Photo: RNZ
A government report shows the cost of auditing school finances prompted a call to the Regulations Ministry's "red tape tip line" and an investigation.
It said a handful of schools spent more than 10 percent of their operations grants on audit fees, but the Education Ministry was already working on bringing the cost down.
The Education Ministry report to Education Minister Erica Stanford in June said Regulations Minister David Seymour wrote to her in May because the Regulations Ministry was investigating school audit fees.
It said Seymour blamed outdated regulations for rising school audit costs.
The paper said that was incorrect.
It said the increase was due to a combination of increased complexity of audits dueto changes in auditing standards, a shortage of auditors, and historic limits on audit fees.
"The audit cost is not based on the number of transactions or size of an entity, but rather the assessed risk of material misstatement occurring. Often, there can be a greater risk of this in smaller entities where there are limited people involved in the process and where a strong internal control environment can be difficult to implement or mitigate identified risks," the paper said.
It said the $25m annual cost of audits represented about one percent of total school funding.
"At a system level, a significant level of assurance is provided for a low percentage cost," the paper said.
"In comparison, the audit fees of other government agencies are noted to be between 0.3 percent and 0.9 percent of total revenue based on 30 June 2024 financial statements. This indicates that schools, as a collective group, are not dissimilar to other crown or government agencies."
It said 233 schools spent more than five percent of their operations grants on audit fees, and six of those schools spent more than 10 percent.
The paper said 441 schools spent less than one percent.
It said the ministry had already started a review of schools' financial reporting requirements.
"This project aims to provide simplified financial reporting requirements for schools, and reduced auditing requirements for appointed auditors," it said.
Earlier this year Auditor General John Ryan said in his office's annual report on school audits that the ministry needed to get on with the project.
"Although the Ministry has committed to the project, it has not yet allocated resources to complete it. In our view, given how some schools struggle with the current financial reporting processes, this project is increasingly important," the report said.
School annual reports for 2024 recorded audit fees ranging from about $22,000 for large secondary schools to about $8-9000 for primary schools with some showing relatively large increases since their 2023 audit.
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
