Appendix: Proposed work programme for 2010/11

Annual Plan 2010/11.

Proposed performance audits and studies in 2010/11

In 2010/11, the Auditor-General proposes to start the performance audits and studies briefly described in the table on pages 65-70.

The actual work programme we deliver in 2010/11 may differ from this proposed programme. 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 proposed audit is no longer relevant.

Reports on many of the performance audits and studies started in 2010/11 will be completed and presented to Parliament during 2010/11, while some will be presented in 2011/12.

For context, the table on page 71 lists the performance audits and studies that will have been started during 2009/10, and that we expect to report on to Parliament in 2010/11. Descriptions of these audits were provided in our Annual Plan for 2008/09 or 2009/10.

Performance audits and studies are grouped by the Office's core areas of interest. They may have been included in the work programme because of entity or sector specific reasons, or because it is an area of focus identified by the Auditor-General. The performance audits and studies we are proposing to start in 2010/11 are shown below, grouped according to the core areas of interest.

Major asset management or infrastructure spending/management

  • ONTRACK follow-up audit: Maintaining and renewing the rail network;
  • Freshwater quality in New Zealand: Effectiveness of management responses;
  • New Zealand Transport Agency: State highway maintenance – Part 2;
  • Transpower: Managing the national grid; and
  • Housing New Zealand Corporation: Maintenance of state housing follow-up.

Major public investment/liability management

  • Accident Compensation Corporation: Management of funds; and
  • The Treasury: Administration of the Retail Deposit Guarantee Scheme.

Major public revenue management or generation

  • New Zealand Customs Service: Effectiveness of the customs revenue assurance strategy and programme; and
  • Inland Revenue Department: The voluntary compliance strategy.

Major expenditure (including service delivery expenditure)

  • Quality assurance and administration of internally assessed standards for the National Certificate of Educational Achievement;
  • Ministry of Health and district health boards: Provision of home-based support services for older people;
  • The role of teacher registration and initial teacher education course approval processes in ensuring the quality of teaching in New Zealand schools;
  • Management of care and protection services for children and young people in care;
  • District Health Boards: Contract management practice;
  • The effectiveness of responses to Māori housing needs and demand; and
  • Review of reported performance information.

Local government

  • The demand for water – Auckland region;
  • Matters arising from our audit of the Auckland planning document; and
  • Observations on the audits of Auckland entities being dissolved.

Performance audits and studies to be started in 2010/11

No Title Description
1 ONTRACK follow-up audit: Maintaining and renewing the rail network Our 2008 report Maintaining and renewing the rail network identified that ONTRACK has significantly more work to do before its systems, plans, policies, and procedures for maintaining and renewing the rail network are complete, connected, and able to be used together where necessary. The report included 10 key recommendations.

We propose to carry out a follow-up audit to check ONTRACK's progress in implementing the recommendations in our 2008 report.
2 Freshwater quality in New Zealand: Effectiveness of management responses Deteriorating fresh water quality has been widely identified as one of the most critical environmental issues for New Zealand. This deterioration creates economic risks, social and cultural risks, and environmental risks. Regional councils are responsible for managing freshwater quality through administering the Resource Management Act.

The audit will examine the effectiveness of management responses designed to maintain or enhance water quality.
3 New Zealand Transport Agency: State highway maintenance – Part 2 The New Zealand Transport Agency (NZTA) spends about $400 million annually on maintaining state highways and motorways. We intend to conduct a performance audit to examine how NZTA delivers maintenance and renewal work on the state highway network, with a focus on the procurement and contract management procedures it uses for this work.

This is the second of two audits we are conducting into NZTA's maintenance and renewal of the state highway network. The first, to be published in early 2010/11, focuses on the effectiveness of NZTA's understanding of the nature and condition of the state highway network, and its planning for maintenance and renewal work.
4 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.
5 Housing New Zealand Corporation: Maintenance of state housing follow-up In 2008, we audited how Housing New Zealand Corporation (the Corporation) maintained state houses. Our 2008 audit found that the Corporation's existing systems could not provide detailed information about the condition of state housing properties, which limited the effectiveness of its planning for maintenance.

This would have been a significant concern if the Corporation had not already identified and put in place a process to address the problem, and to renew its systems. This new audit will follow up on the work the Corporation has done since our original audit.
6 Accident Compensation Corporation: Management of funds We propose to carry out a performance audit to examine whether the Accident Compensation Corporation (ACC) is effectively and efficiently managing the investment funds it is building up to pay for the treatment of injured people, the future costs of their injuries, and the provision of compensation to them.

ACC operates six accounts that are used to meet these payments. Each of these accounts is split between an investment in ACC's short-term "cash portfolio", which is used to meet near-term expenditure requirements, and its longer-term "reserves portfolio", which is set aside to meet the future costs of existing claims. It is important that these accounts are managed effectively and efficiently.

However, ACC's governance and oversight of these investments is currently being considered as part of a stocktake of ACC announced by the Minister for ACC in August 2009. We will therefore determine the scope and timing of our audit when the outcome of the ACC stocktake is known.
7 New Zealand Customs Service: Effectiveness of the customs revenue assurance strategy and programme The New Zealand Customs Service (the Service) is expected to collect over $10 billion in 2009/10, which is about 15% of the Crown's total revenue. The Service collects the revenue with a voluntary compliance regime, which encourages individuals and organisations to comply with requirements.

In 2007, we audited the Service's arrangements for collecting customs revenue and found that they were sound. This new audit will look at the policies, procedures, and practices of Trade Assurance, which is the part of the Service that examines whether the voluntary compliance regime is effective.

The audit will focus on one of our core areas of interest – public revenue management or generation. It is the second of our rolling programme of audits about the Service's revenue collection work. We aim to give Parliament assurance that the Service's approach to collecting the customs revenue owed is effective and efficient.
8 Quality assurance and administration of internally assessed standards for the National Certificate of Educational Achievement The National Certificate of Educational Achievement (NCEA) was fully implemented as the main secondary school qualification in 2004. The Ministry of Education (the Ministry) and the New Zealand Qualifications Authority (NZQA) share responsibilities for the ongoing development and administration of NCEA.

In 2008, NZQA implemented a national external moderation process for the NCEA standards assessed internally by schools. We consider it timely to consider whether the Ministry and NZQA have effective and efficient processes to help ensure the fair and consistent development, assessment, and moderation of internally assessed NZEA Achievement and Unit Standards.
9 Ministry of Health and district health boards: Provision of home-based support services for older people District health boards (DHBs) are responsible for providing and funding home-based support for older people. The Ministry of Health is responsible for providing strategic direction for DHBs in this area. As the population ages and the preference of older people to stay in their own homes for as long as possible is increasingly recognised, the demand for home-based support for older people will increase.

We propose to examine how effective the Ministry of Health and DHBs are in ensuring that, where appropriate, older people get the support they need to remain independent as long as possible. This performance audit will be the second we have carried out in the area of health services for older people. In 2009/10, we carried out a performance audit of arrangements to check the standard of services provided by rest homes.
10 The role of teacher registration and initial teacher education course approval processes in ensuring the quality of teaching in New Zealand schools Having teachers who are well equipped with the necessary skills to teach in our schools is a significant objective of the education system, given the role of the system in preparing our youth for the future. Research has shown a correlation between initial teacher education, quality of teaching, and student achievement.

A range of stakeholders contribute to ensuring that graduate teachers are well equipped when they enter the classroom, including the New Zealand Teachers Council, the Ministry of Education, the Tertiary Education Commission (TEC), and the New Zealand Qualifications Authority, among others.

We can contribute to effective teaching by providing assurance on activities that are designed to enhance the quality of teaching in the classroom. This performance audit will therefore assess the effectiveness and efficiency of the processes for assuring the quality of teacher graduates – from the approval of initial education provider programmes through to the provisional registration of teachers. The audit will examine TEC's initial teacher education programme approval (and re-approval) process and the teacher registration process. It will also examine other key functions, such as TEC's funding role, and the degree to which the various entities understand their roles and responsibilities, and co-ordinate their efforts to achieve an optimal outcome.
11 Management of care and protection services for children and young people in care Children and young people in care are a particularly vulnerable group. The needs of these children and young people differ. The needs often contribute to subsequent difficulties in achieving a permanent placement for the child or young person.

International research shows that the mental health and psychological well-being of children and young people can be damaged by multiple moves between foster care homes, and unsuccessful or temporary returns to the care of the family.

We will audit how well Child, Youth and Family:
  • assesses and responds to the needs of children and young people who are placed in foster care;
  • assesses the suitability of and supports the caregiver/foster care parent; and
  • ensures the ongoing effectiveness of placements.
12 District Health Boards: Contract management practice In our Annual Plan 2008/09, we outlined our intention to audit procurement practice in district health boards (DHBs). DHBs collectively spend more than $5 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.

Through our work over recent years looking at policies and procedures for procurement, conflict of interest, and delegations in the health sector, we have found that many of the policies needed improvement, and we have reported this. Other work in the health sector has also indicated that there may be a systemic problem with how DHBs implement procurement policy in practice.

Since we published our Annual Plan 2008/09, we have decided to split our work into two parts – one part examining purchasing practice (establishing the delivery of supplies or services, by raising a purchase order or establishing a formal contract for the supply or delivery of a service), and one part examining contract management practice (managing the delivery of the supplies and services).

Our work on purchasing practice in DHBs is nearing completion, and we intend to publish our report in the near future. As well as completing this work, we are working collaboratively with the DHB sector to consolidate what we know about the state of contract management practice, identify what DHBs are doing to improve contract management practice, and identify good contract management practice across the DHB sector that can be usefully applied by all DHBs.
13 Review of reported performance information As part of our commitment to improve performance information produced by public entities, we have agreed to a three-year joint work programme with the Treasury, with the aim of supporting entities to improve their non-financial performance information and reporting. We also propose to review the published performance information produced over the last five years by selected entities, and will report the results of our work to Parliament. We anticipate that we will be able to identify lessons that can be shared with the wider public sector and can also be used to inform the development of future activity by this Office.
14 The effectiveness of responses to Māori housing needs and demand As a population, Māori experience some of the worst housing conditions in the country. Māori, along with Pasifika peoples, are more likely than European families to live in overcrowded housing. Māori are disproportionately represented on Housing New Zealand Corporation waiting lists, and 27% of Accommodation Supplement recipients are Māori. The home ownership rate among Māori has declined sharply in the past ten years, faster than the decline in the home ownership rate for Europeans.

We propose a performance audit to examine whether public sector organisations are addressing Māori housing needs effectively and efficiently.
15 The demand for water – Auckland region Water is an essential service for safeguarding the health and well-being of residents and communities in a district or region. We previously reported on the ability of local government outside of Auckland to manage water demand and the optimal investment in assets. The reform of local government brings the full integration of all water and wastewater services into one subsidiary of the new Auckland Council – Watercare. This will involve integrating Watercare's existing water wholesale services with the distribution networks of the seven amalgamating territorial local authorities.

Subject to the stage and status of these reforms of Watercare, we propose to review aspects of Watercare's water demand management strategy. Depending on the development of Watercare, this may focus on the effectiveness of the merging of the distribution assets and a review of integration of the related strategies. We expect to start our work in 2010/11, and to report on it in the following financial year.
16 Matters arising from our audit of the Auckland planning document The Auckland Transition Agency (ATA) is charged with preparing, on behalf of Auckland Council, a planning document by 31 October 2010 that will enable the new Council to have a document against which it can assess policies and decisions as it begins its governance responsibilities. While the detail of the document is still subject to finalisation through the current "No. 3 Bill" before Parliament, the current intent is to enable Auckland Council to begin work with a longer-term plan consistent with the rest of local government. This represents a significant task for the ATA, and the Auditor-General is required to issue an audit opinion on the appropriateness of the planning document.

We consider it a significant document, and intend to report to Parliament on matters arising from that audit engagement and observations that may be relevant in any future local government reorganisation.
17 Observations on the audits of Auckland councils being dissolved The scale of change in the reform of Auckland local government is unprecedented and challenging. This includes the work and reporting of the eight councils that are being dissolved on 31 October 2010, with the new Auckland Council assuming the sole local government responsibility in the region from 1 November 2010.

While dissolutions are a normal part of a restructure, they will still represent a significant challenge for the new Council to complete. They will form the basis for the opening balance sheet, not just of the new Council but also of its substantive subsidiaries. Their completion will represent a key milestone in the Auckland reforms, and we will report to Parliament on observations and lessons from the dissolution audits.
18 The Treasury: Administration of the Retail Deposit Guarantee Scheme The Government introduced the Retail Deposit Guarantee Scheme (the Scheme) in October 2008 at a time of international financial market turbulence. The purpose of the Scheme was to maintain the confidence of retail depositors in New Zealand's financial system.

The Scheme was initially for a two-year period, but was amended in September 2009 and extended until the end of 2011. The Treasury is responsible for administering the Scheme. We propose to carry out a performance audit to examine selected aspects of how the Scheme was implemented and managed.
19 Inland Revenue Department: The voluntary compliance strategy Inland Revenue uses a compliance model for the tax system with two main approaches:
  • helping taxpayers to comply with their obligations of their own accord; and
  • taking proactive action when needed to encourage non-complying taxpayers to comply with their obligations.
The tax system is most effective and efficient when taxpayers comply voluntarily. This audit will examine how effectively and efficiently Inland Revenue is carrying out its strategy of promoting voluntary compliance by helping taxpayers to comply with their tax obligations of their own accord.

Performance audits and studies started in 2009/10 and due to be finished in 2010/11

District health boards: Availability and accessibility of after-hours services
Ministry of Social Development: Management of debt
Sport and Recreation New Zealand: Promoting participation in sport and physical recreation
Reporting on the progress of major defence acquisitions
Elective surgical services study
Department of Internal Affairs: Grants administration
New Zealand Transport Agency: State highway maintenance – Part 1
Inland Revenue: Managing child support debt
Social marketing campaigns

Audits we have deferred or cancelled

There are four audits that we have deferred temporarily while changes in the respective sectors are introduced. Over the coming year, we intend to review whether these proposed audits remain relevant and valuable. The four audits are:

  • Department of Corrections: Managing prisoner employment;
  • Department of Building and Housing: Effective management of tenancy services;
  • Ministry of Education: Effective management of the Crown's financial interests in integrated schools; and
  • Tertiary Education Commission: Monitoring of tertiary education institutions.

There are three audits that we have decided not to proceed with, because there have been major reviews or changes in the areas concerned that mean our proposed audits would not add value at this time, or because we have re-evaluated our priorities. These are:

  • Legal Services Agency: Administration of legal aid;
  • Ministry of Foreign Affairs and Trade: Overseas property management; and
  • District Health Boards: Asset management planning.
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