis on the financial health of schools and report on it in our full report.

Future of school financial reporting

In our previous report, Results of the 2020 school audits, we noted that we had started discussions with your staff about the future of school financial reporting, and about opportunities for making improvements in the school audit process. Throughout the past year we have continued those discussions and supported your staff to finalise terms of reference that commit the Ministry to developing a work programme on the future of school financial reporting.

The work programme will consider the needs of the different users of school financial information. It will also consider the nature of assurance required over school financial reports, and how that assurance can be carried out in a cost-effective and timely manner. We will continue to support the Ministry on this work, as appropriate.

We will also continue supporting your staff with identifying potential efficiencies in the current reporting and audit process. Your staff simplified the Kiwi Park model financial statements in 2021, and further simplifications have been made for 2022. We will support your staff to progress these initiatives and identify other opportunities for improvement while the future of school financial reporting work programme is carried out.

Should you wish to discuss any of the matters in this letter please contact Tuzla Lathiff, our Sector Manager for Schools, at tuzla.lathiff@oag.parliament.nz or Todd Beardsworth, Assistant Auditor-General, Audit Quality, at todd.beardsworth@oag.parliament.nz. Because of the public interest in the school sector, we will publish this letter on our website.

Nāku noa, nā

Greg Schollum
Deputy Controller & Auditor-General