Part 4: Compliance monitoring by District Licensing Agencies
4.1
In this Part, we describe the monitoring and enforcement responsibilities of DLAs before discussing in more detail:
- monitoring strategies;
- risk-based monitoring; and
- how DLAs were recording and analysing compliance information.
The monitoring and enforcement responsibilities of District Licensing Agencies
4.2
In our view, DLAs have a clear responsibility for actively monitoring and enforcing the Act.
4.3
The monitoring and enforcement roles of DLAs are implied in the requirement for district licensing inspectors to be appointed with specific powers under the Act, including the power to enter licensed premises and to apply for a variation, suspension, or cancellation of a liquor licence or manager’s certificate.
4.4
The Authority has noted, referring to the report of the Working Party on Liquor1 that preceded the Act:
The proposal was that territorial authorities should be empowered to enforce the liquor law, both in relation to conditions attached to licences and to matters of more general application, such as the sale of liquor to minors. It was envisaged that such a responsibility to enforce the liquor law would be in addition to the powers of Police so that enforcement measures could be instituted either by the police or by the Inspector.2
4.5
The responsibility for monitoring and enforcement is also consistent with the powers of the DLA as the body responsible for issuing liquor licences, and for imposing conditions on those licences as prescribed by the Act. There would be little value in a DLA issuing liquor licences (in the expectation of compliance) without taking measures to ensure that the conditions of licences were met.
4.6
The objective of DLA compliance monitoring is to provide assurance that licensees are meeting statutorily mandated requirements and the conditions of their licences. To meet this objective requires a systematic, risk-based monitoring programme. Components of such a programme are:
- a monitoring strategy that is supported by objectives directly related to the purpose of the legislation, and an explicit assessment of the desired level of compliance;
- a system for recording and analysing the results of compliance activities, to inform the assessment of risk, plan appropriate enforcement, and assess trends in compliance over time to evaluate the effectiveness of the monitoring and compliance strategy; and
- a programme of risk-based monitoring activities that draws on a variety of relevant information, and provides ongoing assurance about compliance. An assessment of risk based on all relevant information should also support an informed consideration of applications to renew a liquor licence.
Main findings
4.7
The primary purpose of compliance monitoring is to provide assurance that licensees are meeting their statutory requirements under the Act and complying with the conditions of their licences. All DLAs were carrying out some form of compliance monitoring, but practices varied in focus and coverage.
4.8
The different monitoring strategies lacked a clear rationale based on any target level of assurance about compliance with the Act. DLAs were aware of high-risk premises from their own monitoring or from their contacts with the Police and public health services. However, the intelligence available to assess the risks associated with the management of most licensed premises was often fragmented and incomplete, with relevant information not shared in a coordinated way.
4.9
Monitoring was sometimes responsive rather than planned, and was often not based on a systematic assessment of risk. Special events at which liquor is sold, for example, pose particular risks of liquor abuse, requiring DLA involvement in planning and supervision. Positive initiatives had been taken by some DLAs to work with event organisers, while others needed to include such occasions in their monitoring strategy.
4.10
To assess compliance, a DLA needs to gather and interpret all relevant information. DLAs were not using the results of monitoring to analyse and report on trends in compliance.
Monitoring strategies within District Licensing Agencies
4.11
We expected each of the DLAs to have a monitoring strategy, to define the types of activities that the DLA would carry out to confirm and measure compliance, and how often the activities would occur. We expected the strategy to identify the level of risk for each regulated entity, classified according to the type of business, its history, and the conditions of the liquor licence. An assessment of this type should determine the monitoring effort required, and therefore the resources required.
4.12
Strategies for monitoring compliance with the Act should differ according to factors such as the number of licensed premises and licences, the size of the district, whether it serves a rural or urban population, and the drinking patterns of the community. However, any such monitoring strategy should require the inspector to visit licensed premises at different intervals for different purposes. The strategy should, in our view, provide for:
- Periodic visits to licensed premises classified as low risk. These site visits might be scheduled to take place once or twice a year, and would enable the inspector to maintain contact with the licensee and managers, remind them of their obligations, check for compliance with technical provisions of the licence (such as signage and layout), and discuss aspects of host responsibility policy and practice. Such visits could occur during the day when a business is less busy, and offer a valuable opportunity to discuss training and other practices required to ensure that staff are well informed of their roles and responsibilities.
- Monitoring premises in their first year of being covered by a liquor licence (the probationary period), and during the period covered by a temporary authority. Anyone purchasing a licensed business must apply to the DLA for a temporary authority until their own application for an on-licence or off-licence has been approved. The holder of a temporary authority may not be experienced in managing licensed premises, and may not have been subjected to the scrutiny associated with an application for a full licence, so the risk of practices inconsistent with the aim of the Act is higher.
- Visits when a new application is being sought or a licence renewed. These visits are a means of ensuring that the premises will be managed to comply with the requirements of the licence and the Act. When an application is made to renew a liquor licence, a site visit provides the inspector with an opportunity to check that management practices reflect the conditions of the licence, to raise any issues that might have arisen during the previous licence period, and to set expectations for the following three-year period. This visit also provides an opportunity to check that the licensee has displayed the public notice required by the Act.
- Late-night inspections of premises classified (because of the nature of the premises or identified management problems) as high risk. Hotels and taverns are usually busiest at night and in the early morning. At these times it may be more difficult to adequately supervise and control licensed premises (including preventing the entry of minors), to ensure that food and non-alcoholic beverages remain available, and to offer safe transport options.
4.13
This suggested monitoring strategy is summarised in Figure 3. However, DLAs should determine their own strategies according to their own circumstances.
Figure 3
Suggested strategy for monitoring by District Licensing Agency inspectors
| Purpose of inspection | Target group | Frequency |
|---|---|---|
| Maintain contact, set expectations, check for technical compliance, remind licensee of obligations, discuss host responsibility practices, ensure ongoing staff training. | Low-risk premises. | Every six or 12 months. |
| Set expectations, ensure compliance, ensure understanding of obligations. | New licensees. | Periodic visits during the first 12 months of operation. |
| Verify the layout of premises, set out or confirm expectations, check management practices, raise any issues. | Applicants for new liquor licences or renewals. | In association with consideration of new applications or renewals. |
| Ensure compliance, focus on control and supervision, intoxication, access by minors, host responsibility. | Busy and high-risk premises. | Evenings and early morning - at least monthly, and more often for problem premises. |
| Follow-up on identified breaches, investigate complaints. | All premises. | As necessary. |
| Ensure compliance with licence conditions, control and supervision. | Selected high-risk events or occasions where these are operating under a special licence. | As necessary. |
4.14
Other visits should be made if a complaint is received, if circumstances arise that increase the risk of harm, or to verify that a breach identified during a previous visit has been resolved. Visits should be made to sites where liquor is being sold and large numbers of patrons will be attending (such as large festivals or sports events), because the risks of alcohol abuse can be high.
Monitoring approach of District Licensing Agencies
4.15
The monitoring approach taken by most DLAs included some, but not all, of the components we expected to see. Practices varied significantly. While some DLAs followed a prescribed inspection schedule, at other DLAs inspections happened only when time allowed. Inspections also differed in their focus − for example, some DLAs were carrying out inspections only during the day, or only for new and renewal applications.
4.16
We looked for evidence of the rationale for these different monitoring strategies. In the DLAs we visited, we did not find any articulated goals or objectives that defined the nature and extent of assurance each DLA considered necessary to meet its regulatory obligations under the Act.
4.17
Some DLAs had recognised the importance of compliance monitoring by setting targets for the numbers of inspections and making these targets performance measures for inspectors. The licensing database flagged outstanding inspections, ensuring that the target was met.
4.18
Other DLAs had a more narrow view of their responsibilities, and sometimes saw no reason to duplicate what they saw as the job of the Police. Some DLAs gave liquor licensing inspections a low priority, with compliance monitoring competing with other, higher-priority tasks such as processing licence applications, and non- DLA regulatory functions such as food premises inspections.
4.19
Because of the varying approaches among the DLAs we visited, and without any clear rationale, licensees were subject to different levels of scrutiny, with different levels of contact with an inspector, depending on where they were running their business.
4.20
Some licensees might not see an inspector for more than a year, while in other districts routine inspections were made twice a year, with other visits as necessary.
4.21
Figure 4 shows, for the DLAs we visited, how often a licensee was likely to be visited by an inspector.
Figure 4
When licensees could expect a visit from an inspector
| When licensee applies to renew licence | When the hotel or tavern is at its busiest | At least once a year | |
|---|---|---|---|
| DLA 1 | Maybe | No | Maybe |
| DLA 2 | Yes | Periodically - more frequently if there are problems with management or alcohol-related incidents | Likely |
| DLA 3 | Maybe | No | Maybe |
| DLA 4 | Maybe | No | Maybe |
| DLA 5 | Yes | Periodically - more frequently if there are problems with management or alcohol-related incidents | Maybe |
| DLA 6 | No | Unlikely | Maybe |
| DLA 7 | Maybe | Periodically - more frequently if there are problems with management or alcohol-related incidents | Yes |
| DLA 8 | Yes | Periodically - more frequently if there are problems with management or alcohol-related incidents | Maybe |
| DLA 9 | Yes | Periodically - more frequently if there are problems with management or alcohol-related incidents | Likely |
| DLA 10 | Unlikely | No | Likely |
| DLA 11 | Yes | Periodically - more frequently if there are problems with management or alcohol-related incidents | Yes |
| DLA 12 | Yes | Unlikely | Maybe |
Risk-based monitoring
4.22
Any systematic compliance regime should be based on an assessment of the regulated entity against relevant elements of risk. Whether a systematic or less formal approach is taken to identifying and analysing risk3 will depend on the number of licensed premises and the type of community.
4.23
The assessment of risk relies on:
- targeted compliance monitoring activity;
- identifying and collecting all relevant information; and
- analysing that information to produce useable intelligence about the nature and level of compliance.
4.24
Factors that may have a bearing on risk include:
- issues raised by inspections carried out by the DLA, the Police, or the public health services;
- complaints made by the public about the management of licensed premises – such as excessive noise or the unavailability of food; and
- reports of incidents of disorder or crime associated with the licensed premises.
4.25
We expected all relevant intelligence about the management of licensed premises to be co-ordinated and recorded by each DLA in licensee files.
Targeted compliance monitoring activity
4.26
We looked for evidence that each DLA’s inspection programme was based on an assessment of risk. The risk could be based on the type of business, the patron group, the history of the licensee, and the conditions of the liquor licence.
4.27
Most of the problems with poorly managed licensed premises are associated with a small number of businesses. For effective and co-ordinated targeting of those high-risk premises, the three regulatory agencies need to share information about problem premises, and consult on monitoring activity and, where necessary, on enforcement.
4.28
Most DLAs were in regular contact with the Police and public health services to discuss any concerns about licensed premises (such as incidents of disorder, evidence of intoxication at or near licensed premises, or allegations of sales to minors), share the results of inspection visits, co-ordinate compliance monitoring activity, and, where necessary, discuss enforcement options. These meetings, and other ongoing inter-agency communication, gave DLAs a good appreciation of which premises were causing problems and therefore warranted active monitoring.
4.29
Other, more routine, inspection activity was less informed by shared information.
4.30
The inspection schedule for one DLA was based on an assessment of the risks associated with types of licensed premises. This was a useful approach, although some premises had not received a visit for more than a year. The inspectors acknowledged that building this compliance history was a priority, because it would enable them to refine their monitoring.
4.31
Licences to sell liquor are held by very different types of business, including hotels and taverns, nightclubs, supermarkets, convenience stores, bottle stores, and sports clubs. Inspection activity needs to take account of how each type of business operates, its patrons, and the setting in which liquor is sold, to design an effective and efficient risk-targeted approach.
4.32
We did not find evidence of any risk-based approach to the monitoring of businesses holding different types of licence. Rather, the most common approach was to seek to visit all premises in a given period (such as annually), or at the time of renewal, without making a distinction based on relevant risk factors.
The scope of compliance monitoring
4.33
We were concerned at the limited scope of some DLA compliance monitoring, which resulted in an incomplete – and potentially distorted – picture of how premises were being managed.
4.34
Daytime inspections of licensed premises provide a limited opportunity to assess the effectiveness of supervision and control practices that ought to be addressing the risk of alcohol-related harm. Creating a safe drinking environment for patrons by preventing intoxication and preventing access by minors are important statutory duties. Practices to achieve these objectives are tested when a hotel or tavern is at its busiest – normally in the late hours of a weekend.
4.35
Six of the 12 DLAs had an active after-hours monitoring programme, with inspectors expected to carry out regular late night and early morning visits. These DLAs included both large and small territorial authorities. One inspector was carrying out most inspections at night. Reference was sometimes made to this requirement in employment agreements, with provision for rosters and for financial or non-financial recognition of extra hours worked.
4.36
However, some DLAs were not carrying out any after-hours monitoring. This significantly limited the nature and extent of assurance that could be obtained about compliance with the Act. We noted the following obstacles to after-hours work:
- the need for inspectors working on their own to arrange joint visits with Police or public health services staff, for personal safety reasons;
- limited time, sometimes with competing tasks when liquor licensing inspections and other regulatory work had to be carried out during one visit;
- lack of remuneration or arrangements for staff to take time off later, and the absence of a budget for this work; and
- the demands of liquor licensing paperwork.
4.37
One view put to us was that the DLA’s role was to process applications and issue liquor licences, and that after-hours monitoring was the responsibility of the Police. It was seen as the role of the Police to initiate enforcement action in response to any serious breach of the Act.
4.38
We asked DLAs, the Police, and the public health services about the benefits of after-hours monitoring compared with inspections carried out during the day. Day inspections typically revealed few significant issues of non-compliance with the Act, other than minor breaches such as incorrect signage. Night inspections pointed to different issues, such as the presence of intoxicated patrons, disorder, and the stockpiling of liquor by patrons.
4.39
In two districts, compliance monitoring was carried out primarily by the Police and public health services. The DLA was following up only in response to problems brought to their attention by the Police or public health services, or to complaints from members of the public. Inspectors in these districts carried out only limited checks of compliance.
4.40
The Police and public health services have a common interest in compliance, but typically their focus and interests differ. The reactive approach taken by these two DLAs provided no independent or comprehensive assurance that the conditions of liquor licences were being met, or that the requirements of the Act were being followed.
Monitoring special events
4.41
Many DLAs issue special licences for particular events or occasions. Some of these – in particular, sporting events open to the public and other occasions with large numbers of patrons – can lead to alcohol-related harm. At one DLA, the inspector assigned a risk score to all applications for special licences. The score reflected an assessment of the likelihood of harm occurring, based on the number of people attending, security arrangements, type of event, age of attendees, and how long the event would last. This approach clearly identified high-risk events to which the DLA and the Police might wish to direct their monitoring efforts.
4.42
The Police and public health services both noted that large special events posed significant risks, and needed careful planning and supervision. There was an expectation that DLAs would have a presence at such events, and we asked DLAs if they carried out monitoring inspections as necessary. While some did, others did not – despite, in some cases, a history of well-known alcohol-related problems at such events.
4.43
We noted useful initiatives to improve the control over the sale of liquor at public events.4 A requirement for organisers to compile an alcohol management plan, to which participating businesses make an explicit commitment as a condition of their attendance, was one positive approach. Other initiatives taken by DLAs were alcohol management protocols with venue organisers such as managers of sports facilities or festival co-ordinators.
Identifying and collecting relevant information
4.44
One purpose of co-ordinating intelligence is to guide decisions on monitoring activity, so that effort is directed most effectively and efficiently to where the risks are highest.
4.45
A second purpose is to inform the DLA’s consideration of applications to renew liquor licences. The DLA has only a limited range of matters to which it must have regard in considering an application for renewal of a licence. These are concerns about suitability, the conditions attaching to the licence, and, in particular, the manner in which the licensee has conducted the sale and supply of liquor under the licence. To carry out this consideration, the DLA must be able to draw on relevant intelligence from a range of sources.
4.46
We examined a sample of DLA files to establish what information was held about the management of licensed premises. We also asked the DLAs, the Police, and the public health services whether they shared with each other relevant information about their compliance activities.
4.47
Intelligence gathered from the activities of the DLAs, the Police, and the public health services was fragmented. Their interests overlapped, as evidenced by the similarities in their inspection checklists. Given this similar focus, we expected inspection reports to be shared, to avoid duplication of effort and to build a common picture of premises’ compliance.
4.48
The DLA has primary responsibility for ensuring that licensees comply with the conditions of their licences and with the Act. This responsibility makes collecting and analysing all information about compliance activity a vital component of a DLA’s obligations under the Act.
4.49
Crime statistics and related data held by the Police can identify possible relationships between individual licensed premises and alcohol-related harm, providing useful intelligence for targeted DLA or joint monitoring or enforcement. Liquor licensing practice in one district was well supported by a systematic Police approach to intelligence-led enforcement. This involved the co-ordinated collection and analysis of information from all three regulatory agencies, to draw up a monitoring programme and consider enforcement options. Weightings assigned to individual premises on the basis of intelligence from the three agencies (such as analysis of inspection results or reports from Police patrols) were used to measure levels of compliance in response to different forms of compliance monitoring activity and enforcement.
4.50
However, most DLAs were collecting only limited information about licensed premises from the Police and public health services. Information held by the individual regulatory agencies was generally not co-ordinated, reducing the quality of information available for considering licence applications.
4.51
Most DLAs seldom received copies of inspection reports from the Police and public health services, or sent them copies of their own reports. Information about high-risk premises was shared informally at regular meetings. However, co-ordinated information about licensed premises was not readily available to most DLAs when they considered licence applications. Where available to inspectors, Police information (such as Alco-Link data5), records of inspections by public health services staff, or documented results of DLA monitoring were a valuable reference source for considering renewal applications.
4.52
Evidence of excessive noise from licensed premises can be indicative of the management of the business, and the suitability of a person to hold a liquor licence. We examined systems for recording noise complaints, and whether liquor licensing staff had access to those records to inform their monitoring and consideration of applications.
4.53
Most liquor licensing staff had access to noise complaint data, which was able to be searched to identify specific licensed premises. Informal notification of any complaints generally worked well, although in one DLA we found this process needed to be formalised to ensure that relevant noise issues were consistently brought to the attention of the inspectors. One useful practice was that of routinely checking noise complaint records whenever applications were made to renew a liquor licence.
Other monitoring
4.54
The Act prohibits promotions intended or likely to encourage people on the licensed premises to drink to excess. A National Protocol on Alcohol Promotions, drawn up by ALAC, Local Government New Zealand, the Police, and the Hospitality Association of New Zealand, describes the type of promotions and events that are likely to be acceptable in terms of this statutory provision. Inspectors at one DLA told us of an arrangement reached with a particular licensed premise to seek prior approval of any liquor promotions, following concerns raised about their alcohol advertising.
4.55
The inspector at another DLA told us they made a special visit when a liquor promotion came to their attention. This is sensible practice, and consistent with a risk-based monitoring approach. All DLAs could usefully draw the attention of licensees to the protocol and remind them of their responsibilities under the Act.
4.56
Inspections to check that identified breaches have been addressed are a further important aspect of compliance monitoring. Good practices we found were:
- leaving a copy of the inspection check sheet with the licensee or duty manager;
- setting out the results of the inspection in a letter to the licensee; and
- systematic scheduling of follow-up inspections.
Recording and analysing compliance information
4.57
To assess compliance, any regulator has to record and analyse information in a form that allows for consistent interpretation and reporting. Taken together, this enables the DLA to build up a licence history for risk assessment and ongoing monitoring. We examined DLA processes and information systems to assess if and how information was collected and used to report on trends in compliance with the Act.
4.58
As noted earlier, compliance information was often fragmented. Better coordination and analysis of intelligence was needed to identify risks and to target monitoring, making best use of DLAs’ own information and that collected by the Police and public health services. Our discussions with DLA staff indicated the need for more systematic recording of monitoring activity, interpretation of inspection results, and reporting of compliance.
4.59
Complete records of compliance findings are vital to enable a DLA to assess the nature and level of compliance at licensed premises. The practice in one DLA of the inspector referring to the results of past inspections in their assessment of an application for licence renewal shows the value of having ready access to monitoring records.
4.60
Not all inspectors recorded the findings from all inspections, or entered those findings into the DLA’s information system. Records of inspections were sometimes not recorded in licensing files, or were held in hard copy and not accessible through the DLA’s licensing database.
4.61
While inspection records commonly showed whether a premises had met statutory requirements, most DLAs had no rules for interpreting the significance of a breach or for grading compliance or non-compliance in a transparent and consistent way.
4.62
Only three DLAs had clearly specified the enforcement procedures they would follow for different types of breach. Dunedin City Council had published its enforcement procedures on its website, outlining action the DLA, the Police, and the public health services would take when an enforcement issue came to their attention. This gave licensees a clear understanding of the regulatory agencies’ expectations, and of how breaches would be dealt with. In Figure 5, we have reproduced a chart used by Dunedin City Council to show how enforcement procedures work.6
Figure 5
Dunedin City Council’s enforcement procedures
4.63
Some Police liquor licensing units followed the “Graduated Response Model”, which they often applied in collaboration with the local DLA and public health services staff. The model draws on harm values – and thus levels of risk – assigned to a licensed premise based on identified breaches, making it possible for the three regulatory agencies to have a concerted and systematic response to enforcement.
4.64
Inspection check sheets covered similar compliance requirements, although, for those inspectors carrying out inspections only during the day, references to checking for intoxication and sales to minors were largely redundant. A comparison of the check sheets used in the DLAs we visited reflected differences in the scope of compliance monitoring. Training and security were two useful additions to the check sheet used by inspectors at one DLA. At one DLA the Police, public health services staff, and inspectors used the same inspection check sheet, ensuring consistent record-keeping and facilitating the analysis of trends in compliance.
1: Report of the Working Party on Liquor chaired by Sir George Laking, October 1986, The Sale of Liquor in New Zealand.
2: Report of the Liquor Licensing Authority for the 12 months ended 30 June 1999, parliamentary paper E.8, page 6.
3: The Police have developed a Graduated Response Model based on a systematic response to premises posing differing levels of risk as evidenced by instances of harm. This model is applied by the Police in some districts, in conjunction with the DLA, to provide an intelligence-led approach to monitoring and enforcement.
4: In 1999, ALAC published Managing a successful public event, a booklet that provides guidelines for professional events managers organising public events, on the responsible sale of liquor.
5: Alco-Link data is gathered by the Police from offenders. Each offender processed in a Police station is asked whether they have been drinking. If so, they are assessed for intoxication and asked where they had their last drink.
6: Applicable to infringements or issues other than those specifically mentioned in section 132A (which relates to the powers of the Police to seek suspension or cancellation of liquor licences by the Authority for certain offences).