Woodhouse Michael; Robertson GrantHon MICHAEL WOODHOUSE (National): Thank you Madam Chair. I'm going to go a bit backwards now that Mr Smith has raised his issue and with the Minister's reply while it's still fresh in my mind about the intention of this as set out in the Controller and Auditor-General's letter dated 2 July. I would add incidentally that while the Minister points out the first sentence in that—and Mr Bayly will speak to this I'm sure—the National Party's position was certainly an openness to consider it but at no point did the party indicate its support for the legislative changes nor could we have done that before the caucus saw the bill and was able to consider it for themselves yesterday morning. So I think that's perhaps a misunderstanding. I don't believe that Mr Ryan intended to say something that wasn't accurate but it's worth putting on record that the support was to have a decent look at this as we are responsible to do. It is our requirement.Now back to the question of what the Minister or the Government knew and when and the Minister has indicated to the committee that he was first alerted to this on 16 June and that was followed up on 17 June. My question is around the Budget bid process. I don't think the Treasury documents have been released on to the website yet but it's customary that after a Budget a swag of documents will get uploaded on to the Treasury website in due course. Usually the Government is a bit coy about Budget bids that aren't successful and there's big black lines through lots of those documents but I think given the situation we find ourselves in the committee I think deserves an explanation—or an understanding rather—of the degree to which the salary constraints that the Auditor-General clearly knew was happening because they've lost 27 staff over the last year were reflected in a Budget bid that was put to the Government and whether or not that bid was successful.Now it may well be that it is and it's simply a case that it takes longer—as we know from this Government just making an announcement and an appropriation doesn't make things happen.Hon Scott Simpson: They're good at announcements.Hon MICHAEL WOODHOUSE: They are good at them. That's right. But there's always a pretty significant body of work particularly when it comes to recruitment of staff in short supply and so it may well be that there was a successful Budget bid. But I think we need to know whether or not there is a remedy coming and whether that was sought in January or February when the Budget bid process was under way.In my time—the last question I have at this stage relates to the answer that the Minister gave to Mr Smith in respect of the intention as articulated in that letter of 7 July. Why does the bill not reflect that intention? Because the Auditor-General is very clear about which audits will be completed within the current statutory time frames and which ones he and his teams will need an extension of time but the bill is a broad blanket. Once this bill is passed the best endeavours don't become law because the bill is much wider than that. Every Crown entity that's subject to the Crown Entities Act and every local government and council-controlled organisation that's the subject of the Local Government Act gets the extension. So why are we not being more precise about this and putting into law that which is intended by the policy?Hon GRANT ROBERTSON (Minister of Finance): On the last point that the member's made I would have thought it was reasonably obvious that an Officer of Parliament has a certain amount of discretion. The Auditor-General has that discretion and I don't think it would be the right thing to do for this Parliament to direct him in that way. Now that is entirely in Parliament's hands obviously but we do tend to trust the Officers of Parliament to make the kinds of decisions that the member is talking about the kinds of prioritisation decisions.In response to questions from both myself and Mr Bayly the Auditor-General has outlined the prioritisation and the sequencing in the way that I just did but I think it is certainly my view and I believe the view of the Government members of the House that we trust the Auditor-General. We believe the Auditor-General should be the person who makes decisions about specific audits and the specific times they happen. The practice of Parliament getting involved in that would have potentially very unfortunate consequences. For example a member of the House may decide that actually they'd rather that a particular Government department wasn't audited and move that around in the sequencing. We would not like that kind of approach. That would be a level of interference I think that we would not be comfortable with. So it is a matter for the Auditor-General the order in which he and his staff undertake their work and I don't believe it would be appropriate for the House to interfere in that.On the member's other question I want to clarify for him how the staffing arrangements of the Audit Office work and where the funding comes from. Audit staff who do their work in this space are funded from audit fees which are charged to the agencies. So it's not actually an appropriation matter. Non-audit staff within the Audit Office are funded out of an appropriation and it is my understanding that when the Auditor-General appeared before the Officers of Parliament Committee on 11 March he indicated that audit fees were going to need to increase in order to maintain a competitive pay structure within his office and that Parliament had also approved funding to adjust pay levels for the non-audit staff in order to make sure that they had comparative pay rates with the rest of the public sector. So in terms of these people here that's not an appropriation matter.Hon MICHAEL WOODHOUSE (National): Thank you Minister for that explanation. I would make one comment and then finish with a question before I'm sure my colleagues have others. I fear the Minister may have conflated two things. One is the exercise of discretion by the Auditor-General about priorities in carrying out his function with his legislative obligations to do them in a certain time frame. He has no discretion to breach those time frames. That's why we're here. We're kind of arguing both sides of the same coin in that regard in the sense that we're being asked not for him to have greater discretion; he wants the legal power to have a longer period of time. I think it's not unreasonable for this House to grant that if it so wishes but to be a heck of a lot more specific about that than we are than the broad blanket and many of the Supplementary Order Papers that are being tabled right now actually speak to that point.My colleagues will speak to it specifically but if certain organisations are going to be prioritised fine—exclude them from the extension of time. The question I have—and I thank the Minister for clarifying the point about how audit fees are charged and I expect that the appropriation is probably for the external auditors the big four" and so on that actually subcontract out and then they charge Audit New Zealand—Hon Grant Robertson: That will all be under the fees.Hon MICHAEL WOODHOUSE: OK but if those fees have gone up was a bid for extra fees put in and was it accepted?Hon Grant Robertson: They don't need to bid.Hon MICHAEL WOODHOUSE: The Minister says they don't need to bid. OK. But they don't have carte blanche—Hon Grant Robertson: They just charge. Hon MICHAEL WOODHOUSE: That's their charges to the client. That is the Crown entity. So my question then is: when an external organisation like PricewaterhouseCoopers or Deloitte is used to carry out their audit as many of them are are those fees charged to the Audit Office or to the client—in that case say the school or the DHB or what have you? The reason this is relevant is if the fees have gone up and the client is paying them that's fine—I understand that—but if the fees have gone up and the Office of the Auditor-General is paying them then that would have resulted in a Budget bid.Hon GRANT ROBERTSON (Minister of Finance): I can confirm they're charged to the clients."