Appendix 1 : Summary of reports on performance audits, inquiries, and other studies published in 2010/11

Spending on supplies and services by district health boards

The report provides examples of good practice that we encourage, and examples of poor practice, to help District Health Boards (DHBs) improve their own spending on supplies and services from external suppliers and providers. Together, the 20 DHBs spend about $6 billion on purchasing supplies and services from external organisations. This report brings together what the Office has learned during the last three years about how DHBs are managing the processes of spending money on supplies and services and determining value for money. The report sets out four critical questions that DHBs need to ask to determine whether they are managing the process of spending money on supplies and services well and ensuring value for money. This report gives examples from practices observed by the Office. These examples are intended to let DHBs compare their own practices and to help them determine how they can further improve the processes they use to spend money.

Matters arising from Auckland Council's planning document

Auckland Council became operational from 1 November 2010. Like all local authorities, Auckland Council must have an annual plan and a long-term plan. The planning document serves as Auckland Council's annual plan for 2010/11 and its long-term plan for 2010-19. Because the planning document had to be in place from 1 November 2010, it was produced on Auckland Council's behalf by the Auckland Transition Agency. This report covers aspects of Auckland Council's planning document from the perspective of our audit of it. It also provides some pointers for Auckland Council as it continues to develop its own strategies and planning for the future. Our audit of the planning document was our first opportunity to be involved in providing assurance to the new Auckland Council and its communities and stakeholders.

Public entities' progress in implementing the Auditor-General's recommendations

Our vision is to provide audit and assurance work that improves 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. In our series of annual progress reports, we consider the progress that public entities we have audited have made against our recommendations in our performance audit and inquiry work. The 2011 progress report looks at how well five public entities have implemented our recommendations. It is not a full and final assessment because some of the recommendations will take time to implement. The entities have generally accepted our recommendations, but progress in implementing them has been faster for some recommendations than for others.

Inland Revenue Department: Making it easy to comply

We carried out a performance audit to see how effectively Inland Revenue is making it easy for taxpayers to comply with their obligations to pay tax. As part of our audit, we tested Inland Revenue's website with two groups of taxpayers who had new tax obligations – tradespeople and rental property owners. We found that Inland Revenue can make it easier for taxpayers who need to file a tax return for the first time to understand their tax obligations and pay tax. By making it easier for taxpayers to comply, Inland Revenue could reduce the costs for taxpayers to comply, collect more revenue that is legitimately owed to the Crown, and spend less on collecting tax debt.

We found that Inland Revenue needs to better understand how effectively its different communication channels make it easy for taxpayers to comply with their tax obligations. Inland Revenue collects information about the usefulness of contact centre interactions but needs to better understand how useful some of its other main channels, such as its websites and publications, are for taxpayers. We also found that Inland Revenue is aware that it can improve how it provides information to make it easier for taxpayers to comply. Inland Revenue has prepared a communication channels strategy to do this. The strategy appears sensible and is similar to the approach taken by overseas revenue collection agencies.

Central government: Cost-effectiveness and improving annual reports

This discussion paper looks at the publicly reported performance information (annual reports) of six government departments and Crown entities during the last six years (2005 to 2010). We wrote this discussion paper to encourage ongoing improvements in performance reporting and in using information about performance to support good decision-making and management.

Government departments and Crown entities are required to prepare annual reports of their performance for external publication under the Public Finance Act 1989 or the Crown Entities Act 2004. Annual reports serve as an important tool for entities to promote what they do, how they deliver their services, and the value they provide to people.

The discussion paper focuses on findings that are common to a number of public entities and features illustrative examples from the six public entities. We have included recommendations that, if effectively addressed, would lead to significant improvements in an entity's reported performance information.

It is important that service performance information is useful and is being used to manage performance. In addition, taking a longer-term view of performance, and monitoring changes in demand and service delivery over time, is central to ensuring that service delivery will continue to be "fit for purpose".

Final audits of Auckland's dissolved councils, and managing leaky home liabilities

The former Auckland councils, and a significant number of their council-controlled organisations, were dissolved on 30 October 2010, immediately before commencement of Auckland Council and its new group. We audited the financial statements and statements of service performance included in these entities' final annual reports, which were for an extended period of 16-months up to the transition date. This report outlines the results of our audits, and some aspects of the final annual reports. The report also builds on our previous reporting of the effects of leaky homes liabilities on local authorities, the financial effect of which is concentrated in Auckland.

Inland Revenue Department: Managing child support debt

We carried out a performance audit to examine how effectively and efficiently the Inland Revenue Department was managing child support debt. Inland Revenue is responsible under the Child Support Act 1991 for making sure that parents take financial responsibility for their children when a relationship ends and the parents are unable to come to a voluntary arrangement for child support payments. Inland Revenue's role includes collecting money that is paid to the parents with whom the children spend most of their time (custodians), and collecting money for the Crown to offset the cost of any benefits paid to custodians. Child support debt incurs penalties, which are compounded monthly. As at 30 June 2009, child support debt totalled about $1.56 billion, of which $1.02 billion was for unpaid penalties.

We found that, overall, Inland Revenue is doing a good job monitoring, prioritising, and collecting child support debt. However, Inland Revenue needs to do more to prevent debt from occurring in the first place. Inland Revenue's debt strategy has not adequately focused on preventing debt; nor has it addressed the adverse effect that the penalty regime is having on levels of debt. The largest gains in collecting child support debt will come from making it more likely that a liable parent will make their payments voluntarily. This can be achieved in two ways: by creating a scheme that more parents understand and support, and the possibility of new international agreements making it easier to collect child support from overseas.

District health boards: Availability and accessibility of after-hours services

Sometimes an injury or worsening medical condition occurs when a general practitioner's practice is closed. The Government has set an expectation that district health boards (DHBs) should ensure that after-hours services are available for 95% of the population in each DHB district within 60 minutes' travel time. We carried out a performance audit to see whether DHB plans met this expectation for geographic availability of after-hours services.

We found that all DHBs met the expectation. Our audit showed that they had planned for after-hours services to be available as required by government policy. In addition to the expectation about geographic availability, the Government also has expectations about how DHBs will work to ensure that public health care services – including after-hours services – are accessible, which includes being affordable. We found that, despite a high level of geographic availability that met the Government's expectation, most DHBs had not clearly identified and responded to transport and affordability barriers.

DHBs have largely been responding to the after-hours challenges of today. This may not be enough to sustain after-hours service coverage in the future. DHBs need to design their service networks to ensure more sustainable after-hours services.

New Zealand Transport Agency: Information and planning for maintaining and renewing the state highway network

The state highway network is one of the country's major infrastructural assets. It carries about half of New Zealand's annual road traffic and is valued at about $29 billion. The network is vital to New Zealand's economic growth and productivity. The Government also plans to invest significantly in it during the next 10 years. This report is on the first of two performance audits and looks at how well the New Zealand Transport Agency (NZTA) uses information about the condition of the network to plan for maintenance and renewal work.

We found that NZTA had good descriptive and condition information about state highway roads. We also found that NZTA had a planning framework that enabled it to use this information for day-to-day maintenance and renewal work. However, not all of the information was complete, especially for structures on the state highway network, such as bridges and tunnels. The long-term planning of NZTA was also incomplete at the time of the audit. NZTA was aware of these issues, and has been working to address them. The report makes 10 recommendations to support and enhance the improvements NZTA is making.

We intend to publish this year the second report, looking at how well NZTA carries out that maintenance and renewal work, and a summary of the overall findings for both audits.

Department of Internal Affairs: Administration of two grant schemes

The Department of Internal Affairs (the Department) aims to contribute to building strong, sustainable communities, hap , and iwi. One way it does this is by distributing grants for community projects and organisations. Many community organisations depend heavily on grants for their operational funding or special projects. For two schemes, the Lottery Grants Scheme and the Community Organisation Grants Scheme, grants are decided by decision-making committees. These committees are supported by the Department, who also administer payments, monitor review grant recipients' accountability, and carry out audits and reviews.

Our audit examined whether the Department's administration of these two schemes is consistent with the expectations that we outlined in our 2008 good practice guide Public sector purchases, grants, and gifts: Managing funding arrangements with external parties. We found that the Department bases its approach to administering the two schemes on the six main principles in our 2008 good practice guide. Overall, the Department's systems are effective in helping to put the principles into practice. However, we identified the need for improvements in transparency and accountability in the decision-making by the grants committees, and in accountability arrangements with grant recipients. We also made a recommendation to support the Department's intention to replace its electronic grants administration system, to improve the effectiveness and efficiency of grant administration.

Defence acquisitions – major projects report

During 2009/10, in partnership with the Ministry of Defence, the New Zealand Defence Force, and the Treasury, and liaising closely with the Ministry of Foreign Affairs and Trade and the Defence and Trade Committee (the Committee), we identified what information stakeholders expected to see reported about major defence acquisition projects. The Defence acquisitions: Pilot major projects report was presented to the Committee in late 2009.

The Ministry of Defence and New Zealand Defence Force completed a major projects report covering eight major projects late in 2010. We undertook an independent review of the information provided in the project summaries and data sheets provided in the report. The defence agencies presented the report to the Committee in November 2010. The defence agencies intend to update this report annually and include information about new major projects as they are introduced.

Sport and Recreation New Zealand: Improving how it measures its performance

The initial focus of the audit was to examine whether Sport and Recreation New Zealand (SPARC) was delivering its 14 functions as defined by the Sport and Recreation New Zealand Act 2002. We were also interested in how effectively SPARC's activities were contributing to increasing participation. SPARC had a range of activities that fulfilled its functions. However, we were unable to assess how effectively these activities were contributing to increasing participation because the quality of the information about the relationship between SPARC's work and its broader outcomes was limited. SPARC had identified this and was already working to improve its information.

Because good quality performance information is critical for entities to account for how they have used public funds, we decided to examine the work SPARC was doing to improve how it measured its performance.

Because SPARC was still introducing its new measurement framework at the time of our audit, it was too early to assess the framework's effectiveness. However, it was clear that SPARC knew what its information needs were, had thoroughly considered how to meet these information needs, and was setting up systems to provide the information it needed. Accordingly, we did not make any recommendations. However, within an appropriate time frame, we plan to follow up on SPARC's efforts to improve how it measures its performance.

Ministry of Social Development: Managing the recovery of debt

We carried out a performance audit to assess how well the Ministry of Social Development manages the recovery of money owed to the Ministry. Benefits are a major form of expenditure, and we wanted assurance that the Ministry was effectively managing the recovery of loans and other kinds of debt. People may owe money to the Ministry because they have received a recoverable assistance loan or a benefit overpayment.

Overall, our audit concluded that the Ministry is using well-established and appropriate systems to effectively recover the loans and the overpayment debt. It has a clear understanding of the main causes of benefit overpayments, and uses sensible strategies to try to prevent overpaying and to identify overpayments when they occur. We suggested some changes that could improve the Ministry's practices. In many instances, the Ministry already has work under way or has planned to make improvements.

Progress in delivering publicly funded scheduled services to patients

New Zealand will always have more patients than our publicly funded non-urgent medical and surgical services can cope with at any one time. This report assessed the progress made in achieving the government strategy "Reduced Waiting Times for Public Hospital Elective Services", which was released in 2000. The strategy aimed to ensure that patients get an appointment with a specialist within six months and receive any treatment within six months. Our report found that about 90% of patients are getting scheduled services within this limit. In June 2010, there were 6800 people (10%) who did not receive required services within the time limits. Some had waited up to two years.

In the last five years, more patients have been getting services because of increased funding. We found that there is no certainty that the "right" patients are always seen, or that they are treated in the appropriate priority order. Despite encouraging improvements made in the last 10 years, there is not yet a system for scheduled services that can demonstrate national consistency and equitable treatment for all. We suggest that such a system is achievable. We found that useful steps were being taken, such as the introduction of a new tool to prioritise patients for cardiac surgery.

Inquiry into New Zealand Defence Force payments to officers to the United Nations

In 2008, the Minister of Defence asked the then Auditor-General to inquire into a number of matters associated with the payment of accommodation assistance by the New Zealand Defence Force (NZDF) to four officers whom it seconded to the United Nations Department of Peacekeeping Operations in New York. Over a number of years, these officers had wrongly claimed accommodation assistance by submitting false declarations. This practice enabled them to receive additional accommodation assistance from NZDF outside the terms of the UN secondment. The request to the Auditor-General asked us to look more deeply at the causes of the problem, and in particular to identify whether anyone in NZDF had encouraged or condoned the wrongdoing.

Our inquiry found that this issue had arisen because of poor policy development and other failures at critical points. We also found that the rationale on which NZDF had decided to pay the seconded officers NZDF accommodation assistance was incorrect, that there was therefore no need to pay the seconded officers NZDF accommodation assistance, and that the problems that ensued could have been avoided.

The inquiry considered what had caused the problems to arise and how they could persist for so long when so many people in NZDF knew that what was being done was wrong. We concluded that three aspects of the organisational culture in NZDF headquarters contributed to the problem:

• a strong silo mentality, which enabled people to see the issue as someone else's problem;
• the military discipline of hierarchy and command lines, which enabled people to see it as inappropriate for them to question decisions apparently taken by their superiors; and
• a general desire for practical solutions to problems, and an inadequate recognition of when those solutions may conflict with fundamental public sector values relating to integrity and legality.

Inquiry into the Plumbers, Gasfitters, and Drainlayers Board

During 2008/09, we carried out an inquiry into how the Plumbers, Gasfitters, and Drainlayers Board was carrying out its functions under the Plumbers, Gasfitters, and Drainlayers Act 1976. We found problems in how it was carrying out most of its 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.

In early 2008, the Minister for Building and Construction 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. The Board did a great deal of work during 2009 and in early 2010 to deal with many of the issues that we had identified. We understand that the Board is still working on these issues. However, the problems with the Board's activities are deep seated and will require significant work in the future.

Matters arising from the 2009-19 long-term council community plans

This report outlines the results of, and the matters arising from, our audits of local authorities' 2009-19 long-term council community plans (LTCCPs). It builds on our previous reporting on audits of the 2006-16 LTCCPs. The report includes a summary of our findings from our audits of the 2009-19 LTCCPs. It focuses on positive aspects and good examples, and it acknowledges the significant improvements between the 2006-16 and 2009-19 LTCCPs. The report also identifies how and where local authorities could improve further when they prepare their 2012-22 long-term plans.

Effectiveness of the Get Checked diabetes programme

This report followed up on our 2007 report – Ministry of Health and district health boards: Effectiveness of the get checked diabetes programme – which had 17 recommendations for District Health Boards (DHBs). We prepared this latest report to help DHBs further improve the effectiveness of the Get Checked diabetes programme. It sets out the intent behind the 17 recommendations and includes examples of the actions that some DHBs reported to us that they were carrying out to meet the intent of our recommendations. DHBs can use the contents of this report, and the questions posed in it, to consider their progress and identify how the Get Checked programme could be improved.

Guidance for members of local authorities about the local authorities (Members' Interests) Act 1968

In October 2010, we published updated guidance for members of local authorities about the Local Authorities (Members' Interests) Act 1968. This good practice guide provides guidance for members of local authorities about how to identify financial and non-financial conflicts of interests and how to manage them.

Inquiry into payments to chief executives of dissolving local authorities in Auckland

In November 2010, the Auditor-General published the results of an inquiry into the employment termination arrangements for chief executives of the eight dissolving local authorities in Auckland.

We found that, of the total payments, almost all were made under contractual arrangements and in keeping with the Auckland transitional legislation. However, we considered that two payments with a total cost of $42,000 were not authorised and did not need to be made.

We also considered that that total cost of payments in lieu of notice to chief executives of $263,722 was significant and that the Auckland Transition Agency and the local authorities could have done more to reduce or avoid these costs. We concluded that the need to reduce or avoid these payments should be considered in any future restructuring of this kind.

How the Department of Internal Affairs manages spending that could give personal benefits to Ministers

After requests from the Prime Minister, a Minister, and the Department of Internal Affairs (the Department), the Auditor-General agreed to carry out an inquiry into how the Department manages spending that could give personal benefits to Ministers. The purpose of the inquiry was to:

• audit the expenditure incurred by one ministerial office from November 2008 until February 2010;
• review the rules, policies, and procedures to see whether they were appropriate and effective and identify any improvements that could be made; and
• consider any other matters that the Auditor-General considered relate to, or arise from, the above.

We published a report on the first term of reference on 30 March 2010. The second report addressing the two remaining terms of reference was published in December 2010.

In our second report, we concluded that the current system for providing support to Ministers has flaws at each of the levels we examined. The system functions but, cumulatively, the problems are significant. We found that the institutional and legal context in which the Department's Ministerial Services unit must operate is unhelpful, and that there were weaknesses in the underlying administrative policies, procedures, and practices. We concluded that the basic design of the procedures is reasonable, but they need further development.

We found that, at an operational level, there did not appear to be any pattern of major spending irregularities, and we found only occasional examples of transactions that we considered were arguably or clearly outside the rules. We also found that the basic design of the financial management processes is sound.

Our overall conclusion was that, taken as a whole, the current Ministerial Services system for managing spending is an unsatisfactory basis for providing support to Ministers.

Provision of billboard for Len Brown's Mayoral Campaign

In December 2010, the Minister of Local Government asked the Auditor-General to consider the legality and appropriateness of the Counties Manukau Pacific Trust's contribution of free billboard space to Mr Len Brown's mayoral campaign. In February 2011, we reported our findings to the Chairman of the Trust.

We found that there was not a significant lapse of judgement or lack of probity by the Trust, and that the financial benefit to Mr Brown's campaign was provided as part of the Trust's normal procedures for community organisations using the billboard. However, we did note that the Trust risked criticism for entering the political domain by supporting one candidate and could have thought about this more when making its decision. We did not consider that there was evidence that the Trust was intending to support a particular candidate or take a political role in making the billboard available to mayoral candidates.

We also found that there was no cost to Manukau City Council ratepayers. We noted that the Trust incurred no cost by making the billboard available, and in fact received a small amount of income in commission on the banner displayed.

Effective reporting on students' progress and achievement

Our report to parliament on Central government: Results of the 2009/10 audits (Volume 1) included the results of our work examining how well a sample of primary school boards reported on student achievement in their 2009 annual reports. We followed up this work with a short summary report that we sent to all public primary schools. The summary provided guidance to school Principals and Board Chairpersons to help them prepare student achievement targets and improve the quality of analysis of variances between performance and the targets in their annual reports. Our summary included a checklist that school boards of trustees could follow when preparing their analysis of variance reports. We received positive feedback from schools commenting on the usefulness of the guidance.

Central government: Case studies in reporting forecast performance information

This discussion paper sets out case studies of three government departments and Crown entities' forecast performance information contained in their 2009-12 statements of intent and 2009/10 forecast statements of service performance. The three entities – Career Services, Ministry of Economic Development, and New Zealand Customs Service – were chosen from among the public entities that received a "good" grade from our auditors for their service performance information and associated systems and controls.

Public entities are required to report their plans and their performance against those plans to demonstrate that they deliver services efficiently and effectively. This supports their accountability to Parliament and to the public for responsibly using the public resources and regulatory powers entrusted to them.

In this discussion paper, we discuss the six elements of a good performance story and then discuss each of the elements of the three featured entities. We commented on the elements that we liked as well as aspects that each entity could improve. We provided illustrative examples, and hope that public entities will find these helpful in preparing their own forecast performance information.

District Health Boards: Learning from 2010-13 Statements of Intent

During 2010/11, we reviewed the Statements of Intent (SOIs) of all district health boards (DHBs). This report relates to our findings from that review, and was published in February 2011 to help DHBs as they prepared their 2011-14 SOIs. We aimed to help the DHBs by reporting an overview of our findings, illustrating examples of better practice in some of the DHBs' 2010-13 SOIs, and discussing the need for measuring and reporting on the quality of DHB services.

By looking at nine key factors we considered important in DHB SOIs, we concluded that most DHBs had made notable improvements in their 2010-13 documents. However, some made little progress and were still grappling with basic performance framework issues. We concluded that all DHBs needed to ensure that their most significant services were properly covered in their SOI, and they all needed to report more measures of service quality.

We were able to highlight examples of the reporting practices of five DHBs, each of which presented a particular aspect of performance reporting better than the others. The examples related to presenting the performance story, reporting main measures and targets for health outcomes, differentiating the outputs from their impacts, describing the health services provided, and providing a good coverage of the health services.

Although performance measures for the quality of health services were thin, we highlighted those we had identified and discussed some of the issues in reporting service quality to help DHBs consider how they might improve their reporting in their 2011-14 SOIs.

Review of the Northland Events Centre Project

In 2011, we completed a review of the Northland Events Centre Project. Concerns had been raised with the Auditor-General about the project – in particular, about the business arrangements between Whangarei District Council and Northland Regional Council, their plans for ongoing management of the centre, and the way in which the Northland Rugby Union's interests in the development were being managed.

We concluded that the project appears to have been a success in practical terms. In particular, the stadium was built on time and within budget. However, we did identify some aspects of the project that we consider could have been managed better.

We found that the Whangarei District Council should have consulted more with the Northland Regional Council before changing its mind on the arrangements for the ongoing ownership and management of the centre, given that this was a joint project and Northland Regional Council was raising most of the capital costs from regional ratepayers.

We also found that, although the Northland Rugby Union was entitled to be compensated for the interests it surrendered to enable the redevelopment of Okara Park to proceed, we were not satisfied that the Whangarei District Council had sufficient information to show that the $2 million figure it had agreed with the Rugby Union represented fair value for its interests in the site.

We also found that Whangarei District Council tried to manage perceptions about conflicts of interest for its councillors who had links to the Northland Rugby Union, but its approach of delegating relevant decision-making to its chief executive did not work well and needed to be reconsidered.

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