The Office of the Auditor-General’s 2024 school audit results, published 8 December 2025, reveal a systemic failure in financial governance. The data is stark: 27 schools required Ministry of Education financial guarantees, a 400% increase year-on-year. 64 audit reports flagged questionable expenditure, including boat cruises and principal travel. One school board maintained insufficient accounting records for three consecutive years, rendering its accounts unauditable. The audit trail shows 10 schools breached conflict-of-interest rules, 8 exceeded borrowing authority, and 2 violated international student scholarship legislation.
The Risk
This is not administrative error; it is a quantifiable governance deficit. For a director, the liability is calculable. The Companies Act 1993 imposes a duty of care, diligence, and skill. Inadequate financial record-keeping and weak control environments may indicate a failure to meet this duty. The financial exposure is direct: unlawful borrowing creates contingent liabilities, while misuse of funds like the $6,000 principal support grant represents a clear diversion of public money. The audit opinion itself is a key performance indicator—its absence or qualification is a direct reflection on the board’s oversight. Directors may be personally liable if a court finds this oversight fell below the standard of a reasonable director in the same circumstances, especially where statutory breaches are documented.
The Control
The solution is a forensic-grade control environment. This requires moving beyond policy to verifiable process. Implement a quarterly financial governance dashboard. It must track: 1) the status of all internal control attestations, 2) a complete log of transactions exceeding delegated authority, and 3) a reconciliation of all restricted funds against their intended use. The audit committee’s terms of reference must mandate direct, unmediated access to the school’s financial management system and external auditor. Treat the audit not as a compliance exercise, but as a stress test of your financial governance model.
The Challenge
These are the critical questions you should be raising at the board table:
| Can you provide me with the last three months of bank reconciliations and demonstrate, transaction by transaction, how every dollar from the principal support fund was spent against its defined purpose? | |
| What is the exact numerical variance between our current borrowing and our authorised limit, and what is the documented, board-approved plan to rectify it? | |
| Show me the evidence trail that our expenditure and payroll controls were operating effectively for the last quarter. If it’s an attestation, where is the supporting sample testing? |