An audit of New Zealand schools’ financial statements has found issues with 88 of them — the highest number in five years.
About $9.6 billion in government funding went to 2468 schools during the 2023-24 financial year.
Most schools received a "standard, unmodified" audit report from the Office of the Auditor-general (OAG), which meant it believed their financial statements fairly reflected their transactions for the year and their financial position at the end of the year.
However, Wallacetown School, in Southland, was one of seven schools across the country that were considered to be in serious financial difficulty, and needed a letter of support from the Ministry of Education to confirm it was operating as a going concern.
A further 88 schools (nine of which are in Southland and none in Otago) contained "modified opinions".
It meant East Gore, Garston, Heddon Bush, Mataura, Otautau, Saint Patrick’s (Invercargill), Salford, Southland Adventist Christian and Waikaka primary schools did not provide enough evidence to satisfy the OAG that the financial statements were a fair reflection of the school’s use of public money; or the OAG disagreed with the schools about an aspect of the information they included in their financial statements.
"Although it is a small proportion of all school audit results, it [88] is the highest number in the last five years," the report said.
"The most common reason for a modified opinion was inadequate or inaccurate information about school maintenance costs.
"Schools are required to have 10-year plans to maintain the ministry’s buildings, and provide for a regular cycle of maintenance.
"Many schools did not have adequate provisions for cyclical maintenance or lacked enough evidence to show that their provisions were a sensible amount to set aside, and some had no provision for maintenance at all.
"Given how many schools struggle with this requirement, we consider that the ministry needs to support schools with reviewing and updating these plans."
The report also called for a simplification of financial reporting processes for schools while ensuring schools complied with accounting standards and provided transparency for school communities.
It said the ministry needed to explore what form of assurance was needed over a school’s financial information and how that assurance could be provided in a cost-effective and timely manner.
"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 OAG also called for an improvement to school payroll processes and controls.
"Many payroll transactions are initiated by schools, making it essential that schools have a strong control environment. Many schools do not."
It also asked the ministry to help schools better control sensitive expenditure — any spending that could give private benefit to staff.
"In our 2023 audits, we found incidences where schools had used funding for principals’ professional coaching and well-being support, in ways that did not have any educational benefit for the school.
"We also noted incidences where the educational benefit of gifts provided and overseas travel were not well defined.
"We recommend that the ministry determine appropriate actions to take when school spending on professional coaching and wellbeing support funding was inconsistent with the purpose of the funding or inconsistent with ministry guidance."
It also recommended the ministry review the accountability requirements for schools that had closed.
When a school closed, it must prepare a final set of financial statements up to the date of closure, and a liquidation statement detailing how remaining assets had been distributed.
Flagswamp School in Otago (closed in 2020) and Isla Bank School in Southland (closed in 2018) had not done this.
"If the auditor does not receive all the information required to audit the final set of financial statements and the liquidation statement, the audit cannot be completed.
"There have been significant delays in completing audits for closed schools, and some incomplete audits date back to 2014."
