Annual Reporting and Audit Time Frames Extensions Legislation Bill

Members, we now come to Part 2, which is the debate on clauses 5 to 7, the Amendments to the Local Government 2002. The question is that Part 2 stand part.

Thank you, Madam Chair. I thought I’d talk to my tabled amendment, just as a bit of a change. My tabled amendment deals with the issue of the two-year clause, and specifically deals with clause 6 and, actually, clause 7. So what it does is it deletes new clause 5(b), which states: “in relation to the financial year ending with 30 June 2022, the report referred to in that subsection must be delivered in accordance with subsection (1)(b), and made available in accordance with subsection (1)(c), no later than the close of 30 November 2022.” Similarly, clause 7 also deals with a similar time frame—albeit it notes that it will have to be the 31 December date, as opposed to the 30 November date.

The purpose of this tabled amendment deals with the second year. Obviously, Mr Robertson, in predetermining the legislation, which he delivered to us on 1 July, always anticipated a two-year stand-down period, or delay, for all entities—and, of course, we’ve been debating some of those entities before. But in terms of local government, it also specifies that local government entities—and, of course, it doesn’t specify or limit who could be delayed; it could be any local government entity. The purpose is saying, “Look, if you’re going to give a delay, why don’t we do it on a basis that we allow, under legislation, for one year, and reconsider it thereafter?”

I suppose that gives rise to a wider issue: if you did that, that would force the Government to become a little bit more creative than it has been, in the sense of, actually, in terms of the Auditor-General fulfilling its role, what could be done to assist the Auditor-General to do that in the second year of this delay? And that might involve making sure that we’ve got access to the so-called 200 missing auditors who could come through managed isolation and quarantine, could involve a discrete and rapid training programme to get auditors into the area of becoming auditors, if they are qualified accountants or near qualified.

And then, it also gives rise to the Government maybe having a discussion with the Auditor-General around remuneration, because what I don’t think anyone in this House wants to do is to be in a situation where we are coming back in two years’ time because COVID is still carrying on and the Government still has a policy of locking down the borders—unnecessarily so—and we are having to do another extension. So this is why the tabled amendment suggests that we should limit the extension to only one year, and, if need be, this piece of legislation passed under urgency can take place pretty quickly, as the Government is inclined to do by passing it through under urgency.

So the first thing is that I assume the Minister was the person who directed the Parliamentary Counsel Office to write this draft, which was presented to us on 1 July.

💬 Chris Bishop: Cabinet.

So, if that was the instructions that were given, what advice did he have or take in terms of limiting it to one year or extending it to two years? Secondly, the other aspect that I’m quite keen to hear from the Minister on is around whether he contemplated an alternative process, particularly in the second year, and maybe the third year, if that needs be, of maybe thinking about an Order in Council. So I’d be quite keen to hear the Minister’s views around those aspects.

Thank you very much, Madam Chair. I’m covering a little bit of similar ground from Part 1 of this in terms of how we got to the two-year number. I covered off that, firstly, that was the request of the Auditor-General—as the member Andrew Bayly knows, both he and I were asking questions of the Auditor-General around why that was required, and many of the issues he’s raised, actually, about what else would you do in the meantime. So the first answer is the same one I gave to Part 1, which is that I would rather do it this way than come back again and have the House’s time taken up.

Again, I have a great deal of trust and faith in the Auditor-General, who has assured both myself and the member who’s asked these questions that this would only be used in the event that it needs to be used. But some of the issues that exist are not going to be resolved inside one year. That, in particular, is the global shortage of auditors. Now, we can do more, we hope, over the course of the next two years to see people come in from offshore for the large accounting firms who assist the Auditor-General during audit season to be able to bring people in. So we hope that we won’t need to go beyond the two years, but we can’t guarantee all of that global shortage will be resolved inside a year.

Equally, the Auditor-General wants to take some time. Again, I think he said this in one of those letters, that he wants to take some time to look at what innovative processes he can put in place to make sure that we can move more swiftly through the audit process as well. So we want to work on that. There are technological solutions that might emerge over the next couple of years. So it’s my view that two years is the appropriate length of time. It covers off the fact that it will take some time for the world to get back to a sense of pre-COVID normality. It may take a considerable amount of time, but we believe two years is the appropriate length there. It also allows the opportunity for the Auditor-General—and, to take the member’s point, the Officers of Parliament Committee, to work with the Auditor-General on a range of options. That might mean that this is not needed for the second year and certainly not yet needed in the period beyond there.

In answer to his other part of the question, his colleague Mr Bishop has already answered the question for him: it is Cabinet that issues those instructions. This bill went through Cabinet and the Cabinet legislation process.

Thank you, Madam Chair. It’s not a great surprise that we’ve ended up in this position because, if we look at many of the stories that we’ve been dealing with for the past little while, and even in the last 24 hours, three headlines: “More than 80,000 job listings as employers battle for staff”, next quote, “Stretched farmers frustrated at exemption process”, next quote, “Business confidence rebounds but labour shortages worst on record”. It is no surprise that we’ve ended up here.

In speaking to Part 2 of this bill tonight, I’m just really wanting to make a point that this report is an example of the fine work of the Office of the Controller and Auditor-General, and this beef that we’re having tonight is with the Government, not the Auditor-General. This is the productivity of the Auditor-General, this is the productivity of an apple orchard [Holds up two apples]. So I would like to propose a tabled amendment—I’ve got a tabled amendment here, and my amendment suggests that we have a new clause 8. So “After clause 7, insert 8 New section 98A, after section 98, insert: 98A Extend the apple picking season—(1) All local Government bodies, where able, for the financial year ending 30 June 2021 should ask that apples stay ripe for the picking of an extra three months. (2) This section is repealed at the close of 31 January 2023”. So the explanatory note for the Minister with my tabled amendment is that “While the Government is able to extend”—

CHAIRPERSON (Hon Jacqui Dean): Order! Order! Thank you. That tabled amendment is out of scope with the bill and so therefore ruled out of order. The member has a few more minutes to speak if she wishes to make a speech which is relevant to the bill.

My only addition—and I won’t speak to the amendment any further, thank you, Madam Chair—is that there needs to be some consistency in the decisions that this Government choses to make over the productivity of one industry as opposed to another. Thank you.

Thank you, Madam Chair. I just want to return to what the Minister said before, and thank you for addressing the matter. In my comments before, I wasn’t asking the Minister to solve the global audit problem. The issue is that we have an issue in New Zealand. We have 27 staff that have left Audit New Zealand and, under his own reckoning and public announcement before, an estimated 200 shortfall of auditors in New Zealand. New Zealand is the issue, not the global issue.

So one of the things in that whole issue about the two-year time frame is whether that’s going to be sufficient. I know the Auditor-General has asked for two years, but I asked specifically whether he took advice on another alternative, which is an Order in Council option, because what seems apparent to me is that the bill was drafted—and I take the point, through the Cabinet, but I’m sure the Minister had a very strong view on it—and that’s come through and been presented to us last week. There has been a consideration and discussion subsequent to that that led to this 2 July letter, and yet there has been no change to the bill, and so that’s quite a significant thing.

I think, in terms of the capacity constraints, which is the heart of why we are talking about whether we have a one- or two-year delay, the other question, and I’m quite specific about it, is: to what extent has the Minister—and I know it’s not the Minister’s direct responsibility, but we have a parliamentary responsibility to make sure that we do get to a situation as soon as possible where all the audits of every organisation of Government are actually audited on the due date.

The big issue I’ve had is, even with the councils, I note in the 2 July letter that smaller councils are likely to be dropped off the list. The issue is: maybe some of those, if you look at it from a risk perspective, in fact might be ones that we particularly want to see are subject to an audit, because, of all the audits that the Auditor-General undertakes, they’re the ones that possibly may lead to some significant issues that should be highlighted as soon as possible and not delayed. So the question comes back to that prioritisation, which I think is a pretty important issue.

On the last point, on the prioritisation, we’ve been over it a number of times, so I won’t rehearse it again. But the member, in fairness, did raise the question about the Order in Council in his last contribution, and I didn’t respond to it, and I apologise for that. Indeed, as the member and I discussed, it could have been possible, simply, to take the approach of an Order in Council when there is a need to do something like extend time frames.

My view was that we needed to take some time to consider whether that was an appropriate long-term instrument for dealing with situations like this. At the moment, we have to use the Act to make the change, but if we were to go down that path, I just wanted to take a little bit of time to work out whether that is the best way to do this. Because we can see from tonight that there are a number of strongly held views about meeting statutory time lines. I know that the Auditor-General—and he has written it to both myself and Mr Bayly—would rather not be in this position, and, generally speaking, is not, and does meet the statutory time lines, but exceptional circumstances create this situation.

So, yes, we did consider, to answer the member’s question, the Order in Council process, and it could well be what we do in the future, but I think we need to consider that. I’d invite, potentially, the Officers of Parliament Committee to have a look at that as well. But we will consider it in the future, but this is the process we have in front of us today.

To go back to the member’s first point, the global issue is what impacts here, because the way in which this process is undertaken, in the intense period where these audits are needed, does involve, and has always involved, people coming from offshore, either to the Audit Office itself or to the larger accounting firms who take on the work that the Audit Office is not able to take on. So it is about a global shortage. That global shortage may not resolve itself in full inside a year. We hope that we will see more people looking to come to New Zealand and Australia and elsewhere as we move through and we get to a point where we don’t have the amount of border restrictions that we do. So, at the moment, it is the global issue that sits behind this. We will work with the Auditor-General, as indeed the Officers of Parliament Committee will as well.

Madam Chair, gosh, thank you very much for granting the call. It’s great to be the last call, I hope, because I do want to ask—and it potentially may take some time; I’m interested to hear the answers in the morning. Referring to Part 2, my specific question is: Minister Robertson’s articulated on 16 June he was notified around the degree of vacancy. So I’d like to ask if the vacancies for Audit New Zealand could be tabled—the vacancies that are currently there today and for every month in the last 12 months—because I want to substantiate the point that this is absolutely a new phenomenon that just appeared on 16 June, which is what the Minister has told this House. So I would like those numbers to be tabled—there’s only 12 numbers we’re looking for, by month. I want to just ensure that what is being said correlates with those numbers, because when I looked at the website for Audit New Zealand this evening for vacancies, do you know how many I found? Well, I’ll tell you: I found four.

💬 Hon Member: Four?

Four—four vacancies. Maybe I missed a few, but that’s how many are on the website this evening. And if I quote the departmental disclosure statement, Part One, “to mitigate the impacts of a severe”—and, as the Minister has said, global—“shortage”—

CHAIRPERSON (Hon Jacqui Dean): Order! Order! The member will address Part 2 of the bill.

Sorry. Yes.

💬 Hon Member: It’s Part One of the statement, though.

Sorry, the departmental disclosure statement Part One—my apologies for not being clear. Within the departmental disclosure statement, it talks about severe shortages, and hence what I’m trying to link back to this is around the number of vacancies.

Can we also get some context around staff turnover numbers, which are also being used as a reason why we are having to put in place this legislation under urgency? In particular, are those turnover levels today, versus, say, 12 months ago, significantly increased or different from normal? I think that would be fair to substantiate those points.

The other aspect, as well, is I want to understand—and just so you know, I’ve got a couple of other new areas of investigation that I probably have to talk about tomorrow—was there any impact of the public sector pay freeze on this entity? Now, of course, they’re a separate entity—separate. But I don’t know. They’re a separate entity, and I get that, but I want to understand, are we dealing with maybe something that this Government has caused in regards to the pay sector freezes? Because my understanding, having talked to a number of senior people within the Auckland market in recruitment and other areas within the firms that we’re talking about, is that the private sector has, in effect, increased graduate audit role salaries by about 14 percent—seven grand—and that’s because of factors relating to a number of things that we’ll probably talk about a little bit later on. But I’ll leave it there for the moment.

Members, the time has come for me to leave the Chair. The House is suspended until 9 a.m. tomorrow morning. Thank you.

Sitting suspended from 9.58 p.m. to 9 a.m. (Thursday)