Appendix 1: Summary of reports on performance audits and other studies published in 2009/10

Annual Report for the year ended 30 June 2010.

Performance audits

Effectiveness of arrangements to check the standard of services provided by rest homes

We carried out a performance audit to assess the effectiveness and efficiency of arrangements for checking the quality and safety of rest home services. Older people who live in rest homes are some of the most vulnerable in our society, so it is important to have effective arrangements to ensure that their care is appropriate. Rest homes must be certified and audited to ensure that the care they provide meets the Health and Disability Services Standards (the Standards). The Ministry of Health (the Ministry) is responsible for auditing and certifying rest homes and contracts out this work to eight designated auditing agencies (DAAs). We found that the auditing of rest homes by DAAs has been inconsistent and sometimes of poor quality. We also found that the Ministry's monitoring of the DAAs was weak. Rest homes are also monitored by district health boards. Monitoring of rest homes by district health boards has not been well co-ordinated with the work of the Ministry. The Ministry has put in place a programme of work to address the issues found in our audit. However, it is too early to judge whether the changes being made will make auditing, certifying, and monitoring of rest homes more effective and efficient. We will follow up on progress with implementing our recommendations during 2011.

Effectiveness of arrangements for co-ordinating civilian maritime patrols

New Zealand has interests in the extensive oceans over which we have rights and responsibilities (the maritime domain). Maritime patrols are used to protect these interests, by detecting and deterring illegal activities, and by gathering information about activities that are occurring in the maritime domain. We examined how effectively the National Maritime Co-ordination Centre (NMCC) and other government agencies co-ordinate maritime patrols to support New Zealand's maritime interests. We found that, overall, NMCC had an appropriate framework to support the effective co-ordination of maritime patrols. Some improvements were needed so that the NMCC could enhance its whole-of-government co-ordination role and make the most effective use of improved patrol resources. These improvements included better strategic guidance for the NMCC, clarifying the mandate for separate patrol co-ordination arrangements, better understanding of the timing of agencies' patrol needs, and more robust data collection to show where gaps exist and where effort is effective. At the time of the audit, the NMCC was already working to address some of these issues. Because the NMCC is a whole-of-government arrangement, these matters required consideration not just from the NMCC but from all organisations involved or interested in maritime patrols.

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

In 2007, the Commission of Inquiry into Police Conduct (the Commission) released its report into Police conduct. We were invited to monitor the Police's response to the Commission's recommendations and published our first monitoring report in 2009. Our second monitoring report assesses whether the Police have effectively implemented the projects and initiatives set out in their work programme. We found that, while the Police had done a lot of work already to respond to the Commission's recommendations, the implementation of the Police's response is at a critical point. Without more concerted effort now, there is a risk that progress will stall. We found that the Police need to build on the high degree of commitment at senior levels to change, value and learn from the views of people external to the Police, and monitor the effect of change to the service being provided to the public. We also found that instances of behaviour inconsistent with the Police Code of Conduct are still occurring.

Performance audits from 2008: Follow-up report

Our vision is to provide audit and assurance work that improves the performance of, and the public's trust in, the public sector. We aim to do this through giving independent assurance to Parliament, public entities, and the public about whether public entities are carrying out their activities effectively, efficiently, and appropriately. We evaluate the effect of our performance audits by following up on how the entities have responded to, and implemented, our recommendations. This report sets out the actions public entities have taken in response to the recommendations made in performance audit reports that we published during 2008. Overall, we are satisfied with the responses to the findings of the performance audit reports we completed during 2008.

Ministry of Education: Managing support for students with high special educational needs

We carried out a performance audit to assess how well the Ministry of Education (the Ministry) manages four initiatives set up to support school-age students with high special educational needs. There are up to 20,500 students receiving support through these four initiatives. Overall, the Ministry's management of the four initiatives was reasonable, and the basic systems and resources were in place to enable the Ministry to deliver its support. We found that the Ministry needs to improve how it identifies and monitors students with high special educational needs. Our report encourages the Ministry to improve its information and provide consistent support. We also recommended that the Ministry improve its information and resources about the four initiatives and better collate data about the effectiveness of the initiatives.

Ministry of Justice: Supporting the management of court workloads

We carried out a performance audit to assess the effectiveness and efficiency of the Ministry of Justice (the Ministry) in its work to help District Courts and the High Court deal with their increasing workloads. Court workloads have increased significantly in recent years, and forecasts show that the number of cases brought before the courts will continue to grow. We found that, while the Ministry does not control the court system and has only limited ability to manage individual cases, it provides valuable advice and support to facilitate the efficient and expeditious management of cases. We found that the Ministry is well positioned to develop and provide support for increasing court workloads. The Ministry works closely and well with the rest of the justice sector and is responding well to challenges. It is important that the Ministry continues to do so, while recognising that it alone cannot resolve the issue of court workloads or the efficiency of the courts.

Defence acquisitions: Pilot major projects report

We have identified a need for the defence agencies to report more comprehensive and useful information about the progress of major defence acquisition projects to provide assurance to Parliament and other stakeholders that these projects are managed well, and deliver the expected capabilities. In partnership with the Ministry of Defence, New Zealand Defence Force, and the Treasury, and liaising closely with the Foreign Affairs, Defence and Trade Select Committee (the Committee), we have identified what information stakeholders expect to see reported about these projects. This has led to the development of the major projects report, which will outline this key information for eight of the most significant current major defence acquisitions projects. We (the OAG and the two defence agencies) developed a pilot report on one of these projects and presented it to the Committee in late 2009. We will complete the first full major projects report covering all eight projects later in 2010. The defence agencies intend to then update this report annually and include information about new major projects as they are introduced.

Local authorities: Planning to meet the forecast demand for drinking water

Access to good quality water for drinking, bathing, and clothes washing is essential to our health and well-being. 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 to meet community needs. We carried out a performance audit looking at eight local authorities to help us form a view about how well prepared the country is to meet the likely future demand for drinking water. All eight local authorities were able to ensure the security of their drinking water supply at the time of our audit. Only three of the eight – Nelson City Council, Tasman District Council, and Tauranga District Council – were managing their drinking water supplies effectively to meet future demand for drinking water. The other five – Christchurch City Council, Opotiki District Council, Kapiti Coast District Council, South Taranaki District Council, and Central Otago District Council – had further work to do to improve the accuracy of their forecasts and implement their strategies to meet future demand. In some cases, this was a significant amount of work. However, they know what they need to do and are making progress to implement improvements. Provided those improvements continue, within the next 10 years these local authorities should be better placed to meet the forecast demand for drinking water.

Ministry of Social Development: Changes to the case management of sickness and invalids' beneficiaries

In 2008/09, the Ministry of Social Development (the Ministry) spent about $1.9 billion on sickness and invalids benefits, providing income support to people who were unable to work because of ill health or a disability. In 2007, the Ministry introduced a number of changes to improve how it determined eligibility for sickness and invalids' benefits, and to actively manage cases through regular and effective contact with people receiving those benefits. We carried out a performance audit to assess how well the changes were operating and whether they were starting to have the intended effect. We found that the proposed changes were beginning to take effect, but they were not being delivered consistently. We recommended that the Ministry improve how it is monitoring the effect of the changes, so it will be able to assess how well the various initiatives are working and whether they are achieving the intended outcomes.

New Zealand Defence Force: Progress with the Defence Sustainability Initiative

We carried out a performance audit on the progress made by the New Zealand Defence Force (NZDF) in implementing the Defence Sustainability Initiative. We published two reports as a result of this audit – a classified report to NZDF and central agencies outlining our views on the implementation of the Initiative against specific technical measures, and a public report. We found that NZDF had developed clear areas of focus for planning and measuring its progress in implementing the initiative. NZDF had implemented significant improvements in the delivery of corporate services and also made good progress in completing projects designed to improve corporate capability and equipment shortages. We also found that some of the Defence Sustainability Initiative's objectives were not able to be achieved because rates of deployment were higher than anticipated. Although we made some suggestions for further action to NZDF, we did not consider it necessary to make any formal recommendations in our report.

The Civil Aviation Authority's progress with improving certification and surveillance

The Civil Aviation Authority (the CAA) is the regulatory agency that safeguards civil aviation in New Zealand. The CAA controls which operators enter the civil aviation system (certification) and monitors operators' ongoing adherence to safety standards (surveillance). Since 1997, we have carried out four audits of the CAA's certification and surveillance functions for civil aviation operators. Our most recent audit found that, of the 10 recommendations we made in 2005, only one had been fully addressed, eight had been only partly addressed, and one recommendation had not been addressed. We considered that the CAA has failed to understand and effectively address the underlying causes of the weaknesses in its certification and surveillance work. We made a number of recommendations that are designed to improve the governance and accountability of the CAA's certification and surveillance functions, focus its regulatory actions, and improve its management practices. We also recommended that the Ministry of Transport, as the agency responsible for monitoring the CAA, take a more active role in ensuring that progress is made in addressing the recommendations in our most recent report.


Inquiry into certain types of expenditure in Vote Ministerial Services – Part 1

On 2 March 2010, the Auditor-General, released terms of reference for an inquiry into certain types of expenditure in Vote Ministerial Services that provide or have the potential to provide private benefit to a Minister. The inquiry was initiated by the Auditor-General after separate requests from the Prime Minister, Mr Phil Heatley MP, and the Department of Internal Affairs.

The purpose of the inquiry was to:

  • audit the expenditure incurred by Mr Heatley's ministerial office from when he became a Minister in November 2008 until he resigned from his ministerial portfolios for Housing and Fisheries on 25 February 2010;
  • review the rules, policies, and procedures to see whether they are appropriate and effective, and identify any improvements that can be made; and
  • consider any other matters that the Auditor-General considers relate to, or arise from, the above.

This report addressed the first part of our inquiry's terms of reference. It summarised the general principles that apply to public expenditure where there could be private benefit and our overall findings and conclusions, followed by a detailed report about our audit of Mr Heatley's ministerial office expenditure.

Mr Heatley's overall ministerial office expenditure was reasonable compared to expenditure incurred by other ministerial offices for the period we looked at. We found that a total of $1,402 of Mr Heatley's expenditure – $608 in Vote Ministerial Services and $794 in Vote Parliamentary Service – was outside the rules. In all cases, Mr Heatley thought that the expenditure was within the rules, but he did not understand the rules correctly. In the case of the expenditure in Vote Parliamentary Service, the Parliamentary Service was also administering a rule incorrectly for members of Parliament, and Mr Heatley is not the only member who will have been affected.

We will be reporting separately on the remaining terms of reference.

Auckland City Council: Management of footpaths contracts

In May 2009 we were asked to carry out an inquiry into the Council's management of its footpaths contracts. We agreed to do so because of the nature of the concerns being raised and because of the scale of the Council's footpaths work.

Our inquiry aimed to understand the wider context of the Council's footpaths work, and to address several specific concerns. Our staff looked in depth at the Council's management of footpaths contracts during the past eight years to see how the Council has developed its approach to footpaths work and whether there were any fundamental flaws in the systems and processes for current or historical contracts.

We concluded that the Council's processes and procedures for managing footpaths work – while still evolving – are reasonable and have been applied adequately. We were satisfied that the Council has protected the interests of ratepayers throughout its management of footpaths contracts.

We found no fundamental flaws or gaps in the Council's contract management processes, no apparent evidence of corruption at any level, and no waste. However, in keeping with most large and complex asset management systems, we did find some areas where the Council can tidy up its administrative processes and have made a number of comments and suggestions and four recommendations for improvement.

Auckland Regional Council: Management of the LA Galaxy event at Mount Smart Stadium

In December 2008, Auckland Regional Council (the Council) hosted an exhibition football match between LA Galaxy (a team that included international football star David Beckham) and an Oceania "All Stars" team at Mount Smart Stadium. The event resulted in a loss to the Council of $1.88 million, essentially because far fewer people purchased tickets to the match than the Council expected. The chairman of the Council asked the Auditor-General to review the Council's handling of the event.

We reviewed how the Council handled the event. We concluded that, despite the efforts of the council officers involved, the loss occurred because the LA Galaxy/Oceania "All Stars" match was in essence the wrong event, at the wrong time, for the wrong price.

Our inquiry focused particularly on the governance of the Mount Smart facility and its position in the Council's structure and operations, and on the Council's then lack of systems for monitoring and overseeing such events.

The Mount Smart operation was something of an orphan in the Council structure – it did not fit well with the Council's other functions and operations, and the Council had not, at the time, considered or agreed on suitable governance and business models for it. Although there was a general view within the Council that Mount Smart Stadium needed to operate commercially, the decision to promote the LA Galaxy event was made without a formal business strategy or a clear policy about the level of commercial risk that the Council was willing to assume.

We were satisfied that the Council had correctly identified the problems with its governance and management of Mount Smart Stadium, and that it was taking appropriate steps to address those problems.

Investigation into conflicts of interest of four councillors at Environment Canterbury

In July 2009, we received a complaint that three councillors at Environment Canterbury (the Council) had breached section 6(1) of the Local Authorities (Members' Interests) Act 1968 (the Act), by discussing and voting on a proposal to recover the costs of managing water resources in Canterbury (the proposal). In October 2009, the complainant told us that a fourth councillor might have breached the Act.

Section 6(1) of the Act prohibits members of a local authority from discussing or voting on a matter if they have a financial (or "pecuniary") interest in it. Section 6(4) enables the Auditor-General to give a declaration that this prohibition will not apply if its application impedes the business of the local authority or is against the interests of electors.

The Auditor-General is also responsible for taking enforcement action when the requirements of the Act are breached. A breach of section 6(1) is a criminal offence and the Auditor-General is the sole prosecuting authority. Therefore, we investigated the complaints made to us about the potential breaches of the Act. This report sets out our findings and conclusions.

We concluded that the four councillors have breached section 6(1) by participating in a decision when they had a financial interest in it. However, we decided that a prosecution would be unlikely to result in a conviction and that it would not be appropriate in these circumstances to seek to have the councillors prosecuted. We consulted the Crown Law Office before finalising our view. That Office agreed that the Act had been breached and that a prosecution was not warranted.

We subsequently worked with the Council and the individual councillors to help them deal more appropriately with conflicts of interest in later decisions on water management issues, and granted declarations in appropriate cases to enable councillors to participate.

How the Thames-Coromandel District Council managed leasing arrangements for Council land in Whitianga

The Auditor-General inquired into aspects of how the Thames-Coromandel District Council (the Council) has managed leasing arrangements for a block of land in Moewai Road, Whitianga. The block of land is commonly referred to as the Sherriff Block, and the Council has owned it since 2000. Our inquiry included considering the nature of the Council's leasing arrangements with Mr Dirk Sieling before he was elected to the Council in 2007 and the handling of his interest in the Sherriff Block after he became a Councillor.

We found that the Council was not effective in its management of the Sherriff Block because it did not formally document a lease agreement or have arrangements in place to manage its interests in the land. In our view, a formal lease agreement would have provided clarity about the terms and conditions of the lease of the Sherriff Block, including the requirement to pay rates.

We also concluded that the Council's administration systems did not adequately support the management of conflicts of interest in this matter. We understand that the Council has now addressed the way that it administers matters where there are conflicts of interest. For example, the staff member responsible for sending out papers for Council or Committee meetings takes steps to ensure that Councillors do not receive information about matters in which they have declared a conflict of interest.

In our view, Councillor Sieling handled his interest in the land in a reasonable manner.

Auditor-General's decision on parliamentary and ministerial accommodation entitlements

In September 2009, the Auditor-General received some requests to inquire into the way parliamentary and ministerial accommodation entitlements are administered and how they have been applied in relation to Hon Bill English.

In relation to reimbursement of accommodation costs by the Parliamentary Service and Mr English's "primary place of residence", we concluded that Mr English had correctly completed the declarations he was required to as an MP, and provided other information on his accommodation arrangements, in order to claim Wellington accommodation costs. Mr English's various declarations and claims relating to his "primary place of residence" and accommodation costs were considered and approved as appropriate by the Parliamentary Service or successive Speakers. The fact that Mr English was being reimbursed for the cost of renting a house owned by his family trust was not exceptional, and the administrative system now includes protections such as a market evaluation of rent.

In relation to the provision of a ministerial residence, we concluded that Ministerial Services had not considered the status of a home owned by a family trust until Mr English asked if Ministerial Services could take over the lease of the property he was already renting from a family trust. Ministerial Services asked Mr English to sign a declaration that he did not have a pecuniary interest in the family trust. He did so, and attached a copy of the advice he had received about what amounted to a beneficial interest in a trust for the purposes of Standing Orders. Having received that declaration, Ministerial Services got a market evaluation of the rent, took over the existing rental agreement, and provided the house as a ministerial residence. In our view, the advice that Mr English relied on to make his declaration was not applicable to this situation and was based on too narrow a test for the Ministerial Services' situation. We considered that Mr English did have an indirect financial interest in the trust.

At Mr English's request, the rental agreement between Ministerial Services and the trust ended, and Mr English reimbursed the rent and other costs that had been paid.

The Prime Minister then announced that a new policy was to be implemented under which Ministerial Services would no longer provide accommodation directly for Ministers. Instead, Ministerial Services will simply provide a fixed level of financial assistance to Ministers, who will make their own accommodation arrangements. This approach will mean that the question of whether a Minister has a personal financial interest in a property will no longer be relevant, and may help to smooth the interface between the parliamentary and ministerial accommodation entitlements systems.

How the Ministry of Education managed the 2008 national school bus transport tender process

In February 2009, we announced the terms of reference for our inquiry into how the Ministry of Education managed the 2008 national school bus transport tender process. Our inquiry examined:

  • how the Ministry prepared its overall procurement strategy and Request for Proposal (RFP) for the 2008 bus tender process;
  • the extent to which the RFP reflected the Ministry's earlier consultation with stakeholders, where appropriate, and the clarity with which any important changes to the RFP were communicated to stakeholders;
  • the extent to which the RFP rules were applied correctly and consistently by Ministry staff, contractors, and the Tender Evaluation Committee; and
  • the extent to which the Ministry responded promptly and effectively when concerns were expressed about aspects of the 2008 bus tender process.

Overall, the Ministry's procurement approach was sound. No process is perfect, and we found a number of areas for improvement that we expect the Ministry to address in any subsequent bus tender processes. The errors and inconsistencies we found did not, in our view, undermine the overall outcome of the 2008 bus tender process. However, the Ministry must strengthen the quality assurance arrangements it has in place in subsequent bus tender processes.

Other studies

Local government: Examples of better practice in setting local authorities' performance measures

This report discusses examples of better practice that we saw in performance measures within local authorities' 2009-19 long-term council community plans. The intention of the report is to promote discussion about improvement rather than be a technical guide on performance measures for various activities.

The Auditor-General has a significant interest in improving public management. Improving local authorities' performance information – especially in relation to assessing performance and making decisions – is one way of improving such management. The Auditor-General's overview provides a useful perspective on the report and also comments on the relevance of the report to proposed changes to the Local Government Act 2002.

District Health Boards: Improving external service performance information reporting

Checklist for district health boards: Improving your statement of intent

Our paper was provided to district health boards (DHBs) to identify, and help them to consider, issues with the current state of non-financial performance reporting. We hope that the paper will help improve the quality of DHB statements of intent and, consequently, the annual reporting of actual performance. The checklist augments Part 7 of our report to Parliament, Central government: Results of the 2008/09 audits, in which we discuss DHBs' non-financial performance reporting in the context of their planning and accountability framework.

Our observations are drawn from our 2008/09 audits of DHBs, in which we reviewed the DHBs' 2009/12 statements of intent. We concluded that the quality of DHB service performance information was at the lower end of the scale, and the checklist sets out where, in our view, further effort from the DHB sector could result in significant improvement to the statement of intent (SOI) and annual report. To demonstrate their effectiveness and efficiency to external stakeholders (for example, Parliament and the public), DHBs need to ensure that they report on the range of services they are accountable for and on how well they are providing those services. This includes putting more effort into reporting on the quality of those services. DHBs also need to clearly and separately report on the effect they hope to achieve (that is, the impacts and outcomes resulting from their services). Improved performance reporting in their SOIs and annual reports will help ensure that DHBs are held accountable to Parliament and the public.

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