Appendix 1: Summary of reports on performance audits, inquiries, and other studies published in 2008/09

Annual Report for the year ended 30 June 2009.

Performance Audits

Defence Sustainability Initiative

We carried out a performance audit on the progress made by the Ministry of Defence and the New Zealand Defence Force in implementing the Defence Sustainability Initiative. This was a classified report to defence and central agencies outlining our views on the implementation of the Initiative against specific, technical measures. A further, non-classified report will be published later.

Department of Corrections: Managing offenders on parole

How well the Department of Corrections manages offenders on parole is an area of great public and political interest. In our performance audit we looked at how well the department managed offenders released on parole by assessing whether probation officers and other staff were managing offenders in keeping with the department's requirements. In most of the case files we examined the department had not followed one or more of its own sentence management requirements and in some cases we determined that the Department had not managed cases adequately. If offenders on parole are not adequately managed in keeping with parole requirements, public safety is put at risk. Given the nature and extent of what was identified during this audit, we will be closely watching the department's progress in implementing our recommendations.

Electricity Commission: Review of the first five years

In 2003, the Government established the Electricity Commission (the Commission) to provide better governance over the generation, supply, and use of electricity. We carried out a performance audit to provide a more in-depth review of the Commission's progress in reporting its performance against the Government Policy Statement's objectives, outcomes, and performance standards. Although the Commission has completed many tasks that are important to the ongoing functioning and development of the electricity market, it has had difficulty measuring its achievements against the Government Policy Statement's objectives and outcomes. It will take time before meaningful trends and information provided by the impact indicators will enable the Commission to assess the outcomes of its work and whether this work is enough. The Commission considers that there is strong evidence of positive outcomes from its work, and its challenge is to develop the arrangements, voluntary and regulatory, that allow commercial entities to deliver the desired outcomes. We will be watching the Commission's progress in assessing the effectiveness of its work in influencing outcomes.

Housing New Zealand Corporation: Maintenance of state housing

State housing is the largest publicly owned property portfolio in the country, with an estimated value in 2008 of $15.2 billion. Housing New Zealand Corporation (the Corporation) is the agency responsible for maintaining state housing. We carried out a performance audit to assess the effectiveness of the systems and processes the Corporation uses to maintain state housing. Overall, the systems for maintaining state housing properties are comprehensive and effective. The Corporation has set clear standards for the quality of its responses to tenants and for the quality of its maintenance work. It also monitors how the standard of its properties compares with properties in the private sector rental market. However, the inability of the Corporation's existing systems to provide detailed information about the condition of state housing properties has limited the effectiveness of its planning for maintenance. This means that it has lacked a reliable basis for measuring and managing its overall maintenance workload.

How government departments monitor Crown entities

This report describes how well three government departments – the Department of Internal Affairs, the Ministry for Culture and Heritage, and the Ministry of Economic Development – support Ministers in meeting their responsibilities for selected autonomous Crown entities, Crown agents, and independent Crown entities. This was the second of three reports looking at how particular categories of Crown entity are monitored. The main focus of our audit was to examine how well the selected departments carried out their day-to-day monitoring tasks and whether they had effective systems in place to support their Minister. Overall, the three departments were reasonably positioned to support their Ministers through their monitoring work. However, there is clear room for improvement. All three departments did some aspects of their monitoring work well, but fell short of what was expected in other aspects.

Inland Revenue Department: Managing tax debt

Although most taxpayers pay their tax on time, the Inland Revenue Department (Inland Revenue) acknowledges that tax debt is growing at a rate that is outpacing Inland Revenue's capacity to deal with it. Inland Revenue has estimated that total tax debt could more than double within five years unless it takes a different approach to managing the debt. We looked at how Inland Revenue manages its tax debt collection role and examined whether it was taking a strategic approach to debt management, and adequately monitoring and reporting its performance in managing tax debt. Although Inland Revenue's management of tax debt was satisfactory once debt cases were assigned to its debt officers, its overall approach to tax debt management is insufficient to control the growth in tax debt. Inland Revenue has limited information to monitor the effectiveness and efficiency of its tax debt collection work. Inland Revenue was aware of how many tax debt cases it needs to manage, but was not able to identify how many tax debt cases it was actively managing.

Ministry of Education: Supporting professional development for teachers

We carried out a performance audit that looked at the Ministry of Education's (the Ministry's) arrangements to support the professional development of primary and secondary school teachers after they have graduated from a teacher education programme. Professional development can be informal or formal and covers a wide range of activities. It includes training courses, conferences, tertiary study, observed practice, and study groups. We determined that there are aspects of the Ministry's work that could be improved. These improvements include greater coherence of its information and activities for the professional development of teachers. We found that while the Ministry is aware of the range of sources of funding it uses for professional development, it does not consider all of these sources as a whole when making decisions about the relative priority of initiatives, or the adequacy of the funding available for professional development for teachers. The Ministry's focus on evidence of what is effective professional development is one of the strengths of the professional development system. There is, however, potential within both the Ministry and the wider education sector for greater use of this evidence.

Ministry of Health: Monitoring the progress of the Primary Health Care Strategy

In 2001, the then Minister of Health launched the Primary Health Care Strategy (the Strategy), which the Government regarded as introducing the most significant changes to primary health care in more than 50 years. It was estimated that carrying out the Strategy could take five to 10 years. It is a large and difficult task, which involves participation by many primary health care stakeholders. We carried out a performance audit on how the Ministry of Health (the Ministry) has monitored progress toward the Strategy's goals. Overall, the Ministry needs to review its measures to ensure that it can assess progress toward all of the goals in the Strategy's vision statement. Once it has that progress information, it needs to report it publicly and regularly in a consolidated report.

Ontrack – Maintaining the rail network

We carried out a performance audit to provide assurance about the effectiveness of Ontrack's systems for maintaining and renewing the rail network. We focused on Ontrack's long-term planning, its systems, plans, policies, and procedures for managing day-to-day maintenance and renewal work, and the checks it had carried out on the work done. We expected that its top priority would be to ensure that it had systems, plans, policies, and procedures for managing day-to-day work. We also expected Ontrack to have started preparing a long-term plan for managing the rail network. Overall, Ontrack had, or was putting in place, various systems, plans, policies, and procedures for maintaining and renewing the rail network. However, these varied in completeness and comprehensiveness, and in most instances there was room for improvement.

Performance audits from 2007: Follow-up report

Our report to Parliament sets out the actions taken in response to the findings of the 14 performance audits we completed in 2007. The work we do provides Parliament with independent assurance that public sector organisations are operating, and accounting for their performance, in keeping with Parliament's intentions. This includes assurance about the activities and operations of local government, local authorities and the entities they control.

Reporting the progress of defence acquisition projects

We were unable to complete our planned performance audit to identify and report changes in recent major defence acquisition projects managed by the Ministry of Defence and the New Zealand Defence Force (the defence agencies). We had difficulty getting all of the necessary information, particularly from the Ministry's information systems, and had to change our audit approach. Although we were unable to complete our audit, we were able to compile a high-level summary of how the costs and time frames have changed for each of the 10 acquisition projects we looked at. For most of the 10 projects, estimated costs and time frames had increased, in some cases significantly, between when Cabinet gave approval for acquisition to commence and when Cabinet gave approval for the contract to be signed. In our view, this information is not enough for the defence agencies to demonstrate how well they are managing the projects or for Parliament or other stakeholders to reach a view on this. There is scope to improve the quality, transparency, and usefulness of the reports that the defence agencies provide about the progress of defence acquisition projects. We will work with the defence agencies during the next two financial years to make the changes needed.

Workforce planning in Crown Research Institutes

Crown Research Institutes (CRIs) are the largest providers of scientific research in New Zealand. Their staff have a diverse range of research, science, and technology skills, and have an important role in enhancing economic growth and environmental well-being. The ability of CRIs to deliver research, science, and technology products depends on attracting and retaining people with the necessary skills and knowledge. Competition for science skills, changing workforce demographics, and tight labour markets pose a risk to the ability of CRIs to attract and retain staff, and therefore to scientific research in New Zealand. We carried out a performance audit of the workforce planning within all nine CRIs with a focus on how CRIs identify their workforce needs, establish initiatives to address their needs, and monitor and evaluate those initiatives. Overall, we found that all the CRIs had established, or were establishing, appropriate systems to support effective workforce planning. However, the maturity of workforce planning differed between the CRIs.

Response of the New Zealand Police to the Commission of Inquiry into Police Conduct: First monitoring report

In 2007, the Commission of Inquiry into Police Conduct (the Commission) released its report. The report criticised the historical conduct of some police officers and their associates. The conduct included inappropriate sexual activity and a culture of scepticism in dealing with complaints about sexual assault. As recommended by the Commission, the Government invited us to monitor the Police's response to the Commission's recommendations. In our first monitoring report, we observed that, overall, the Police have responded in a committed manner to the Commission's findings. The Police need to review and amend how they report their progress with implementing the Commission's recommendations in their internal and external reporting documents. The reporting documents need to appropriately reflect the importance of the Commission's findings to changes within the Police. Making sustained changes within the Police to implement the Commission's recommendations is not easy. The Police organisation is large, complex, and hierarchical. Achieving effective change within this type of organisation takes time and tenacity. The Police's commitment to making these changes is clear, but there is still much work to do.


Inquiry into immigration matters (two reports)

In May 2008, the then Prime Minister and the then Minister of Immigration requested that we carry out an inquiry into a range of integrity concerns arising out of Immigration New Zealand, which is part of the Department of Labour. The request was in response to various concerns that had been discussed in the public domain. This inquiry did not find widespread integrity and probity issues within Immigration New Zealand. However, the inquiry has identified a need for the Department to improve the systems and processes that Immigration New Zealand uses to support staff who make visa and permit decisions (Volume 1). This inquiry also examined the public sector recruitment processes involving Ms Thompson and the handling of recruitment-related concerns (Volume 2).

Inquiry into the West Coast Development Trust

Our inquiry began after a number of specific allegations were made about individual files and transactions at the West Coast Development Trust. After investigating the detail of those allegations, we concluded that many of the concerns were unfounded and that others were based on minor administrative or procedural errors, or occasional errors of judgement. In the course of this inquiry, it became apparent that the governance of the Trust was dysfunctional and did not work effectively. The inquiry revealed an atmosphere of suspicion and distrust, behaviour that was inappropriate for a public entity or for trustees. We concluded that assurance could not be provided to Parliament that the Trust was able to deliver fully on its purpose of generating sustainable employment opportunities and economic benefits for the people of the West Coast region until this dysfunction was rectified.

Inquiry into the Christchurch City Council's decision in July 2008 to purchase five central city properties

We inquired into this matter as a result of the high public interest shown in the Christchurch City Council's decision in July 2008 to purchase five central city properties. Overall, we concluded that the decision-making process followed by the Council was sound. We considered that the Council's process for deciding to purchase the five properties complied with the principles of decision-making set out in the Local Government Act 2002, and was consistent with the Council's wide discretionary powers under the Act. The Council's decision was made under time pressure and the Council considered relevant factors, including its policy on determining significance. The Council considered the consistency of the decision with existing Council strategies and plans; in particular its aspirations for city revitalisation and urban regeneration. The merits of the decision to purchase the properties are a matter for the Council's elected members. In this instance, a majority of elected members decided that the Council should buy the five properties.

Other studies

Statements of intent: Examples of reporting practice

Our discussion paper gives examples of reporting practice from the statements of intent (SOIs) of government departments and Crown entities, including statements of forecast service performance (forecast SSPs). The examples were selected during the Office's review of the 2008–11 SOIs. Each of the 26 examples includes features of "better practice". It is intended that highlighting these examples will stimulate discussion within public entities and contribute to better non-financial performance reporting. Performance reports (such as SOIs and SSPs) should reflect the entity's management intentions, and are an essential part of accountability documents. These documents help ensure that government departments and other state sector entities are held accountable to Parliament and the public. The quality of performance reports needs to improve significantly to achieve their purpose satisfactorily.

The Auditor-General's views on setting financial reporting standards for the public sector

Our discussion paper set out the Auditor General's views and concerns on the setting of financial reporting standards for the New Zealand public sector and outlined some changes that are needed to provide a better basis for public sector financial reporting standards in New Zealand. The financial statements required by generally accepted accounting practice need to be relevant and appropriate for financial accountability purposes. It is important that financial reporting standards result in financial information that can be readily integrated with non-financial performance information. Financial and non-financial performance information needs to be integrated, because true accountability requires transparency about financial and non-financial performance and an appropriate relationship between the two.

Model financial statements

In addition to the work outlined above, Audit New Zealand prepares model financial reports to assist different types of public entities with the preparation of financial statements. The model reports are based on fictitious entities but set out good practice reporting of typical operations, balances, and transactions for the type of public entity that the model is intended to assist. Audit New Zealand updates its model financial statements periodically to reflect changes in financial reporting standards and other requirements over time. In 2008/09, Audit New Zealand reviewed and reissued its model financial statements for council-controlled organisations in accordance with New Zealand equivalents to International Financial Reporting Standards.

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