Part 3: Organisational health and capability

Annual report for the year ended 30 June 2008.

Capability report

Our Annual Plan 2007/08 set out the measures we intended to use to assess our current capability, specifically:

  • staff numbers and the distribution of staff by function, gender, and ethnicity;
  • number of internal promotions to senior roles;
  • average investment in staff training and development; and
  • data on staff tenure and turnover.

Our specific intentions and results against these measures for 2007/08 were:

  • to maintain and improve our overall rating as assessed by staff in our annual staff survey; and
  • to maintain and improve all of the key capability statistics from the previous year.

Specific areas of focus were:

  • strengthening the management and leadership development of our people;
  • further embedding the national professional development programme;
  • supporting all staff members with Individual Development Programmes;
  • ongoing investment in targeted areas of generic training (for example, Te Reo, presentation skills, media liaison, and writing);
  • completing a significant “future business model” project that will provide us with a robust planning tool to better forecast staff requirements;
  • introducing high potential and talent management programmes to recognise, reward, and develop our high performers;
  • further embedding our national internship programme; and
  • further aligning our human resources policies and procedures to support recruitment, retention, and development of the best people.

Based on this information, we also make some of our own conclusions about the adequacy, quality, and effectiveness of our current capability.

Summary results

Overall we have made good progress during 2007/08 in:

  • improving staff numbers in a difficult labour market;
  • ongoing leadership and capability development of our people;
  • improving our systems and processes;
  • improving recruitment and retention strategies to attract and retain good people; and
  • maintaining acceptable levels of organisational health.


Work on our “future business model” project has provided us with a planning tool to better forecast audit staff requirements in future years. This model has shown us that we need to maintain a consistent level of recruitment for both graduate and qualified employees. It also shows that we need to continue to supplement our internal staff with secondees from New Zealand and overseas accounting and audit firms to help us through our peak periods.

Our recruitment initiatives and processes were quite successful in 2007/08, with a net increase in staff numbers of 23 full-time equivalents to 311. This reflects an increased intake of accounting graduates (40) and successful recruitment programmes targeted at qualified auditors in the United Kingdom and South Africa. The graduate programme is very successfully supported by an effective internship programme, with 23 interns recruited for nine weeks in the 2007/08 year. A new Alumini programme for ex-staff based in the United Kingdom is also showing early signs of success.

Despite a successful recruitment programme, staff turnover – especially that of qualified auditors – remains of concern. A variety of contributing factors have been identified, including overseas travel, work-life balance, and career change. Several initiatives seek to address this, including more targeted development programmes, more flexible working arrangements, careful management of remuneration, and potential secondment programmes to our equivalent organisations in the United Kingdom.

Figure 14 provides a summary of staff numbers, their functional distribution, and staff turnover for the year.

Figure 14:
Staff numbers, functions, and turnover

As at 30 June 2008 2007 2006 2005
Staff numbers (full-time equivalents)
Office of the Auditor-General 57 70.9 70.7 66.2
Audit New Zealand 216 217.2 189.1 177.6
Corporate Services* 38 n/a n/a n/a
Total 311 288.1 259.8 243.8
Functional distribution
Audit/assurance 74% 72% 71% 69%
Technical and advisory 9% 4% 4% 4%
Corporate support 13% 20% 21% 23%
Management 4% 4% 4% 4%
Office of the Auditor-General 19% 19% 18% n/a
Audit New Zealand 21% 18% 28% n/a
Corporate Services* 21% n/a n/a n/a

* Corporate Services function is shared between the OAG and Audit New Zealand business units. From 2008, the staff numbers for Corporate Services are shown separately. In previous years, these staff numbers were distributed between the two business units.

** During 2007/08, a restructure resulted in a small change in allocation of staff between the shared Corporate Services team and Audit New Zealand. This restructure also led to increased turnover, contributing an estimated 2% to each of shared Corporate Services’ and Audit New Zealand’s totals.

Equal employment opportunities

Under the Public Audit Act, the Auditor-General must develop and publish an equal employment opportunities (EEO) programme, and ensure that this programme is complied with.

The principles of equal opportunity are embedded in the Office’s policies and procedures. Our recruitment programme in particular aims to attract and appoint the best people, who have the appropriate skills, values, and attributes to meet the Office’s needs, objectives, and strategic direction, in a manner that provides equal employment opportunity to Māori, women, ethnic or minority groups, and people with disabilities.

We believe that the Office benefits from a diverse workforce, and we are committed to recognising and valuing different skills, talents, experiences, and perspectives among our employees. A diverse workforce will help the Office relate to our clients and bring a variety of perspectives to bear on any given topic.

While the Office practices the principles of EEO, a formally articulated EEO programme is still being developed and will be completed in the 2008/09 year. As shown in Figure 15, the diversity of our staff continues to increase.

Figure 15:
Staff diversity

As at 30 June 2008 2007 2006 2005
Gender distribution – all staff
Women 52% 54% 51% 48%
Men 48% 46% 49% 52%
Gender distribution – executive management
Women 42% 45% 33% 30%
Men 58% 55% 67% 70%
Ethnicity distribution
NZ European 42% 48% 49% 53%
NZ Māori 4% 3% 3% 4%
Pacific Islander 3% 2% 2% 2%
Asian 12% 9% 12% 14%
Other European 12% 8% 9% 7%
Other ethnic groups 2% 3% 3% 2%
Undeclared 25% 27% 22% 18%

Training and development

We aim to continue to improve the overall skill, leadership capability and experience level of staff. This is of particular importance for audit staff, but applies to staff throughout the Office.

We have continued the development of high potential and talent management programmes, both as a way of improving staff retention and to broaden the skills of our current and future leaders. Leadership competency frameworks were successfully introduced to both Audit New Zealand and the OAG.

Expenditure on training and development has increased for Audit New Zealand. This reflects an increased proportion of pre-qualified staff with significant training programmes, and costs associated with a leadership coaching programme for managers and directors.

Many staff members have also received generic training, including on writing, presentation, and media skills.

Professional development continues to have a very high priority. In 2007/08, Audit New Zealand refreshed its national professional development programme for all audit staff. The programme delivered 30 modules/courses to 437 course participants, which were highly rated by audit staff. The programme is aimed at developing the base professional competencies of audit staff. This includes equipping them to work within Audit New Zealand’s national professional practice framework, audit methodology, quality control systems, and the Auditor- General’s statements and standards. In conjunction with the OAG, Audit New Zealand also delivered technical workshops and updates as part of its “auditor readiness” programme, to prepare it for the introduction of International Financial Reporting Standards to New Zealand.

Figure 16:
Staff experience and training

As at 30 June 2008 2007 2006
Experience – average time in job (years)
Office of the Auditor-General 7.2 5.8 5.6
Audit New Zealand 4.3 4.3 5.0
Corporate Services* 5.4 n/a n/a
Training and development – average expenditure per employee
Office of the Auditor-General (incl. Corporate Services) $1,884 $2,572 $1,754
Audit New Zealand $4,509 $3,165 $2,298
Pass rate of staff undertaking NZICA accreditation

100% 100% 97%

* Corporate Services function is shared between the OAG and Audit New Zealand business units. From 2008, the staff numbers for Corporate Services are shown separately. In previous years, these staff numbers were distributed between the two business units.

Organisational health and staff satisfaction

We survey our staff each year, to understand trends in various aspects of our staff satisfaction. We are particularly interested in the overall satisfaction and engagement of our staff, whether the organisation meets the basic needs of our people, the degree to which our people contribute as individuals and as a team, and the opportunity for growth in the organisation.

In 2007/08, we changed the survey methodology, electing to join many other State sector employers in using the Gallup Q12 employee engagement survey. The change in survey means that it is difficult to compare this year’s results with those of previous years, the only common question being overall satisfaction. However, we have compared the results of similar questions between last year and this year and have found that, in general, the response is similar.

Our results (see Figure 17) are broadly on a par with other State sector organisations, although generally below the average for employees in New Zealand as a whole. We consider it desirable and beneficial to improve our employees’ engagement and satisfaction across the board, and will be working on this throughout the coming year.

Figure 17:
Staff survey results

As at 30 June 2008 2007 2006
Staff survey results (1=low, 5=high)
(Note: 2006 and 2007 figures converted to 5-point scale for comparison)
Overall engagement 3.7 n/a n/a
Overall satisfaction 3.5 3.6 4.3
Basic needs met 4.0 n/a n/a
Individual contribution 3.5 n/a n/a
Teamwork 3.5 n/a n/a
Growth 4.0 n/a n/a

Another indicator of organisational health is the average sick days taken by employee. As shown in Figure 18, the figures for 2007/08 are consistent with previous years.

Figure 18:
Sick leave

2007/08 2006/07 2005/06
Sick leave taken – average days per employee
Office of the Auditor-General 5.2 5.3 4.3
Audit New Zealand 5.5 4.8 5.2
Corporate Services 4.3 n/a n/a

Information systems

The Office, especially Audit New Zealand, is highly dependent on information technology to carry out its work. Audit staff working in the field need to have remote access and communications tools to ensure an effective, efficient, and customer-focused service. The Office of the Auditor-General needs systems to manage the 4000-odd audits it is responsible for.

During 2007/08, the Office invested in redevelopment of the core system used to manage the allocation and tracking of annual audits. The new system replaces one that is more than ten years old, which no longer meets the information, management, and security needs of the Office. The replacement system contains considerable new functionality, and incorporates significant business and process knowledge that was previously tacit in nature.

Also in 2007/08, a project was started to replace the core financial and time and cost management systems. These systems are particularly critical to Audit New Zealand’s effectiveness at managing the time and costs associated with annual audits.

Financial performance indicators

Details of our performance against measures established in the Annual Plan 2007/08 are summarised in Figure 19 below.

Figure 19:
Financial performance indicators for the year ended 30 June 2008

Measure 2007/08
Supp. Estimates
Annual Plan
Operating results
Income: other than Crown 58,525 58,708 53,981 58,503
Output expenditure 67,861 68,328 63,580 67,553
Surplus before capital charge* 549 120 120 552
Surplus 285 - - 285
Working capital management
Current assets less current liabilities 2,324 2,221 1,753 1,844
Current ratio 130% 129% 128% 123%
Average receivables and work in progress 42 days 36 days 32 days 35 days
Resource use
Plant and equipment:

Total plant, equipment, and intangible assets at year-end 1,847 2,040 2,262 2,389
Additions as % of plant and equipment 42% 46% 56% 51%
Taxpayers’ funds
Level at year-end 3,521 3,521 3,586 3,521
Net cash flows
Surplus on operating activities 452 1,274 1,313 1,867
Surplus/(Deficit) on investing activities (652) (849) (1,275) (1,015)
Surplus/(Deficit) on financing activities (469) (469) - -
Net increase/(decrease) in cash held (669) (44) 38 852

* Capital charge and offsetting interest components are now reported separately for 2006/07 and 2007/08 Actual figures. These were previously offset, with only the net capital charge being reported in the Statement of financial performance. The Annual Plan and Supplementary Estimates figures were prepared on this basis.

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