Inland Revenue Department: Effectiveness of the Industry Partnership programme

We assessed the effectiveness of the Industry Partnership programme carried out by the Inland Revenue Department (IRD) from February 2002 to November 2006. The programme was focused on reducing the undeclared income from cash transactions in selected industries.

The scope of our audit

Our April 2008 audit examined:

• the design of the programme;
• the operation of the programme;
• the evaluation of the programme; and
• whether the objectives of the programme were met.

Our findings

IRD generally performed well in designing, operating, and evaluating the programme. Overall, we found that the programme had some positive benefits for IRD and taxpayers and strengthened IRD's presence in the community. The programme helped inform IRD's work to try to reduce the incidence of industries operating partly or completely outside the tax system (the hidden economy). However, IRD could have given greater attention to bringing into the tax system the people and organisations likely to have undeclared cash incomes.

We found that:

• The programme was in keeping with IRD's compliance model and strategic direction, and the rationale and objectives of the programme were well defined.
• The programme design allowed IRD's "field teams" the flexibility to try fresh approaches to compliance. However, the programme lacked a single, cohesive planning framework to ensure that it was consistently implemented.
• The monitoring and evaluation of results were strengths of the programme, and evaluation of results showed that the programme increased compliance with tax obligations for those industries selected for participation in the programme. However, IRD needed to present more clearly the changes in tax revenue and compliance that were directly attributable to the programme.
• In general, IRD achieved the programme's objectives. However, in our view, as the programme evolved during its five-year life, IRD needed to have set measurable targets and to assess its progress against specific programme objectives.

Because the programme had ended at the time of our audit, our recommendations focused on the broader implications on the work that was done in the programme.

We made two recommendations to IRD. These were that IRD:

• record and reflect the lessons learned from the Industry Partnership programme in specific operational guidance and support resources for staff focusing on the hidden economy; and
• identify, as part of reporting on the results of a specific programme or initiative that might be affected by a range of variables, those factors contributing to the results that are not attributable solely to the programme or initiative.

The response to our findings and recommendations

From November 2006, the Industry Partnership programme ceased to exist as a specific project or as part of mainstream business resourced with separate Industry Partnership teams. IRD's Customer Insight Group took over some of the functions of the Industry Partnership programme. At the time of our audit, the Customer Insight Group was newly established. It was subsequently restructured, but its functions and staff have been retained and are now located in two other business groups.

IRD told us that, in response to our first recommendation, permanent staff positions in the Assistance Group and Customer & Product Innovation Group have been created. Part of the groups' accountabilities is a focus on compliance risks, including those in the hidden economy, a need identified by the programme. IRD has also told us that information repositories to increase knowledge-sharing capability have been developed on its intranet. Interactive wikis (collaborative websites that can be viewed and edited by IRD staff) have also been created to enable sharing and communication of lessons learned from different initiatives or activities that aim to improve compliance.

IRD told us that, in response to our second recommendation, it has made some improvements in its processes for evaluation and ensuring that only those results directly resulting from a programme are attributed to it. IRD is aware of the complexity of attributing outcomes to specific programmes or initiatives, and is working to continuously improve the ability of its evaluation team to do so. This issue continues to be highly relevant to IRD's work, and we encourage IRD to give ongoing attention to it.