New Zealand Novopay audits: errors and later controls

What the audit found

Novopay became the central payroll system for most state schools in August 2012. The Auditor-General's report on the 2012 school audits found that payroll errors, incomplete information and weak reporting delayed audit work and increased audit costs ¹.

The report said manual adjustments were needed to produce reliable school payroll information. Schools and auditors had to examine payroll records, overpayments, leave balances and funding-code errors before accounts could be completed ¹.

The Auditor-General distinguished the annual-audit effect from the separate Ministerial Inquiry into implementation. The audit focused on whether school financial statements could be supported and completed ¹.

The official response

The Ministry of Education told the Auditor-General that routine payroll reached a steady state in mid-2013. It created a Novopay business unit and began work on data quality, pay-centre controls, security, privacy, overpayments, leave and tax ¹.

The Auditor-General recorded that significant work remained after the ministry's stability assessment. Manual procedures and the 2014 start-of-year problems showed that long-term reliability had not yet been established ¹.

Parliament

The Auditor-General reports to Parliament on public-entity audits. The 2014 school-audit report placed Novopay's effect on about 2,500 state schools and their financial reporting in the parliamentary record ¹.

No separate select-committee conclusion is relied on for this page. The audit reports and their published recommendation updates supply the outcome trail reviewed here ^1,4.

Follow-up audits and recommendations

The report on 2018 school audits recommended controls within the payroll system, follow-up of unusual transactions and more support for boards. It said error exceptions had reduced but some recurred ².

The 2019 audit results showed the value of gross overpayments and funding-code errors had fallen from earlier years. The ministry's auditor continued central data analysis and annual reporting on payroll controls ³.

For the 2021 audits, the Auditor-General found that replacing the Novopay Online transaction report during the move to EdPay weakened a school control and caused extra audit testing. New guidance issued in March 2022 restored reporting support, and the recommendation was not repeated ⁴.

Courts, tribunals and investigations

The 2014 report noted uncertainty over a High Court claim alleging breach of statutory duty arising from Novopay service failures. It did not provide a final judgment on that claim ¹.

No later court ruling is used to determine the audit findings on this page. The outcome classification rests on the official audit follow-up and system replacement record ^1,4.

Where it stands now

EdPay replaced the Novopay Online interface in October 2021, and that interface was decommissioned. Education Payroll Limited continued to administer the school payroll for the ministry ⁴.

The 2023 recommendation update said schools had re-established the control lost during the transition and that the ministry would keep monitoring future changes with Education Payroll Limited. The Auditor-General did not repeat the payroll recommendation but said monitoring would continue ⁴.

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