Procedural audits

Introduction

Road networks that are funded through the NLTP, are subject to periodic technical reviews. The reviews involve examination of the network assets as well as an audit of the processes used by the approved organisation that is responsible for managing the assets, to assess:

In selecting the approved organisations to be audited, three risk factors are considered:

  1. Known issues/risks;
  2. Levels of funding; and
  3. Length of time since the previous audit.

Most approved organisations are audited every three years, with those receiving a higher level of funding on a two ‑ yearly cycle. That part of the NZ Transport Agency responsible for State highways is audited every year due to being responsible for over half of the land transport programme.

An average of 33 procedural audits are carried out each year, including about four passenger transport audits.

Mandate

The Land Transport Management Amendment Act 2008, section 95(1)(e)(ii), requires the NZ Transport Agency to audit the performance of approved organisations in relation to activities approved by the Agency.

The Performance Monitoring Teams Charter states that this statutory requirement will be met by regular procedural audits and regular technical reviews of local authorities.

Planning the audit

In May each year, all approved organisations are sent a copy of a general circular showing the audit programme for the coming year. The general circular is also available on the NZ Transport Agencys web-site.

For each approved organisation included in the programme, the auditor will contact them about a month in advance of any audit and negotiate a suitable date. A letter is sent, confirming the details of the audit and requesting that the approved organisation has some information prepared at the time of the auditors arrival. It is useful and efficient, both for the auditor and for the approved organisation, if this preparation is carried out.

The audit process

An entry meeting is held to explain the audit process and establish relevant contacts with key staff.

The audit is carried out and then, at its conclusion, an exit discussion is held with key staff. Any issues are raised at this time to ensure there are no surprises in the final report.

Before the audit report is finalised, it is sent to the approved organisation for comment. The comments are considered and some text of the report may be changed as a result. The comments are appended to the report in full. A final report is issued after adoption by the Chief Executive under delegation from the Board.

Recommendations are followed up by regional liaison staff. Where necessary any over-claimed expenditure is recovered from the approved organisation.

The audit - what we do

Procedural audits focus on ensuring approved organisations comply with the NZ Transport Agencys requirements in accordance with the Programme and Funding Manual, procurement Manuals and various general circulars that have been issued to approved organisations. The audits include:

  • Reviewing documentation/ledgers supporting final claims submitted to the NZTA
  • Reviewing and validating a sample of transactions included in the general ledger
  • Checking a sample of contracts to ensure they have been let in accordance with approved procurement procedures
  • Looking at management of the contracts subsequent to them being let, including both financial and non-financial aspects
  • Validating annual achievement reports submitted to the NZTA.

Information

Information needed by the auditors in completing a procedural audit includes, but is not limited to:

  • Copies of each final claim for the period since the previous audit
  • Financial records, including the general ledger and any reconciling items to match the claim
  • A copy of the general ledger supporting the audited financial statements and an explanation of how it maps to the financial statements. Any differences between the two versions of the ledger are followed up to assess whether they have been adequately considered in terms of their impact on the claim
  • Documentation supporting a sample of transactions included in the general ledger (and any reconciling items)
  • A contract listing, showing all financially assisted contracts let since the previous audit
  • Contract documentation, as evidence that approved procurement procedures have been followed
  • Project files relating to the contracts audited, for assessing project management and whether road safety auditing requirements have been met.
  • Documentation to support any variations to contracts
  • For approved organisations with a professional services business unit, a copy of the contract between the unit and the approved organisation
  • Financial records, showing income and expenditure for any business unit (professional services or physical works)
  • For those approved organisations who have advance property purchases, a copy of the property return for each year since the previous audit
  • Documentation to support any property returns, including access to financial and process records for purchases and sales
  • Relevant NZTA manuals and general circulars (The Programme and Funding Manual, CPP Manuals, general circulars)
  • NLTP agreement and conditions of funding
  • Copies of the approved organisations latest external audit management report, the latest annual report, the latest planning documents
  • For passenger transport audits, a copy of the Regional Land Transport Strategy and the Regional Passenger Transport Plan
  • A copy of the approved organisations contract administration manual
  • A copy of the approved organisations delegations (both for letting contracts and for financial transactions)
  • The approved organisations consultants register (if used)

Common findings from procedural audits:

Most approved organisations have well structured systems for managing land transport. Recent audits have noted the following areas for improvement:

  • Contracts for in-house professional services being out of date
  • Inadequate accounting systems in place for in-house professional services
  • A lack of compliance with the requirement to carry out road safety audits (or to complete exception declarations)
  • Prioritisation of minor improvements

Passenger Transport Audits

Passenger transport audits are similar to standard procedural audits, but the contracts are let for Public Passenger Transport services, rather than for land transport projects or maintenance. Some aspects of the standard procedural audits are not relevant to passenger transport audits and there are some additional areas of interest. These additional areas of interest are:

  • validating patronage funding claims, concessionary fare schemes and Total Mobility schemes;
  • considering how the approved organisations achieve the constructive tension required to comply with the NZ Transport Agencys procurement procedures for concessionary fare schemes. This is normally achieved through meetings between councils, users and the operators;
  • the status and content of the Regional Land Transport Strategy and the Regional Passenger Transport Plan, and;
  • the process for registering public passenger transport services in the region.

Common questions asked during audits:

During our audits, we are asked a wide range of questions. A few common questions have been selected to share on this web-site:

Question 1: How do I print out a copy of my final claim through LTP online?

Answer: To print a copy, your system needs to be set up to map LTP online to Internet Explorer 5 rather than a later version of Internet Explorer

Question 2: When do we need to consider road safety audits?

Answer: Road safety audits must be considered for each key phase of every project. These are any new works or any replacement works which change alignment, visibility, or any other safety aspect such as the surface. If a safety audit is considered and it is decided that an audit is not necessary, the decision must be documented as an exception declaration. A template of the exception declaration provided in Road safety audit procedures for projects (Manual No. TFM9), Appendix 1, Part B, available on the Land Transport NZ website

Question 3: Who do we contact as the first port of call?

Answer: Your regional liaison staff member

Question 4: Where do I find the audit programme?

Answer: The audit programme is published annually in a NZ Transport Agency General Circular, which may be looked at on the NZTA web-site. Here is an example of the programme.