Part 3 : Organisational health and capability
Our operating model
The Auditor-General's staff are organised into two business units – the Office of the Auditor-General (OAG) and Audit New Zealand.
The OAG carries out strategic planning, sets policy and standards, appoints auditors and oversees their performance, carries out performance audits, provides reports and advice to Parliament, and carries out inquiries and other special studies.
Audit New Zealand is the operating arm, and carries out annual audits allocated by the Auditor-General. It also provides other assurance services to public entities within the Auditor-General's mandate and in keeping with the Auditor-General's auditing standard on the independence of auditors.
The Auditor-General also engages private sector accounting firms to carry out audits of some public entities. Figure 28 shows the Auditor-General's operating model.
Figure 28
Our operating model
Size and scale of our operations
The Auditor-General has a statutory duty to conduct annual audits of the financial reports and other audits required by various statutes of about 4000 public entities, of which about 3000 are schools and other very small entities. The Auditor-General is also able to perform other services reasonable and appropriate for an auditor to perform, and to audit other quasi-public entities.
We employ about 350 staff in eight locations, and engage about 50 private sector accounting firms to carry out annual audits of public entities.
People
For the 2009/10 year, our overall staff turnover has been around 10%, – half historical levels. We attribute this drop to two factors: the worldwide recession and improved leadership development programmes. The recession has undoubtedly led to lower worldwide demand for accounting staff, which has reduced the number of our newly qualified auditors leaving to travel overseas. In Wellington in particular, the restraints on the public sector have also reduced the demand for our people. Our ongoing leadership development programme has also contributed to a reduction in attrition, because more senior staff have chosen to stay.
We use a resource planning model to forecast audit staff requirements in future years. This model has shown us that, even though attrition has lessened, we need to maintain a certain level of recruitment for graduates. However, we were able to reduce the recruitment of qualified employees. It also shows that we need to continue to supplement our internal staff with secondees from private sector accounting firms to help us through our peak workload periods.
Our recruitment initiatives and processes were again successful in 2009/10. Twenty-five graduates joined the Office during the year, including 19 who had worked with us as interns in the previous year.
In the past, we have recruited a small number of qualified auditors from the United Kingdom and South Africa, but our lower attrition levels and the success of our leadership development programme has meant that this was not needed this year. Two of the five senior appointments made in 2009/10 were from within the Office, and the other three resulted from our overseas recruitment programme in 2008/09.
Figure 29 provides a summary of staff numbers, their functional distribution, and staff turnover for the year.
Figure 29
Staff numbers, functions, and turnover
| As at 30 June | 2010 | 2009 | 2008 |
|---|---|---|---|
| Staff numbers (full-time equivalents) | |||
| OAG | 62 | 61 | 57 |
| Audit New Zealand | 251 | 249 | 216 |
| Corporate Services | 41 | 44 | 38 |
| Total | 350 | 354 | 311 |
| Functional distribution | |||
| Audit/assurance | 64% | 65% | 74% |
| Technical and advisory | 13% | 10% | 9% |
| Corporate support | 20% | 22% | 13% |
| Senior management | 3% | 3% | 4% |
| Turnover | |||
| OAG | 8% | 19% | 19% |
| Audit New Zealand | 11% | 17% | 21% |
| Corporate Services | 9% | 24% | 21% |
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 the whole organisation. Statistics on staff experience and training are shown in Figure 30.
Figure 30
Staff experience and training
| 2009/10 | 2008/09 | 2007/08 | |
|---|---|---|---|
| Experience – average years in job (at 30 June) | |||
| OAG | 6.9 | 7.6 | 7.2 |
| Audit New Zealand | 4.2 | 4.2 | 4.3 |
| Corporate Services | 3.8 | 2.9 | 5.4 |
| Training and development – average expenditure for each employee | |||
| OAG (incl. Corporate Services) | $1,186 | $1,658 | $1,884 |
| Audit New Zealand | $2,661 | $2,371 | $4,509 |
| Pass rate of staff undertaking NZICA accreditation | |||
| 96% | 94% | 100% | |
We have continued to develop our leadership development programmes, to improve staff retention and to broaden the skills of our current and future leaders. Our aspiring managers' programme and aspiring directors' programme, launched in 2008/09, are well recognised within the Office and continued strongly in 2009/10. These programmes target audit staff who have shown the capability and desire to take on more senior roles, focusing on self-development and leadership skills. The peak figure for 2007/08 reflects the investment we made in establishing leadership development programmes in that year.
Many staff members throughout the organisation have also received generic training, which includes plain English writing, presentation, and media liaison skills.
Professional development continues to be a high priority. In 2009/10, Audit New Zealand continued with its national professional development programme for all audit staff. The programme delivered 24 modules/courses to 407 course participants. These were highly rated by audit staff, with an average rating of 8.2 out of 10 – up from 7.9 in the previous year. The programme aims to improve the base professional competencies of audit staff. This equips them to work within:
- Audit New Zealand's national professional practice framework, audit methodology, and quality control systems;
- New Zealand generally accepted accounting practice; and
- the Auditor-General's auditing standards (including the audit of service performance reports).
Equal employment opportunities
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.
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 our work.
As shown in Figure 31, the diversity of our staff remains high.
Figure 31
Staff diversity
| As at 30 June | 2010 | 2009 | 2008 |
|---|---|---|---|
| Gender distribution – all staff | |||
| Women | 53% | 52% | 52% |
| Men | 47% | 48% | 48% |
| Gender distribution – executive management | |||
| Women | 50% | 42% | 42% |
| Men | 50% | 58% | 58% |
| Ethnicity distribution | |||
| NZ European | 44% | 48% | 42% |
| NZ Māori | 2% | 2% | 4% |
| Pacific Islander | 3% | 3% | 3% |
| Asian | 10% | 12% | 12% |
| Other European | 11% | 7% | 12% |
| Other ethnic groups | 8% | 4% | 2% |
| Undeclared | 22% | 24% | 25% |
Organisational health and staff satisfaction
Each year, we survey our staff to understand trends in various aspects of our staff satisfaction. For the third year in a row, we used the Gallup Q12® employee engagement survey to survey our staff. Figure 32 gives a summary of the results.
We are particularly interested in the overall satisfaction and engagement of our staff, whether the organisation meets the basic needs of our people, the extent of support from management, the degree to which our people contribute as teams, and the opportunity for growth in the organisation.
We are pleased that the 2009 scores for engagement and satisfaction were maintained in 2010.
We consider it desirable and beneficial to continue improving our employees' engagement and satisfaction across the board, and will be working on this throughout 2010/11.
Figure 32
Staff survey results
| As surveyed in May | 2010 | 2009 | 2008 |
|---|---|---|---|
| Staff survey results (1 = low, 5 = high) | |||
| Overall engagement | 3.8 | 3.8 | 3.7 |
| Overall satisfaction | 3.7 | 3.7 | 3.5 |
| Basic needs met | 4.0 | 4.0 | 4.0 |
| Management support | 3.7 | 3.7 | 3.5 |
| Teamwork | 3.7 | 3.7 | 3.5 |
| Growth | 4.1 | 4.2 | 4.0 |
Another indicator of organisational health is the average number of sick days taken by each employee. As shown in Figure 33, the figures for 2009/10 are somewhat higher than in previous years. We have analysed this increase but have not identified any particular cause, other than a heightened level of caution relating to H1N1 influenza.
Figure 33
Sick leave
| Sick leave taken – average days for each employee | |||
|---|---|---|---|
| 12 months to 30 June | 2010 | 2009 | 2008 |
| OAG | 5.7 | 4.8 | 5.2 |
| Audit New Zealand | 5.1 | 5.1 | 5.5 |
| Corporate Services | 7.1 | 4.8 | 4.3 |
Business practices
We are increasingly aware that, in carrying out audits on every public sector entity, the information and knowledge that the Office gathers is unique. During the year, we increased our focus on improving our management of this information and knowledge, and the sharing of these assets among all our people. Improvements include the establishment of a sector-oriented knowledge-sharing space on our intranet, collecting certain audit information electronically instead of manually, and establishing "knowledge networks" in the organisation.
In 2009/10, we continued to work on improvements on a number of business policies and practices. These included:
- A comprehensive review of fourteen of our internal HR-related policies. This review sought to align our policies to current legislation and to good HR practice, and included a full staff consultation phase.
- Significant progress on our programme of work to better manage our records as set out in the Public Records Act 2005.
- Changes to our independence processes and systems that improve the effectiveness and relevance of independence checking for staff.
Facilities
In July 2009, we relocated the staff of the OAG and our shared corporate services staff (about half of our Wellington staff) to a single floor in another building. For the last few years, our 220 Wellington-based staff have been located on seven floors and in two buildings, significantly restricting the extent to which collaboration and sharing of ideas can naturally occur. Moving OAG and corporate services staff has reduced our Wellington accommodation to three floors in two buildings. This co-location has, as anticipated, improved our internal communications and collaboration.
We have previously identified the advantages of co-locating OAG and Audit New Zealand Wellington staff. We delayed our search for suitable premises in 2009/10, as we believed that the Wellington property market would continue to soften during the year. We expect to continue this work in 2010/11.
The Office's other facilities, including Audit New Zealand's other offices, continued to meet the needs of the organisation in 2009/10.
Information systems
The Office, especially Audit New Zealand, is highly dependent on information technology to complete 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 OAG needs systems to manage the approximately 4000 audits we are responsible for.
Throughout the year, we continued to invest in maintaining and improving the infrastructure supporting our auditors. Our normal rolling programme of laptop computer replacement was continued, and this year we implemented an annual maintenance programme for those laptops not yet due for replacement. We have continued to improve the network and computing infrastructure in our regional offices, and have increased the capability and security of our remote access solutions. These programmes have led to a significant improvement in laptop and network reliability for our audit staff during 2009/10.
On 1 July 2009, the Office's new core financial system and integrated time and cost management system became operational. The new system replaced several separate systems that were no longer able to meet the information, management, and security needs of the Office. The replacement system contains increased functionality, including process workflow management and significantly improved operational and management reporting functions. While some components went live later than planned, the new system has been a success.
Also in 2009/10, we completed enhancements to the Office's audit management system. This included new functionality that allows appointed auditors to enter the results and details of audits directly through the internet, reducing error rates, reducing double handling of documents, and increasing the timeliness and accuracy of information.
Finance
Details of our financial performance against measures established in the Annual Plan 2009/10 are summarised in Figure 34.
Figure 34
Financial performance indicators for the year ended 30 June 2010
| Measure | 2009/10 Actual $000 |
2009/10 Supp. Estimates $000 |
2009/10 Annual Plan $000 |
2008/09 Actual $000 |
2007/08 Actual $000 |
|---|---|---|---|---|---|
| Operating results | |||||
| Income: other than Crown | 63,939 | 62,955 | 62,728 | 60,506 | 58,525 |
| Output expenditure | 71,784 | 72,796 | 72,641 | 69,934 | 67,861 |
| Surplus before capital charge | 2,278 | 264 | 165 | 750 | 549 |
| Surplus | 2,014 | 18 | 0 | 486 | 285 |
| Working capital management | |||||
| Current assets less current liabilities | 1,804 | 1,742 | 1,779 | 1,687 | 2,324 |
| Current ratio | 118% | 121% | 123% | 118% | 130% |
| Average receivables and work in progress | 42 days | 41 days | 38 days | 42 days | 42 days |
| Resource use | |||||
| Total plant, equipment, and intangible assets at year-end | 2,265 | 2,299 | 2,397 | 2,351 | 1,847 |
| Additions as % of total | 41% | 52% | 44% | 64% | 42% |
| Taxpayers' funds | |||||
| Level at year-end | 3,521 | 3,521 | 3,521 | 3,521 | 3,521 |
| Net cash flows | |||||
| Surplus on operating activities | 1,801 | 642 | 990 | 2,233 | 452 |
| Surplus/(Deficit) on investing activities | (801) | (1,086) | (946) | (1,428) | (652) |
| Surplus/(Deficit) on financing activities | (486) | (486) | (150) | (285) | (469) |
| Net increase/(decrease) in cash held | 514 | (930) | (106) | 520 | (669) |