Appendix 1: Summary of reports on performance audits and other studies published in 2007/08

Turning principles into action: a guide for local authorities on decision-making and consultation

This publication updates our 1998 guidance report Public Consultation and Decision-making in Local Government, as we became aware of local authority and public concerns about some aspects of decision-making and consultation as set out in the Local Government Act 2002. This guide is the combined view of the Office and a working party within the sector convened to advise the Office. It discusses the principles-based approach in the Local Government Act 2002, and will assist local authorities in their consideration of the principles in the Act as they carry out decision-making and consultation. It also provides examples of local authority practice in areas that the working party and this Office identified as challenges to implement. It does not attempt to define legislative compliance – rather, it is a combined view and discussion on principles and current practice.

Inquiry into Dunedin City Council and Otago Regional Council’s funding of the proposed stadium

We inquired into this matter because of the amount of ratepayer funds that might be contributed to the proposed stadium, the relationship with a non-council controlled organisation, and the uncertainty within the Otago region about the nature of the Councils’ involvement. We had received several requests for inquiries into various aspects of the Councils’ involvement with the proposed stadium. The purpose of the inquiry was to review the Councils’ funding arrangements with the Carisbrook Stadium Charitable Trust. Overall, we found that the Councils’ funding arrangements are appropriate for this stage of the project, but that a formal and robust funding framework will need to be put in place should either or both of the Councils make a firm commitment to fund the construction phase of the project.

Conflicts of interest in the three Auckland District Health Boards

We carried out a performance audit at the request of the Minister of Health, in which we looked in detail at the conflict of interest policies and practices of the Auckland District Health Board, the Counties Manukau District Health Board, and the Waitemata District Health Board. There are several especially difficult types of conflict of interest that are specific to district health boards (DHBs) and that are sometimes unavoidable. The three Auckland DHBs we looked at have a range of useful policies and procedures in place, but in some areas there is room for improvement. In particular, board and committee members need to conscientiously follow the statutory requirements about conflicts of interest that apply to them. Our findings are focused on the three Auckland DHBs, but we hope that this report may also be of value to the wider DHB sector.

Effectiveness of controls over the taxi industry: follow up report

In 2005, we reported on the effectiveness of controls over the taxi industry. The report made 61 recommendations to improve Land Transport New Zealand’s (LTNZ) performance in this area. This follow-up report was part of our commitment to providing the Transport and Industrial Relations Committee with regular updates on LTNZ’s progress in implementing our recommendations. LTNZ has done a considerable amount of work to review its approach to the taxi industry. Overall, we are satisfied with how LTNZ has responded to 49 out of 61 of the recommendations in our 2005 report. Good progress has been made in the recruitment of taxi enforcement officers and the introduction of the Land Transport Rule: Operator Licensing 2007, which should result in significant improvements to how the taxi industry is managed. However there are 12 recommendations for which we consider the progress has not been adequate, and in order to address them LTNZ should give priority to the recommendations in its work programme.

Implementing the Māori Language Strategy

The Māori Language Strategy (the Strategy) is a 25-year strategy to co-ordinate and prioritise government action in the area of Māori language revitalisation. It was produced jointly by Te Puni Kōkiri – the Ministry of Māori Development (TPK), and Te Taura Whiri i te Reo Māori – the Māori Language Commission (Te Taura Whiri). We did a performance audit to see whether the six lead agencies responsible for implementing the Strategy were carrying out their roles effectively. We found that lead agencies’ progress in planning and commitment to the Strategy, while improving, remains variable across the lead agencies.

Liquor licensing by territorial local authorities

Under the Sale of Liquor Act 1989, territorial authorities have the status of District Licensing Agencies, responsible for considering applications and issuing licenses for the sale and supply of liquor to the public. We carried out a performance audit to examine how territorial authorities were managing their liquor licensing responsibilities under the Act. They are, by and large, doing a good job. However, the audit identified some important areas for improvement. District Licensing Agencies are responsible not only for issuing liquor licenses but also for monitoring and enforcing compliance with license conditions and the Act. We found that not all District Licensing Agencies are sufficiently committed to this responsibility.

New Zealand Agency for International Development: Management of overseas aid programmes

New Zealand’s Official Development Assistance funding programme is one of the main ways the Government contributes to reducing poverty in developing countries. The New Zealand Agency for International Development (NZAID) administers the programme. Our audit focused on how NZAID planned, implemented, monitored, and evaluated its overseas aid programmes. It specifically looked at how NZAID managed three programmes – the Papua New Guinea bilateral programme, the Indonesia bilateral programme, and the Pacific Regional Health programme. The audit found that NZAID has a long-term approach to planning, works closely with its development partners overseas and other international aid agencies in planning and implementing its programmes, and (to varying degrees) monitors performance and evaluates the effectiveness of its programmes. The audit also found that more clarity, consistency, and direction were required in all of these areas.

Mental health services for prisoners

Prisoners have a high need for mental health services, and responding to mental health issues in prison has potential to reduce re-offending. Responsibility for prisoners’ mental health services is split between the Department of Corrections, the Ministry of Health, and district health boards. Our performance audit examined service planning, service delivery, and service monitoring and evaluation. We found that systems for providing mental health services are under significant pressure from increasing prison musters and a high demand for inpatient beds. The needs of prisoners with severe mental illness are generally well catered for, but timely access to inpatient beds can be an issue. Service responsiveness is more limited for some groups. These include those with mild to moderate mental illness, women, those with personality disorders, and Māori. The agencies involved in providing mental health services to prisoners have committed resources to identify gaps in services, address these gaps, and improve services overall. Work is also being done to better identify prisoners with mental health issues.

New Zealand Trade and Enterprise: administration of grant programmes – follow up audit

Our performance audit assessed the extent to which New Zealand Trade and Enterprise has addressed areas of concern we identified in a 2004 audit we did of their administration of grant programmes. NZTE is the Government’s national economic development agency. An important purpose of NZTE is to support the development of internationally competitive business performance, which includes administering a wide range of grant and awards programmes on behalf of the Crown. NZTE has responded appropriately to the recommendations we made in 2004, and is now effectively and efficiently administering their grant programmes in keeping with the Government’s intentions.

Audit committees in the public sector

An effective audit committee shows that an organisation is committed to a culture of openness and continuous improvement. This report, prepared with assistance from Deloitte, sets out the principles and practices needed to set up and effectively operate an audit committee in the public sector, and provides other useful resources such as example charters and checklists. The guide is not sector-specific, as the principles and practices it outlines apply to the public sector as a whole. We expect all public entities to consider setting up an audit committee in line with the good practices identified in the report.

Inland Revenue Department: Effectiveness of the Industry Partnership programme

Receiving cash payments but not declaring them for tax purposes is one way of avoiding or evading tax. In 2002, the Inland Revenue Department (IRD) began testing an Industry Partnership programme to try to reduce the incidence of undeclared income from cash transactions in selected industries. Our audit found that IRD generally performed well in designing, operating, and evaluating the programme. The programme included a lot of evaluation, monitoring, and self-critique, and subsequent adjustments to the programme. This was one of the programme’s strengths. However, IRD could have given greater attention to bringing the people and organisations likely to have undeclared cash incomes into the tax system. IRD needs to ensure that lessons learned from the programme are recorded and reflected in operational guidance and support resources. During 2008/09, we will be asking IRD to report on its progress with this.

Responses to the Coroner’s recommendation on the June 2003 Air Adventures crash

In May 2006, the Coroner reported on the June 2003 aircraft crash at Christchurch International Airport. At the Minister of Transport’s request, we looked at how the Civil Aviation Authority and the Ministry of Transport considered, responded to, and reported on each of the Coroner’s recommendations. We found that the process and the range of information used by the CAA and the Ministry in forming their conclusions provide evidence that they have properly considered their response to each of the Coroner’s recommendations. However, the Ministry should have more proactively monitored the timeliness of its responses and the progress made by the CAA in responding to the Coroner’s recommendations.

We had intended that this audit would also follow up on the CAA’s response to the recommendations in our 2005 report. This has not been possible, because the implementation of the certification and surveillance systems (which are aimed at addressing our main recommendations) has taken longer than planned. We will audit the effectiveness of the new systems in late 2008.

Guardians of New Zealand Superannuation: Governance and management of the New Zealand Superannuation Fund

The Guardians are the Crown entity responsible for management and governance of the Fund. The Fund has a long-term purpose, contributing to the future funding of superannuation in New Zealand, in the context of a significantly ageing population. We appointed Ernst & Young to assist with our performance audit, given the highly specialised nature of the Fund. We found the governance and management of the fund to be in good shape. The Guardians’ internal control activities generally meet or exceed accepted international practices and guidelines for operating investment funds. The Guardians have also shown leadership in the New Zealand public sector in relation to the complex area of responsible investment. However, the Guardians are still in the early stages of a long-term role, and will need to make changes as the organisation grows and in response to the challenges of a constantly changing investment environment.

Ministry of Social Development: Preventing, detecting and investigating benefit fraud

The Ministry of Social Development has a major responsibility to safeguard the integrity of the social security benefits system, which makes payments amounting to billions of dollars a year.

Our performance audit assessed the effectiveness of the Ministry’s systems, policies, and procedures for preventing, detecting, and investigating benefit fraud. We found that, overall, the Ministry has good systems, policies, and procedures in place for counteracting benefit fraud. However, we were unable to assess the effectiveness of a range of changes the Ministry has recently made in response to a major benefit fraud uncovered in late 2006. But we believe that these changes should help improve the Ministry’s overall ability to counteract benefit fraud.

The Accident Compensation Corporation’s leadership in the implementation of the national falls prevention strategy

Falls are a major cause of injury, hospitalisation, and deaths, and represent a major cost to the ACC scheme, as well as to the health system more generally. The Government published the national falls prevention strategy in August 2005, with the aim of strengthening co-ordination of the many government, non-government, and community agencies with an interest in falls prevention. Our audit assessed how ACC had led development of the implementation plan for the strategy, and progress with actions to give effect to that plan. We found that ACC had worked well with other agencies to put together the implementation plan, and had developed close relationships with injury prevention partners in establishing a framework for implementation, engaging effectively with agencies such as DHBs. We recommended that ACC draw up a protocol with key partner agencies, and that they finalise a framework and methodology for evaluating the results of the implementation activities. ACC has responded positively to our report, and is committed to acting on the recommendations and other issues we raised for their consideration.

Procurement guidance for public entities

This good practice guide updates and replaces our 2001 publication Procurement: A Statement of Good Practice. Public entities must have a detailed understanding of what they are procuring, the value and risk of the procurement, and how important the procurement is to achieving their overall goals and business strategy. This guide expands on the different methods that public entities can use to approach the market and the factors they need to take into account when deciding on the appropriate method.

Public sector purchases, grants and gifts: Managing funding arrangements with external parties

Many public entities find procurement a challenging and confusing area, and it is not always clear how the various sources of rules and guidance fit together. The aim of this overarching guide is to provide that clarity. This document explains the range of funding arrangements and how to think about which type of arrangement suits a particular circumstance. That range covers conventional purchasing contracts, relational purchasing arrangements, grants, and gifts. The aim is to help public entities to satisfy themselves and Parliament that they are spending public funds carefully, and that they are properly managing the process for spending those funds.

Managing funding to non-government organisations – from principles to practice

In 2006, we published Principles to underpin management by public entities of funding to non-government organisations (NGOs). We expect the principles and the risk-based approach outlined in that guidance to be evident in the management of funding arrangements with NGOs. We were interested in the extent to which this was the case in a public entity that managed many such arrangements. We looked at nine case studies of Ministry of Health/NGO relationships, focusing on the main funding arrangement in each case. We focused on how the Ministry considered the particular risks involved in each arrangement and the principles of good management outlined in our guidance. In the nine funding arrangements we looked at, the Ministry demonstrated a good awareness of the issues and principles involved when a not-for-profit provider delivers public services. We decided to share some of the Ministry’s experiences, to help clarify some of the more difficult areas for other public entities.

The Auditor-General’s observations on the quality of performance reporting

The purpose of this discussion paper was to set out the Auditor-General’s perspective about the purposes of performance reporting, to inform Parliament of observations about the quality of performance reports produced by the public sector in the last two years, and to set out the Office’s conceptual framework for performance reporting. Overall, the poor quality of non-financial performance reporting by public entities is disappointing. It needs to improve significantly to allow Parliament and the public to hold public entities accountable for their use of taxes and rates and for the effectiveness of their service delivery.

Charging fees for public sector goods and services

Last year the Regulations Review Committee asked us to consider providing an update to our 1989 publication Guidelines on Costing and Charging for Public Sector Goods and Services. We have worked with the Committee and the Treasury in preparing this new good practice guide, which replaces our 1989 publication. It discusses our expectation that public entities set fees in keeping with the principles of authority, efficiency, and accountability. It sets out the matters that we expect public entities to consider when calculating the costs of providing goods or services and setting the associated fees. It will form the basis on which we will carry out any work to review how a public entity has set fees.

Ministry of Education: Monitoring and supporting school boards of trustees

School boards of trustees are an important part of New Zealand’s education system. The elected trustees are mainly volunteers from the community, who commit a substantial amount of time and effort to the role. We carried out a performance audit to examine the effectiveness of the Ministry of Education’s monitoring of, and support for, boards in their governance role. Overall, the Ministry provides some useful training and general support for all boards. It also has good systems for supporting boards that are clearly at risk of poor performance. However, the Ministry needs to more actively monitor the whole school portfolio, so that it identifies boards that would benefit from support earlier and provides that support promptly. It also needs to ensure that it supports boards consistently throughout the country. The Ministry has responded positively to the matters raised during the audit and is committed to implementing the recommendations.

Reporting the progress of the defence acquisition project

Projects to acquire defence capabilities involve large amounts of public money and attract much public and political interest. Our intention was to carry out a performance audit to identify and report changes to costs, time frames, and essential user requirements in selected defence acquisition projects. However, we were unable to complete the audit as originally intended, as a lot of the detailed information that we expected the defence agencies to have was not readily available. The focus of this interim report was on the quality of the monitoring and reporting systems, not the quality of the decisions being made. In our view, the defence agencies must be able to report better and more complete information to demonstrate how well they are managing defence acquisition projects. Better reporting will enable greater accountability to Ministers, Parliament, and other stakeholders on progress with these major acquisition projects.