Auditor-General's overview

This inquiry has been very challenging, and has taken a long time to complete. The difficulty we had in completing the inquiry reflects the scale and complexity of the problems that have beset the Plumbers, Gasfitters, and Drainlayers Board (the Board). It also reflects that the last two years have been a time of considerable change for the Board and the trades it regulates.

In September 2008, the then Minister for Building and Construction asked the then Auditor-General to consider carrying out this inquiry. The request was prompted by concerns about the number and nature of complaints received by the Minister and the Department of Building and Housing, many of which suggested that the Board was not carrying out its core functions adequately.

Earlier in 2008, the Minister had replaced most of the appointed members of the Board. The new Board members took office with a clear understanding that their role was to address the problems confronting the Board.

I record at the outset that the Board members have all been co-operative, and focused on the need to tackle problems, throughout our work.

What this inquiry was about

Parliament has given the Board significant statutory powers to regulate the plumbing, gasfitting, and drainlaying trades. The work of the Board is important from a public safety perspective, because poor work in any of these trades can endanger people and property. But it is also important for the people regulated by the Board: the Board's decisions affect whether and how a plumber, gasfitter, or drainlayer can work.

Like any public sector organisation exercising public power, it is vital that the Board uses its statutory powers properly. The courts have developed a body of law (known as administrative law) to safeguard people against the improper use of public power. The principles of administrative law are often summarised as being "simply that the decision-maker must act in accordance with the law, fairly and reasonably".¹

These principles are essentially the hallmarks of good administration. A well-administered organisation has a clear understanding of its legal powers and obligations, supported by well-documented policies and procedures that help its staff to collect the right information, consider all the relevant factors, follow the right process, and explain the process and the decision to the person affected by it. Its work is transparent and documented, its processes are fair, and it can explain the reasons for all of its decisions and actions.

This inquiry essentially assessed whether the Board was meeting these standards. In looking at whether the Board was carrying out its functions properly, we were therefore often also considering legal questions. Good administration and legality are inextricably linked for bodies exercising public power.

What we found in our fieldwork in 2008/09

During 2008/09, my staff examined in some detail how the Board's functions under the Plumbers, Gasfitters, and Drainlayers Act 1976 (the 1976 Act) were working. We found problems in most functions. The problems differed for the various functions, but included unclear or non-existent policies, poor communication, poor processes, decisions and policies that were not clearly well-grounded in the legislation, and little awareness of the need to embed basic administrative law disciplines into the Board's everyday work and decision-making.

We also talked to many individuals and organisations working in the building and construction sector about their interactions with the Board. We encountered a sector that was characterised by suspicion and discontent. Many plumbers and gasfitters we spoke to were unhappy with the work of the Board at many levels. They often did not understand why the Board made certain decisions, could not see the reasons for some requirements, and were unhappy with the cost. They also felt that they were unable to get clear answers to their questions.

Given that they fund the Board through their fees, many plumbers and gasfitters were becoming increasingly disaffected. Some openly refused to participate in the Board's regulatory processes. Many challenged the fees they are required to pay. Others told us that their frustration was such that they were considering leaving New Zealand to work elsewhere.

Why has this situation been able to persist?

None of these problems appeared to be new, and many of the concerns we identified with the way in which the Board was operating related to practices that had been in place for many years.

We have reflected on how this situation could arise, and then persist for so long. In our view, the answer is mainly that the Board has been subject to little effective accountability. Until April 2010, the Board was not subject to the Ombudsmen Act 1975 or the Official Information Act 1982. Although the Board members were appointed by a Minister, there was no significant accountability relationship with that Minister and no reporting to Parliament.

The 1976 Act provided that those concerned about the Board's decisions could appeal to the High Court, but this is not an effective remedy for an individual tradesperson concerned about a decision. The Board controls the livelihood of those it regulates, yet there is no effective avenue for them to challenge its decisions or hold it to account.

Steps the new Board members have taken to improve matters

The situation we encountered in 2008/09 was clearly serious. The newly appointed Board members also recognised this. The Board has done a great deal of work during 2009 and in early 2010 to deal with many of these issues. In particular, the Board has:

• improved communication with the trades – for example, through extensive consultation processes, Board members attending meetings around the country, and a new website;
• worked to improve relationships with other sector organisations, including through personal meetings with the governing bodies of those organisations and the development of shared goals and work programmes;
• commissioned an organisational review, to help it consider what changes need to be made to the Board's structure, capacity, and capability;
• brought the Plumbers, Gasfitters, and Drainlayers Act 2006 (the 2006 Act) into force, so that the legal environment for the Board's work is clearer and more able to be adapted to meet modern needs;
• put renewed emphasis on tackling the failure rate for examinations, including commissioning a report into the overall system, surveying candidates about their experience of the examinations, and agreeing directions with others involved in the training process; and
• begun some work on the gas audit system, once it became clear that there were problems with it.

These steps have all been necessary and important, and we commend the Board for the progress it has made. We also note that the Board immediately took up and acted on many other minor matters that we raised in our draft report in December 2009.

Issues that still need attention

The problems with the Board's activities are deep seated. The changes that have been introduced are a good beginning, but are not yet sufficient. Some of the matters that concerned us about the Board's operations under the 1976 Act continue to present risks with the introduction of the 2006 Act.

My staff spent some time considering the range of problems and discussing them with the Board, to identify common themes and underlying causes. Our conclusion was that the main challenges for the Board now are:

• to fundamentally change the culture of the organisation – from one that is closed, defensive, and relying on the way it has done things in the past to one that is open and engaged with the changing needs of the sector;
• to develop the Board's capacity and capability so that it is able to maintain a coherent overview of the emerging challenges for the sector and for its own role, its relationship with other organisations, and the policy issues that affect it;
• to ensure that it puts legality at the heart of everything it does, because at present we consider that it simply does not have a clear enough focus on the requirements of the legislation and administrative law disciplines, and of the legal risk attached to its activities; and
• to produce the comprehensive, clear, and practical policies and procedures that are needed to turn the legislative rules into good administrative processes and to ensure that the decisions made using those processes are consistent and appropriate.

The two main practical areas of activity that we consider still require substantial attention are the examination system, and the gas certification and audit system. The Board has begun work on both of these, but rebuilding them will require sustained effort by the Board in collaboration with a number of other agencies.

In our view, the organisational or cultural issues that we have identified will also require sustained attention over a long time. In particular, the Board needs to embed the principles of acting fairly, reasonably, and according to law, in everything that it does.

Steps that need to be taken to rebuild trust in the Board

If the Board members keep going with the improvements they have already initiated, and address the additional matters we have highlighted in this report, they will achieve a lot. However, they also need to pay explicit attention to the underlying problem that many in the trades have lost trust in the Board.

There is a great deal of writing on the importance of voluntary compliance in regulatory systems. In any regulatory context, it is too hard to achieve high levels of compliance through force or coercion – effective systems depend on people choosing to participate and follow the rules. For people to want to comply, they have to trust the system and see it as providing an overall benefit. The evidence this inquiry gathered showed that many tradespeople do not have this view of the Board at present.

If more people drop out of the regulatory system or choose to ignore it, the system will not be effective in protecting public safety.

In our view, the Board needs to maintain a clear overall focus on the need to build and maintain trust in the Board. To build trust, it needs to behave fairly and reasonably at all times, and make sure that this is apparent to all those interacting with it. It needs to build the values of openness, accountability, integrity, and fairness into all aspects of its work. It is important that the people the Board regulates, and who fund its work, are able to see and understand what it is doing and why.

There are two specific additional steps that we recommend the Board take to help it regain the trust of the industry. It should establish:

• a simple and effective complaints process for tradespeople who are unhappy with a particular Board decision or action, so that there is an accessible and transparent mechanism for getting a prompt review of a decision; and
• an immediate and short-term process for considering and resolving grievances arising from previous Board decisions that may have wrongly disadvantaged a tradesperson.

The Board has accepted these recommendations.

Conclusion

If the Board takes all of these steps, and continues with its efforts to rebuild relationships with the sector and to improve its communication, it will slowly change its culture. Its goal needs to be to create a regulatory board that is open, accountable, reasonable, and fair, and constructively working with the rest of the sector in meeting emerging challenges and helping build a modern, effective, and safe industry. This task will take time and effort, but the Board is now on the right track.

I would like to thank the Board members and all of the staff for their co-operation and assistance throughout what has been a difficult inquiry. I also acknowledge the contributions from the many tradespeople and representatives of other sector organisations who have provided us with information.

Lyn Provost
Controller and Auditor-General

28 July 2010

1: Sir Robin Cooke (1986), "The Struggle for Simplicity in Administrative Law", in Michael Taggart (ed), Judicial Review in the 1980s: Problems and Prospects, Oxford University Press, Auckland, page 5.