Appointments — Deputy Controller and Auditor-General

, on behalf of the Leader of the House: I move, That pursuant to section 11 of the Public Audit Act 2001, this House recommend Her Excellency the Governor-General to appoint Phillippa Catherine Smith of Wellington as Deputy Controller and Auditor-General for a term of 5 years. Ms Smith graduated from Victoria University of Wellington with a Master of Public Policy, Bachelor of Laws, and Bachelor of Arts, and was admitted as a barrister and solicitor in 1979. She worked as a senior solicitor for Chapman Tripp Sheffield Young from 1989 to 1993, then moved to the Office of the Controller and Auditor-General, where she was the Assistant Auditor-General, Legal, until 1998. She then moved to the State Services Commission, where she has remained as its chief legal adviser. I commend her appointment to the House.

I was fortunate to be on the committee that made the recommendation to the Officers of Parliament Committee for the appointment of Phillippa Smith. In doing so, I just want to look at one of the big challenges the Audit Office has. We are moving through into a new era of financial reporting standards. We have seen the collapse of companies like Enron, we have seen what happened to Arthur Andersen, and if we look worldwide, we see that auditing is becoming a very big part of the way we do business. So I think it appropriate just to outline the role that the Auditor-General plays, because the newly appointed Deputy Auditor-General will be very much a part of the team. The role is important, and I believe that it is important just to articulate some of the roles and challenges that the office will have as we look to it for scrutiny and for very robust and transparent reporting procedures in the way that entities are reported on. That gives us the confidence and the satisfaction of knowing that there is a watchdog agency that can go through and look very closely at what entities do.

The Office of the Controller and Auditor-General, known as the Auditor-General, is a statutory office that exists as a constitutional safeguard to maintain the financial integrity of New Zealand’s parliamentary system of Government. As an Officer of Parliament, the Auditor-General provides independent assurance both to Parliament and to the public that public entities are operating and accounting for their performance in accordance with Parliament’s intentions. That includes the effective and efficient use of the resources and powers conferred on them. The Auditor-General also provides independent assurance about local government, as local authorities are accountable to the public for the activities they fund through locally raised revenue.

But the Auditor-General has identified some concerns. If we look at the report of the Controller and Auditor-General, we see them highlighted in appendix A, but they are also stated in the statement of corporate intent in the draft annual plan. The new appointee will play a major part in addressing the key concerns expressed there.

These are the challenges the Auditor-General’s office faces: “The Auditor-General’s key concerns are a reflection of his mandate”—when I refer to “his”, I am talking about the office as a whole—“under the Public Audit Act 2001. His key concerns are: Performance: Have public entities undertaken activities in accordance with Parliament’s intentions, in an effective and efficient manner? Authority: Have activities, resourcing, and accountability requirements been undertaken within the authority granted by Parliament? Waste: Have resources been obtained and applied in an economical manner?—that is, taxpayers’ dollars not being wasted. Probity and financial prudence: Are entities meeting parliamentary and public expectations of an appropriate standard of behaviour in the public sector? Accountability: Have entities given full and accurate accounts of their activities, and of their compliance with Parliament’s intentions, through the annual reporting cycle? Are governance and management arrangements suitable to address the concerns identified above?”.

So there are a number of issues that the Auditor-General and the team will be operating in. This is an important appointment that is being made. We look forward to the office being at the forefront of scrutiny and being able to deliver in an unbiased manner those things that the public and Parliament expect of such an important part of our parliamentary system. As an Officer of Parliament, the Auditor-General plays a very important part.

We are debating the appointment of the Deputy Controller and Auditor General, which is one of the Officers of Parliament. It is appropriate that such appointments be debated, because it is one of the few occasions when Parliament is able to express a view about how those very important accountability offices are being exercised.

As the House is probably aware, I am critical of the way that those positions are being exercised. I am not criticising just the Auditor-General’s office; my concern goes wider than that. I include officers like the Ombudsmen. In my view, these so-called independent officers are not holding the Government to account. They are far too weak, and the Labour Government has been able to ride roughshod over previous conventions. Even though ACT members are not going to vote against the appointment of Phillippa Catherine Smith, I am sceptical. I do not see anything in her CV to make me think she will give that office the sort of strength that is required in order to get some accountability back into the public accounts.

Those are harsh words about the Auditor-General’s office, but let me convince the House that I have actually done some research. Let me take just one of the most recent reports from the Auditor-General’s office, which is on Government and parliamentary publicity and advertising. One can tell straight away, from page 1, that this will be a gutless report. Let me quote from the report, which is signed by Mr Brady: “The report is not intended to be critical of any government or party, and tries to find a way forward.” Well, why should it not be critical? It is part of the office’s job to be critical. How could it fail to be critical of this Labour Government’s use of taxpayers’ money for publicity, just prior to an election? We have a campaign costing some $20 million of taxpayers’ money to promote the Government’s so-called family package, or whatever it calls it—

💬 Darren Hughes: Rub Out the Crim!

Yes, the Labour Government has a history of those sorts of campaigns. I know that well, and I say it is time we had a strong Auditor-General’s office to do something about it.

But let us just take this campaign at the moment. The Government has the nerve to go to the Auditor-General and say it has to advertise on television because there are some New Zealanders who need to apply in order to get this family support. The cost works out at about $100,000 an application. There have been almost no applications. What the Government is actually doing is putting up TV advertisements to try to convince the voters as a whole that somehow or other its Budget is assisting large numbers of New Zealanders. Well, that is a political campaign. I have to say it has been completely unsuccessful, but that is not the point; $20 million of public money is being spent on a TV campaign that is to run right up until the election campaign.

The Auditor-General’s report points out that in other OECD nations there are very tough rules on that sort of advertising, that there are no rules in New Zealand, and that this Government is taking expenditure to a whole new level. The question I ask is what is the point of having an Auditor-General’s office that is not prepared to put out a report and say what we all know, which is that this Government is spending taxpayers’ money on party political purposes.

We had another example when Labour used its parliamentary money to put advertisements in all the bus stops up and down New Zealand. It was completely illegal and completely against the rules. Has there been any public statement by the Auditor-General? No, there has not. Why is that? Because this Auditor General does not have the strength of character, I guess—or whatever it is—to be prepared to say what he knows to be true, which is that this Government is abusing the public purse, and is illegally spending taxpayers’ money for party political purposes. I do not believe that the appointment today will make any difference to that.

Then I look at another type of report, which is called Civil Aviation Authority: Certification and surveillance functions. I am a former Minister of Civil Aviation, and as the Auditor-General points out—and I am sure the Minister will know—this sort of report about civil aviation is written by the Auditor-General about every 3 years. All the reports taken together are not worth anything. They have not helped civil aviation, and they have not been of any great assistance. Ages and ages are spent looking at certification rules about which I do not think the Auditor-General really has much knowledge, when all MPs know that elsewhere hundreds of millions of taxpayer dollars are being wasted, and a lot of it is being taken fraudulently.

We have a debate at the moment as to whether tax cuts are affordable. We all know that if the Government of the day was prepared to target real fraud that is going on in New Zealand—real abuse of taxpayers’ money—there would be enough money to finance virtually any party’s tax packages. Of course, I am referring to the fact that our Social Development vote is now $7 billion. At a time of record employment, 70,000 New Zealanders, who by law are not entitled to the unemployment benefit unless they are ready, willing, and able to work, are still able to go along and get a benefit.

We then look at the sickness benefit, and, despite the fact that the Ministry of Health tells us that we have never been healthier, the number of people on the sickness benefit keeps on going up, year in, year out.

Then, of course, there is the domestic purposes benefit. We were told, when it was introduced, that there were never going to be more than 20,000 parents on it; there are now over 100,000. We all know there are outright fraudsters on that benefit. How do we know that? One reason is that Australia runs much tougher rules than us, and when it does the checks it finds that dozens of New Zealanders who have been ripping off the system in this country, in welfare abuse, go across to Australia and get caught. Has the Auditor-General ever made a report on that? I estimate that there is actually $2 billion worth of fraud by people on the welfare system, and if there was a proper system, all those people would be back in the workforce.

A courageous Auditor-General’s office would write a real report about welfare. Will it? Of course it will not, because the Labour Government would hate to have that pointed out. It would especially hate to have it pointed out when we look at the position in other OECD countries. I take President Clinton, a Democrat; if his Democrat reforms were implemented in New Zealand our welfare numbers—I am not talking about people on superannuation; I am talking about the 310,000 people on welfare—would drop 100,000 in 18 months. All we would have to do is, firstly, ask everybody to re-register. We would then find that at least 30,000 of the 310,000 are phantom enrolments, if the Australian experience is anything to go by. If we then said to all the able-bodied that they have to front up and do 40 hours’ work, we would find that another 60,000 people would decide that if they have to do that, they might as well go and work.

Why does not the Auditor-General’s office do something about welfare fraud? If it did, we would not be having this debate about whether tax cuts are affordable, because that $2 billion could be spent on two things. Firstly, we could be more generous to the people who really do need our help, because they are being deprived by those bludgers. Secondly, we could give back a lot of that $2 billion to the hard-working New Zealanders who are having to pay so much tax. If we had a decent Audit-General’s office, that should be possible. It is about time someone held this Labour Government to account.

A long time ago—in fact, about 41 years or so ago—I set out to win the annual prize for the best audit student at Victoria University. I am rather glad I did not actually make the grade. There is a bit of a story about that, which I will not trouble the House with. I subsequently went on to have a career in the corporate world, and ended up as the chief financial officer of a large corporation. I must confess that I had rather a dim view of auditors at that stage; they seemed to me to be people who niggled and asked unnecessary questions, who generally took up a disproportionate amount of time for very little positiveness in the way of outcomes, and, furthermore, who charged megabucks to do it. That was, of course, until a few years later, when I went to work for, and advise, an organisation that had not had an audit for many years. I very quickly discovered through that experience the value of having an annual audit. Believe you me, they serve a very, very necessary function in any organisation—certainly within the operation of Government. Without auditors, we would find that anarchy would take over in terms of the financial arrangements of the Government, and we would have all kinds of hidden costs and so on tucked away in all sorts of very, very devious ways.

I want to say in response to the speech from the Hon Richard Prebble that most of the points he made were about politics rather than about auditing. Although I have some sympathy with some of them, I think it is a bit rich to blame the poor old Auditor-General for some of those outcomes. Really, the thing I would say about the Audit Office—and I have said it previously, I think, in questions to Dr Michael Cullen and, certainly, at the Finance and Expenditure Committee—is that we ought just to be a little firmer in ensuring that all the expenditure of Government funds, no matter how it is done, should be subject to rigorous audit analysis. It should be a precondition. We have to get away from the idea of just handing money over to all sorts of little organisations that may be well-meaning and that may be delivering good things for the taxpayer—I do not know whether they are—because we have been bedevilled by many, many scandals even since I have been in the House that could have been nipped in the bud if we had had a cast iron rule that if people or organisations get money, then they will be subject to audit. The Lottery Grants Board has done that now for years. Those members who were around at the time will recall that it came about because the board was giving grants to ghost-busters. That hit the television screens, and everyone said: “Hey! This has got to stop.” The board learnt the lesson, and I think that the Government needs to learn the same lesson.

A very interesting thing on the international stage is that the Commission for Africa—which as members know, wants to see debt levels in Africa reduced dramatically through write-offs by wealthy nations, and overseas development systems given to those countries so that they can rise out of poverty—has come up against the central issue of good governance. Debt write-offs have been put in place but, as I read in a column in a newspaper recently, it has later been found that the money written off from the debt actually ended up redecorating the presidential palace. Not a cent went to people who were looking to better themselves in terms of education, health, and so on.

So that really does highlight the importance of the function we entrust to the Auditor-General and his staff. I do not know Philippa Catherine Smith personally. I have seen her CV. I know she is a lawyer, which probably means that she has quite a bit to learn about the art of auditing. Nevertheless, I am sure that from her legal perspective she can make a very important contribution, and United Future is very happy to agree to this motion.

I listened with interest to the previous speakers. The Minister gave us a somewhat detailed personal background of Phillippa Smith, and expounded on her qualifications. She seems very well-qualified for the job.

Mr Lindsay Tisch indicated—very well, I thought—the importance of the Office of the Controller and Auditor-General, and some of the challenges that lie ahead. The Hon Richard Prebble took those challenges quite a good deal further. I have to say that he might have a point, but for Phillippa Smith to accomplish the challenges on her own she would need to be Wonder Woman or someone like that, and I do not think she is quite that. The last speaker, Gordon Copeland, told us why audits are important, and I agree in very large measure with what he said.

So there is little for me to say, except that I was on the interview panel that Phillippa Smith came before. She is obviously not aware, but she was up against some first-class candidates, and she came through as the winner by a narrow margin. I was very pleased by the calibre of the people who applied for the position. I take this opportunity, on behalf of my colleagues in New Zealand First, to wish her exceedingly well.

Motion agreed to.