Part 6: Consistency of the compliance function
6.1
Our audit focused on the licensing and compliance activities of regional offices, carried out by Regional Compliance Officers, Senior Compliance Officers, Compliance Officers, and Compliance Support Officers.
6.2
In this Part, we discuss the consistency of the regional offices’ practices in relation to:
- recruitment and induction;
- compliance resources;
- training resources;
- the District Court; and
- inter- and intra-office decision-making.
Our expectations
6.3
We expected the Authority to have:
- consistent recruitment and induction procedures throughout the regional offices;
- compliance resources, training, and policies and procedures for granting a passenger endorsement on an applicant’s driver licence, in order to comply with the applicable legislative requirements, and to promote consistent decision-making; and
- procedures for the exchange of best practice, or discussion of common issues.
Recruitment and induction
6.4
Most Compliance Section staff have an enforcement background (that is, former Police or Traffic Safety Service Officers). Each of the 4 Regional Compliance Officers we interviewed, and 2 of the 3 Senior Compliance Officers, came from an enforcement background.
6.5
While the Authority has an induction policy, we found different approaches to induction between regional offices. For example, one task for compliance staff is assessing applications. There is a Compliance Officers’ Resource Manual for Passenger Service Licensing (compliance manual) that includes guidance for assessing applications for passenger endorsements. However, staff are instructed that the legislation is their primary guide because it is so prescriptive. Inductees are placed with a “buddy” – an experienced staff member who trains them, on the job, in decision-making. There is also a general introduction to, for example, the computer systems and filing.
6.6
The Christchurch regional office had a slightly more formal approach. New staff visit the Authority’s National Office, and are required to read a booklet21 produced by the Crown Law Office in 1988-89, which provides guidance for decision-makers. The Palmerston North office uses an informal induction guide, prepared by a Regional Compliance Officer in Dunedin. Generally, though, there is heavy reliance on more experienced staff passing on their knowledge and skill at examining an application, and new staff attempting to predict what decisions senior staff are likely to make.
| Recommendation 53 |
|---|
| We recommend that Land Transport New Zealand ensure that staff follow a consistent induction process, in line with the induction policy. |
Compliance resources
6.7
The Authority does not have any policies about the exercise of discretion in the fitness and propriety assessment because of a concern that policies could be seen to fetter the discretion of compliance staff. The stated guide is to use statutory criteria. However, there is an established body of case law, with key principles that could be distilled, relating both to fitness and propriety, and to other issues. These principles could be turned into guidelines and used judiciously without being prescriptive, in order to not fetter discretion.
6.8
Regional Compliance Officers had different “rules of thumb” or benchmarks. For example, one told us he had a threshold of 3 speed camera tickets in a year before looking further at a new or renewal application for a fit and proper person assessment, so these standards emerge regardless of whether formal guidelines exist. It is important that the Authority strives to achieve a nationally consistent, principled approach to its decision-making. This is unlikely to occur without organised and consistent training and policies.
| Recommendation 54 |
|---|
| We recommend that Land Transport New Zealand prepare guidelines to promote a nationally consistent, and principled approach to the exercise of discretion, that includes a concise summary of relevant principles from case law. |
6.9
The Authority’s compliance manual contains a checklist, based on statutory criteria, for assessing whether an applicant for a passenger service licence is fit and proper. It also contains guidelines from decided cases on how to consider matters such as the significance of historical convictions when assessing fitness and propriety. This checklist, and case law guidelines, could be used for considering applications for a passenger endorsement.
| Recommendation 55 |
|---|
| We recommend that Land Transport New Zealand ensure that compliance staff use the checklist in the Compliance Officers’ Resource Manual for Passenger Service Licensing for assessing an applicant’s fitness and propriety. |
6.10
There was varying knowledge of, and accordingly varying use of, manuals and the Authority’s intranet. The compliance manual is available on the intranet. Some staff were unaware the compliance manual existed, and most did not use it extensively, preferring to rely on the buddy system and the legislation. The compliance manual is a useful tool, and would have required significant resources to write.
6.11
The compliance manual refers to other resources that compliance staff should be familiar with – legislation, fact sheets, study guides, Brooker’s Law of Transportation, Authority publications, and various Road Codes. Knowledge of the compliance manual and the other resources facilitates and complements staff learning of the law relating to the transport sector.
6.12
An Appeals Index of recent case law is available for staff to use, but they tend to rely on their own knowledge to make a decision on an application. Staff refer to case law only when they are faced with a difficult decision, and they believe the case law provides advice on only what aspects should be considered in a decision, not the decision itself.
6.13
Many staff have considerable experience in making decisions about whether an applicant is fit and proper, so will not need to refer to case law every time in making a decision. However, it is important that staff use the resources available when making decisions, and that they are encouraged to regularly refresh their knowledge of the applicable case law.
6.14
In one region, the Regional Compliance Officer’s approach to historic convictions was inconsistent with the guide in the compliance manual, which was sourced from case law. Encouraging staff to be familiar with the resources available to them helps to ensure that sound decisions are made. This should facilitate a consistent approach.
| Recommendation 56 |
|---|
| We recommend that Land Transport New Zealand staff be encouraged to use the resources available when making decisions (including the Compliance Officers’ Resource Manual for Passenger Service Licensing and the resources referred to in it), and that programmes be established to regularly refresh staff knowledge of the applicable case law. |
Training resources
6.15
In addition to courses suggested or requested through the performance management system, the Authority has created a New Zealand Qualifications Authority unit-standard-based qualification for compliance staff. It is called the National Certificate in Public Sector Compliance Management (Road Transport).
6.16
To prepare the standards for the qualification, the Authority had to determine the roles and responsibilities of a Compliance Officer, and the appropriate levels of performance required to achieve a competent standard. Compliance staff helped to prepare the qualification, and also produced policy or training material for the Authority’s National Office. This is a good use of their operational knowledge, but affects the regional offices’ ability to cope with their workload.
6.17
The qualification is compulsory for all new staff, while existing staff members are encouraged to enrol. Existing staff can cross-credit some of their existing experience against the standards. All staff members receive $2,000 after they complete the qualification.
6.18
During our audit, staff expressed concern that the creation of the new organisation (Land Transport New Zealand), and the proposed reorganisation of the Compliance Section’s functions (see Part 7), would affect the currency of the individual unit standards that make up the compliance qualification. Notwithstanding this uncertainty, we consider the qualification to be a useful tool for training new staff, as well as refreshing the knowledge of existing staff. We give credit to the Authority for preparing and implementing the qualification, as it will help to promote consistent practice across the organisation.
Regional offices and the District Court
6.19
The District Court has 2 roles in respect of the taxi industry:
- applicants who fail the fitness and propriety assessment may appeal to the Court; and
- the Authority may prosecute people in the taxi industry for not complying with legislation.
6.20
With such a large volume of applications for a fit and proper person assessment, we expected a steady number of declined applicants would appeal to the District Court. However, declined applicants lodged only 42 appeals during the period 2001-02 to 2003-04, including cases that were withdrawn or discontinued. We are concerned that, given the low number of appeals against the Authority’s fitness and propriety decisions that go to Court, the regional offices did not appreciate the importance of taking test cases for new or unusual circumstances.
6.21
While each case must be considered on its own merits, there are some situations where it is legitimate for the Authority to take a case to the Court to obtain judicial guidance. Such situations arise where the facts mean that a decision is balanced, or a new factor arises, and there is a question about the relative weight to put on that particular factor. In such situations, there is value in obtaining a precedent that will provide guidance on how to approach similar decisions in future.
6.22
One Regional Compliance Officer told us he recognised the value of getting judicial support or clarification of the standards they have set in their region (for fitness and propriety assessments, and the non-compliance required before Compliance Officers can consider a person unfit and improper, and revoke their endorsement).
6.23
As noted in Part 3, the Authority has used a “without prejudice” letter (WoP) on 1211 occasions during the period from 2001-02 to 2003-04, as a means of warning borderline applicants that committing further offences in the next 12 months could lead to the Authority revoking, or refusing to renew, their endorsement. There is a risk that the WoP could be used in such a way that any borderline cases will be approved, especially given the possibility that declined applicants will appeal the decision at the District Court. The Authority needs to actively manage this risk.
6.24
The Authority does not have a policy on when to prosecute those who may have committed offences. The Crown Law Office has produced Prosecution Guidelines to ensure officers and agencies of the State start and continue prosecutions on a principled and publicly known basis. The guidelines state that, in making the decision to initiate a prosecution, there are 2 main factors to be considered – evidential sufficiency and the public interest. We are concerned that these 2 factors are not the main consideration of the Authority’s compliance staff when they decide whether to prosecute.
6.25
We note that taxi authorities in other jurisdictions have written prosecution policy guidelines to ensure a consistent approach to enforcement action. Adopting a prosecution policy would ensure that the Authority has a consistent approach to using court enforcement, and that regional offices use the Court to establish precedents where appropriate.
6.26
The regional offices have different approaches to the District Court. Several offices expressed reluctance to prosecute, citing the resources involved and the political risk if they lose. Some regions had not brought a prosecution for some time, but the Authority responded that it was not indicative of a lack of monitoring. Rather, it indicated that compliance was achieved by means other than prosecution, which the Authority believes is not the best method to achieve industry compliance.
6.27
While time- and resource-intensive, court action is a tool that needs to be used, where appropriate, to improve compliance and act as a deterrent. Active prosecution is particularly important when the Authority relies on a “willing compliance” philosophy. The risk of prosecution provides an incentive to be compliant, which is necessary to encourage compliance.
6.28
Court action is also an option to establish a precedent, which is particularly important in relation to the fitness and propriety assessment. We note that the Authority disagrees with our view that prosecution improves compliance and acts as a deterrent.
| Recommendation 57 |
|---|
| We recommend that Land Transport New Zealand prepare a prosecution policy, based on the Crown Law Office’s Prosecution Guidelines, to ensure that regional offices take court action appropriately and consistently. |
6.29
Sometimes, there is no separation in a regional office between the investigation of a case and the decision whether to prosecute, which can lead to a breach of the principles of natural justice. For example, compliance staff who make decisions can also take part in auditing or investigation. It is important that there is separation of the roles so the decision to prosecute can be made independently, based on the facts obtained during the audit or investigation. The Authority has recognised this problem, and has attempted to address it in its proposed reorganisation of the Compliance Section’s functions (see Part 7) by separating the auditing or investigation roles from the decision-making role.
6.30
Legal resources are available to the regional offices. One employee is a former Compliance Officer who has trained as a lawyer. This employee is sometimes available to conduct court cases in the regions, but the regional offices otherwise have access to lawyers in the National Office.
Inter-office consistency in decision-making
6.31
The Authority has several mechanisms for exchanging information between the regional offices. For example, if an application is declined or an endorsement suspended or revoked, and the decision is appealed to the District Court, a ruling there can provide guidance to the Authority.
6.32
The Regional Compliance Officer in Hamilton maintains a national Case Law Index, and is responsible for periodically sending updates to the regional offices. However, the Regional Compliance Officers we spoke to believed that judicial decision-making is inconsistent between the different regions, and that the Regional Compliance Officers make different decisions to account for the different approaches of judges in each area.
6.33
Regional Compliance Officer meetings occur about every quarter (although there is no set time for these meetings). The meetings enable Regional Compliance Officers and Senior Compliance Officers to discuss issues that affect all the regional offices. In addition to sessions on technical issues, the agenda for these meetings includes discussing peer review matters. Outside these meetings, the Regional Compliance Officers advised us they might discuss difficult cases by telephone or e-mail.
| Recommendation 58 |
|---|
| We recommend that Land Transport New Zealand adopt a formal method for peer review of the Compliance Section’s exercise of its statutory discretion, outside the Regional Compliance Officer meetings. |
6.34
There have been several Compliance Officers’ conferences, held on an infrequent basis. The last conference was held in 2003, but there had not been one for many years before that. There are tentative plans for another conference in 2005. Compliance staff considered the conferences to have value in facilitating the exchange of best practice, and were “a necessity, not a nicety”.
6.35
The frequency of team meetings varies from office to office, with some being weekly and others scheduled as required. None of these meetings focus on training, but do allow new policies or any updates on ongoing tasks to be communicated. Training issues are identified using the performance management system.
6.36
Some regional offices assign Compliance Officers to individual taxi organisations and make them responsible for the taxi organisation as “account holders”, but others do not. The account method has advantages because it allows Compliance Officers and taxi organisations to build a relationship, facilitating communication between the industry and the Authority.
6.37
As noted in Part 3, when agents receive an endorsement application, they use the same Authority-generated cover sheet to ensure consistency in the provision of information to the Authority. However, the cover sheet is designed for the agent’s use, and does not include all the statutory requirements to obtain a passenger endorsement. The regional offices have different approaches to the cover sheet. Some offices use it as the cover sheet for their files, while others have produced a more comprehensive version for their own purposes, outlining more of the statutory requirements for obtaining a passenger endorsement.
Internal audit
6.38
The Authority has an internal audit function that can review a range of matters such as procedures followed, the result of procedures, or the controls over procedures. The Manager of Internal Audit reports to the General Manager of Corporate Services, and also has a direct reporting line to the Director of the Authority and the Authority’s Board.
6.39
Each year the Manager of Internal Audit produces an annual audit plan setting out what aspects of the Authority’s business he intends to audit during that year. He also conducts “demand-driven” audits in response to emerging issues. In 2003-04, there were 18 internal audits, including 5 that were demand-driven.
6.40
When preparing the plan, internal audit staff consider:
- issues identified by the Authority’s “risk register”, a tool used to identify risk areas for the Authority;
- what they have audited recently (some incomplete audits from the previous year’s programme are rolled over to the next year’s programme);
- any changes in the organisation;
- what the audit committee and Director of the Authority would like to examine;
- issues arising from the regional offices;
- consultation with Authority managers about problem areas;
- matters arising out of the annual financial audit; and
- internal audit time and resources available in the coming year.
6.41
Given the Authority’s wide range of responsibilities, internal audit rarely examines issues relating directly to the taxi industry. When internal audit has looked at an aspect of the Authority’s compliance function, it has been in relation to fees or the regional offices’ audit procedures.
Intra-office consistency in decision-making
6.42
All but one regional office we visited used an internal review system, where the Regional Compliance Officer or Senior Compliance Officer reviewed (usually monthly) 10% of approved applications. In addition, all declined applications, suspensions, and revocations had to be reviewed before the decision was approved. This process did not apply to the Christchurch office, where the Regional Compliance Officer, Senior Compliance Officer, or both, made all decisions.
6.43
Internal reviews focused on checking the timeliness of dealing with applications, as this was the only quality requirement in the Statement of Intent 2004/2005 relating to transport service licences. The reviews did not assess whether applications satisfied the statutory criteria for an endorsement to be granted, although aspects of this were sometimes checked. During our file reviews, we found omissions in application files, despite the files having been reviewed by senior staff, because their reviews had focused on timeliness.
6.44
In all regions we visited except one, Compliance Officers were granting applications (in keeping with their delegation), but did not decline applications, or suspend or revoke endorsements without supervisor approval. The same situation applies to some Compliance Support Officers.
6.45
In one region, we showed the Senior Compliance Officer examples of applications that caused us some concern. The Senior Compliance Officer expressed a similar concern that some of these applications had been approved. Some should not have been approved for various reasons, including fitness and propriety. This situation is inevitable when 90% of the applications granted by compliance staff are not subject to any management review.
6.46
Compliance staff are allowed to approve an application – both at entry and renewal. However, they are not allowed to decline an application, which does not accurately reflect the risks involved in making an incorrect grant decision, or one contrary to that a more senior compliance staff member would make. The issue is, as noted in the previous paragraph, that the consequence of an incorrect grant decision is that an unfit and improper person is allowed into the taxi industry. With a declined application, the greatest risk is that the decision is overturned on appeal.
6.47
Further, senior compliance staff check only 10% of approved applications, while all applications that compliance staff recommend be declined are submitted to either the Regional Compliance Officer or Senior Compliance Officer. Therefore, the checks over approved applications are less rigorous than those over declined applications, despite the higher risk to the public involved with an incorrect decision to approve an application.
21: The booklet is titled The Judge Over Your Shoulder: A Guide to Judicial Review of Administrative Decisions. A revised version of this booklet was published on 1 March 2005.
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