Appendix 1: Our proposed performance audit work programme

Proposed performance audits and studies in 2008/09

The Auditor-General proposes to conduct the following performance audits and studies in 2008/09.

The proposed performance audits and studies marked with an asterisk (*) have not previously been described in our annual plans, and are described in more detail on the following pages.

The actual work programme we deliver in 2008/09 may differ from this proposal. Our proposed annual work programme is necessarily determined many months in advance of the year to which it relates. As time elapses, we may need to alter our priorities. For example, other urgent work such as an inquiry may intervene, or government policy or the circumstances of a particular entity may change so that a particular audit is no longer relevant. The reports for some audits that will begin in 2008/09 may not be presented to Parliament until 2009/10.

For context, we also provide a list of work due to be completed in the remainder of 2007/08.

Performance audits and studies proposed for 2008/09
Accident Compensation Corporation - effectiveness of the implementation of the Falls Prevention Strategy
Civil Aviation Authority - follow-up of the Auditor-General’s 2005 audit
*Crown entity monitoring and governance
*Crown Research Institutes - science workforce development
Department of Building and Housing - implementation of the Building Act 2004
*Department of Corrections - management of parole
*District health boards - asset management planning
*District health boards - effectiveness of managing patients in Active Review
*District Health Boards - procurement
*Electricity Commission - effectiveness of reporting against the Government Policy Statement on Electricity Governance
Housing New Zealand Corporation - maintenance of state housing
Inland Revenue Department - management of tax debt
*Local authorities - strategies to meet water demand
*Ministry of Defence and New Zealand Defence Force - Major acquisition project monitoring and reporting systems
*Ministry of Education - effective management of the Crown’s financial interest in integrated schools
*Ministry of Education (Group Special Education) - progress report on the Better Outcomes for Children action plan
Ministry of Education - monitoring and support of school Boards of Trustees
Ministry of Health - monitoring progress against the Primary Health Care Strategy
*Ministry of Justice - management of Court workloads
*New Zealand Defence Force - Defence Sustainability Initiative
*New Zealand Police - implementation of the recommendations of the Commission of Inquiry into Police Conduct
Tertiary Education Commission - monitoring of tertiary education institutions
*Transit New Zealand - State highway maintenance
*Transpower - managing the national grid
Work and Income - effectiveness of case management of sickness and invalid beneficiaries
Performance audits and studies due to be completed by 30 June 2008
Guidelines on costing and charging for public sector goods and services - update
Guardians of New Zealand Superannuation - governance, management, and administration of the New Zealand Superannuation Fund
Ministry of Defence - major acquisitions
Ministry of Education - effectiveness of teacher professional development services
Ministry of Social Development - benefit fraud
ONTRACK - systems, policies, and procedures for maintaining and renewing rail infrastructure
Procurement guidelines - update
Purchasing, grants, and gifts: An overall framework for managing public sector funding arrangements with external parties

Proposed performance audits and studies not previously described in our annual plans

The following paragraphs provide more information about our proposed performance audits and studies that have not previously been described in our annual plans.

Crown entity monitoring and governance

Crown entities deliver many public services of importance to New Zealanders and often provide the “face of government”. Crown entities account for more than 50% of the Crown’s operating expenditure, and it is important that they work effectively. Ministers have agreed on the need to improve Crown entity performance, and the three central agencies have developed a joined-up Central Agency Work Programme for improving Crown entity performance.

We propose carrying out a performance audit to assess the effectiveness of the frameworks of several departments for monitoring performance, capability, and risk within their Crown entities. To inform this work, we will initially gather information on the monitoring activities of government departments. The audit will examine two or three departments. We will select departments not only from those with large monitoring responsibilities but also from those with smaller monitoring responsibilities and therefore with less resource devoted to monitoring. This selection will ensure that we cover a representative sample of monitoring departments.

Crown Research Institutes - science workforce development

Research, science, and technology has an important role in enhancing economic growth, social development, and environmental well-being. Crown Research Institutes (CRIs) represent a significant range of research, science, and technology capacity and capability. Changing workforce demographics, tight labour markets, and increasing globalisation in the labour market represent a considerable risk to CRIs’ ability to deliver innovations in research, science, and technology.

We propose a performance audit focusing on how CRIs are providing for their workforce needs. This will include an examination of planning for future needs, leadership and mentoring initiatives, and provision of professional development opportunities, as well as recruitment and retention strategies.

Department of Building and Housing - implementation of the Building Act 2004

The building sector is an important contributor to New Zealand’s economic and environmental performance, and social well-being. The Building Act 2004 regulates building work, establishes a licensing regime for building practitioners, and sets performance standards for buildings and product certification, with the intention of ensuring that buildings are built right first time. The Department of Building and Housing is responsible for administering the Act and for ensuring the effectiveness of the regulatory system for the building sector. The purpose of our performance audit is to see whether the Department has followed an effective process in implementing the regulatory framework envisaged by the Act.

Department of Corrections - management of parole

Parole is the conditional release from prison of high-risk offenders with sentences of more than two years. Parole is intended to provide a structured plan for an offender based on their risk of reoffending and any risks they pose for the community, their individual needs, and their motivation to address those needs. The Department of Corrections is responsible for managing offenders on parole.

The focus of the proposed performance audit is the effectiveness of the Department of Corrections’ systems, processes, and procedures for managing offenders on parole within the community.

District health boards - asset management planning

The current approvals for capital projects in district health boards (DHBs) for the period 2007 to 2011 are $1.044 billion. All projects involving capital expenditure of more than $1 million have the potential to be referred to a regional forum of DHBs for collective decision-making under a collaborative framework. Major capital projects with an effect on regional or national services must have those service aspects considered through the framework.

We propose to audit the extent to which regional and national service priorities are considered when investment in new assets or reconfiguration of existing assets is approved under the collaborative framework. In particular, we will focus our performance audit on ensuring that the process used in approving capital investments takes adequate account of:

• current and future service levels (regionally and nationally);
• collaboration between DHBs regionally and nationally (in terms of service delivery and infrastructure); and
• the need to provide optimal flexibility for future service requirements.

This will involve assessing the effectiveness of the inter-relationship between the Service Planning and New Health Intervention Assessment Framework and the Capital Investment Framework. In particular, we will look at:

• the role of the regional capital committees and the extent to which they are informed by the work of regional forums on optimal regional service configuration;
• the extent to which the National Capital Committee draws on the strategic advice of the National Service and Technology Subcommittee and the Deputy Director-General and Chief Executive Officer Group for national service configuration; and
• the interaction between the regional capital committees and the National Capital Committee to ensure that regional and national clinical service planning has been appropriately done for major business cases.

District health boards - effectiveness of managing patients under Active Review

The elective services booking system ensures that patients who are assessed as having a need that can be met within DHB’s available funding and capacity are provided with surgery within six months of assessment. When surgery within six months is not possible, but there is a realistic probability that the patient’s condition may meet the threshold for surgery in the foreseeable future, then patients are placed under Active Review.

Patients under Active Review have six-monthly reviews, for up to two years, to check on their health and to find out whether their health status has changed. If surgery has not been scheduled by the end of the Active Review period, then patients may be referred to primary care for continuing management of their condition.

DHBs are responsible for effectively managing Active Review patients. In July 2007, about 12,000 patients were in this category. It is important for the public to have confidence in the integrity of the booking system, which includes the management of patients under Active Review.

We propose a performance audit to assess the effectiveness of DHBs’ management of patients under Active Review and the Ministry of Health’s oversight of Active Review.

District Health Boards - procurement

The 21 DHBs in New Zealand collectively spend more than $5.3 billion each year on goods and services in the health sector. Parliament and the public expect good management of this public resource in terms of value for money, transparency, fairness, and the integrity of the processes for procurement and funding.

Over the last year, we looked at policies and procedures for procurement, conflict of interest, and delegations in the health sector. We found that many of the policies needed improvement, and we reported this to the DHBs concerned. Other work in the health sector has indicated that there may be a systemic problem with how DHBs are implementing procurement policy in practice.

We are extending annual audit work this year to carry out further high level audit of procurement practices across all the DHBs. We will also do a detailed examination of procurement practices, including funding arrangements with NGOs, within three or four DHBs.

Electricity Commission - effectiveness of reporting against the Government Policy Statement

The Electricity Commission (the Commission) is responsible for implementing the Government’s General Policy Statement on Electricity Governance (GPSEG). The GPSEG covers matters such as:

• mandating low, fixed daily charges for small users;
• the requirement for the Commission to promote the efficient generation, distribution, and use of electricity;
• the Commission’s responsibility for security of supply; and
• the Commission’s responsibility for approving a consumer complaints system (which is run by the Electricity and Gas Complaints Commission).

The Commission is required to report its achievements in implementing the GPSEG on an annual basis and in quarterly reports to the Minister of Energy. Annual reporting remains the Commission’s main means of being publicly accountable for its performance.

We propose to review the Commission’s cumulative annual achievements since its creation, and to match that cumulative performance against the GPSEG. As well as providing assurance on achievements to date, our performance audit may help the Commission and the Minister better define the Commission’s intended and actual performance.

Inland Revenue Department - management of tax debt

The Inland Revenue Department (IRD) has a major role collecting tax revenue for the Government. The level of total overdue tax debt has grown significantly in recent years.

We propose a performance audit to examine the effectiveness and efficiency of the IRD’s management of tax debt. In particular, we will examine what strategies and approaches the IRD is taking to address the growth of total overdue tax debt, as well as specific components of tax debt that it can influence.

Local authorities - strategies to meet water demand

Many territorial local authorities play a significant role in providing water supply to the residents and communities in their district or region.

Water supply is an essential service for safeguarding the health and well-being of residents and communities in a district or region. An authority’s ability to supply adequate water quality and quantity to residents and communities relies on a sufficient and reliable water source and the necessary infrastructure to store, treat, and supply the water.

It is important for local authorities to ensure that they have considered and planned for future demand for water supply so they will have adequate infrastructure and/or arrangements in place to meet community needs.

The purpose of this performance audit is to be able to provide assurance that selected territorial authorities that provide water supply services have adequately assessed future water demand for residents and communities in their district, and that they have strategies in place to meet this demand. The audit will also consider the strategies and approaches of the selected authorities to managing the demand for water as a factor in meeting water supply needs.

Ministry of Defence and New Zealand Defence Force - Defence Sustainability Initiative

In May 2005, the Government announced the $4.6 billion Defence Funding Package. This is a 10-year programme of additional funding for the Ministry of Defence and the NZDF. The Defence Sustainability Initiative (DSI) is a major component of the Defence Funding Package, and is aimed at rebuilding the NZDF and the Ministry by addressing shortages in personnel, equipment, and management capability.

In our report on the results of the 2005/06 audits for central government agencies, we indicated that we would monitor the progress of the DSI. This proposed performance audit will look at progress towards achievement of the original objectives of the DSI, taking into account the various programmed internal and external reviews of the DSI.

Ministry of Defence and New Zealand Defence Force - major acquisition project monitoring and reporting systems

This performance audit will examine how well the Ministry of Defence and the New Zealand Defence Force (NZDF) meet the information requirements of internal and external stakeholders, including Parliament, for major acquisition projects. We will examine the Ministry’s and the NZDF’s project monitoring and reporting systems to identify what improvements may be necessary.

Ministry of Education - effective management of the Crown’s financial interest in integrated schools

Integrated schools are schools that were originally private and that have been integrated into the state schooling system under the Private Schools Conditional Integration Act 1975. Integrated schools are governed by elected Boards of Trustees (Boards) in the same way as state schools. However, integrated schools also have proprietors, private entities that own the land and buildings associated with integrated schools. Proprietors are responsible for providing and maintaining the buildings. Boards are responsible for running the schools and educating the students.

The Ministry of Education provides operational grants to Boards to enable them to fulfil their responsibilities. The Ministry also provides some funding to proprietors for maintenance and capital expenditure on buildings. However, in general, proprietors are responsible for meeting these costs, mainly through charging attendance fees.

There is evidence that the financial boundaries between Boards and proprietors have become blurred in some instances, which has led to cases of Crown money being spent to benefit proprietors (private entities). For example, Boards have spent money on buildings on proprietors’ land without receiving acknowledgment of the ownership interest in the buildings that should arise as a result of a Board’s investment.

Our performance audit proposes to describe the financial risks inherent in the Board-proprietor relationship and how the Ministry of Education manages these risks, to review instances where these risks have emerged, and to provide guidance on the future management of such risks.

Ministry of Education (Group Special Education) - progress report on the Better Outcomes for Children action plan

In mid-2006, the Ministry of Education published Better Outcomes for Children, an action plan for Group Special Education 2006-11. The Ministry has appropriations to spend about $460 million for “interventions for target student groups” and “special needs support” in 2007/08. Most of this funding is to deliver special education services to more than 30,000 children. The action plan is intended to ensure that children with special needs who are entitled to targeted funding get the quality services they need, when they need them.

We intend to audit the effectiveness of the Ministry’s implementation of the action plan and the likelihood of the plan being achieved by 2011.

Ministry of Justice - management of court workloads

The Ministry of Justice is responsible for managing court workloads. Court workloads have increased significantly in recent years and are forecast to continue to increase. The Ministry is aware of the increasing court workload and has a range of initiatives designed to address this increase.

We propose a performance audit to examine how well the Ministry is anticipating the increased workload and planning for it, and how it is managing the implementation of initiatives to manage the increased court workload.

New Zealand Police - implementation of the recommendations of the Commission of Inquiry into Police Conduct

The Commission of Inquiry into Police Conduct, which reported in March 2007, recommended that the Government invite the Auditor-General to monitor for a period of 10 years the implementation by the Police of the projects and initiatives they started in response to the inquiry, and to report regularly to Parliament on their progress. In September 2007, the Government invited the Auditor-General to carry out that work. We are currently discussing with the Police an appropriate work programme to monitor their progress. In 2008/09, we intend to complete our first report to Parliament on the matter.

Tertiary Education Commission - monitoring of tertiary education institutions

The Tertiary Education Commission (TEC) is the Crown entity responsible for managing the Government’s purchase and ownership relationship with the tertiary education sector.

The Tertiary Advisory Monitoring Unit (TAMU) is the unit within the TEC that is responsible for managing the Government’s ownership interest in the 31 public tertiary education institutions (TEIs). TAMU’s aim in managing the Government’s ownership interest is to ensure the continued operation and long-term viability of TEIs. TAMU does this through monitoring, providing support, and, where required, initiating statutory intervention processes such as installing a Commissioner.

Our proposed audit will seek to provide assurance that the TEC, and TAMU in particular, is:

• collecting and analysing all relevant information about the financial and operational viability of TEIs;
• using this information to identify TEIs at risk; and
• taking appropriate action to support those TEIs to minimise the number of statutory interventions.

Transit New Zealand - State highway maintenance

Transit New Zealand spends around $400 million annually on maintaining State highways and motorways. We intend to conduct a performance audit to examine how efficient Transit New Zealand is in maintaining State highways, and to identify the extent to which it is following best practice in asset management and contract management.

Transpower - managing the national grid

The reliability of our “national grid”, through which electricity is transmitted from generators to distribution companies and ultimately to power consumers, is vital for the economic and social well-being of all New Zealanders. This performance audit will look at the effectiveness with which Transpower is managing the assets that make up the national grid to ensure security of electricity transmission.

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