Taxpayer not getting value, says Auditor

Press, 29 May 1978, Page 7

Taxpayer not getting value, says Auditor

Parliamentary reporter Financial management I in Government depart- [ ments could be improved [ markedly by changing the : financial year from March 31 to June 30, according : to a review of financial management and control in 30 departments tabled in Parliament yesterday by the Controller and Audi-tor-General (Mr A. C. Shades).

The review was conducted by three senior Audit Office staff and two accountants in private practice, Messrs M. S. Morris and R. O. F. Pyatt. Their report suggests that taxpayers are not always receiving the best value for money because departments have to make financial decisions within the framework of a tight budget cycle. At present departments receive advice of their fianncial allocations after presentation in June or July of the Budget for the year ending the following March. Formal approval of spending on capital worlds and capital equipment may not be received until August, September, or even later: five or six months into the financial year.

The report says that it is asking a great deal to expect efficient financial management when departments are uncertain of the resources at their disposal until well into the year.

Departments’ Budget allocations expire at the end of the financial year. As the allocations are based largely on the amount spent in the previous year, departments tend to spend the full amount available to protect future allocations. This often means that the departments place priority on ■ the purchase of items or plan work that can be completed and will come to charge within the financial year rather than priority based on need. If departments were advised of their ailoca* tions at the start of a financial year beginning on July 1, with the existing budget, cycle, they would have an additional three months in which to plan and commit spending more effectively. The same result could be obtained by changing the budget cycle but this would require presentation of the Budget in March, a change not considered practical within the New Zealand parliamentary programme. The change in the balance date need not affect the tax year, which could remain at March 31, says the report. The present balance date, March 31, falls at a time when economic activity is at a high level particularly in the construction and farming industries, and does not

accord well with seasonal fluctuations in export earnings. Balancing the Government’s books at a time of the. year when activity is high tends to make annual figures less comparable because an early (or late) season could result in costs coming to charge sooner (or later) than anticipated. This means that there can be inconsistencies in spending patterns between years. The report says that a further advantage of a June 30 balance date would be for the preparation of statistics. It is consistent with agricultural and trade cycles and has been suggested for a standard statistical year. The report says that Parliamentary control of Government spending could be improved through better information in the estimates and departmental reports. The same information would also provide a better basis for the Public Expenditure Committee’s review of the estimates. The report indicates that the present estimates format and content does not give Parliament an accurate picture of departmental spending and income. It says that departmental reports are variable, with “much' content of a discursive or philosophical nature.”