Part 3: Capability and guidance for revenue assurance

New Zealand Customs Service: Providing assurance about revenue.

In this Part, we discuss:

Customs' ability to do revenue assurance work

Trade Assurance has staff with significant knowledge and experience in revenue assurance work and has a good framework for training Trade Assurance Officers. Trade Assurance has enough staff to do its work. Customs is able to move staff and allocate work efficiently and effectively. Trade Assurance carried out most of its planned field audits in 2009/10. Audits were rarely cancelled or deferred because of a lack of staff. Customs has appropriate measures in place to support the independence and integrity of staff doing assurance work.

However, maintaining capability is a risk for Customs. It is important for Customs to manage its capability risk effectively so that it can keep doing its revenue assurance work well.

Managing capability risks

Trade Assurance's work requires a complex mix of skills and knowledge (technical skill, relationship management, and understanding the commercial and trade environment, legislation, and policy), so having competent staff is critical for carrying out for the Trade Assurance programme. It is not simply a matter of having enough people to do the work.

Customs has a good framework for training Trade Assurance Officers. Trade Assurance uses self-paced modules, courses (such as tariff classification and an introduction to accounting packages), and learning on the job. Induction modules are comprehensive. They introduce documents, systems, and skills and knowledge that Trade Assurance staff use. Trade Assurance encourages new staff to use longer-serving officers' knowledge and experience through observation, sharing, and listening. There are flexible time frames for Trade Assurance Officers to complete training tasks. As staff experience and better understand trade assurance work, they are expected to learn coaching skills and subject matter expertise.

Customs' framework for developing careers shows that it takes four to five years for Trade Assurance Officers to be fully competent in their roles. The time it takes to become a competent Trade Assurance Officer is a capability risk for Customs. At the time of our audit, this risk was compounded by the retirement or approaching retirement of several experienced Trade Assurance Officers. These retirements are a significant loss of institutional knowledge.

Customs is aware of this capability risk. It was a strong theme in our interviews with Trade Assurance and other Customs staff. Trade Assurance has analysed its capability, looking at the skills and knowledge needed for trade assurance work and the skills and knowledge that staff hold. We consider this analysis useful for better understanding where potential skill/knowledge gaps and shortfalls in capability are. It is not clear whether Customs uses the information it has to act on and manage the risks to Trade Assurance capability.

Because the Trade Assurance role is important for Customs in helping the import and export of goods and because revenue collection is one of its four priorities, Customs needs to have officers with skills and knowledge to carry out trade assurance work. Customs should use the information it has about Trade Assurance to manage capability risks.

Recommendation 1
We recommend that the New Zealand Customs Service ensure that it is taking appropriate action to effectively manage the Trade Assurance capability risks it has identified.

Later in this Part, we note that improving written guidance for audit activities is one way for Customs to manage its capability risks better.

Guidance for revenue assurance staff

Trade Assurance's work is often complex. It requires attention to detail and an understanding of when particular rules and legislation apply to particular import, export, and excise transactions. This means that the written guidance that staff use when doing complex audits is important. It helps staff to do their job correctly and efficiently, and audit consistently. Less experienced staff need to be able to get help from managers and more experienced colleagues when they need it.

Trade Assurance staff have only some of the written guidance they need to carry out assurance activities. The quality of the written guidance they have varies considerably.

Trade Assurance has clear written guidance for audits of bulk fuel imports. This clearly identifies the information that Trade Assurance staff need to collect in the audit, and the steps that audit staff need to take before and during the audit. We discuss bulk fuel audits in more detail in paragraphs 2.8 to 2.10.

Trade Assurance has good reporting templates, making it straightforward for staff to record the information and results collected for specific assurance work. Audit staff can get help from managers when needed.

Customs has guidance documents covering matters that Trade Assurance staff need to know to carry out revenue assurance work. We reviewed 23 of these documents. Most are overdue for review and difficult to understand. They rarely allow a staff member to identify all the information they need to determine whether a trader has paid enough customs revenue. Trade Assurance staff told us that they work to the legislation and do not rely on these Customs' guidance documents.

Improving the quality of written guidance to support Trade Assurance's effectiveness and efficiency

Given the experience and length of service of many Trade Assurance staff, it is reasonable that they do not always rely on written guidance. However, taking into account the retirement or approaching retirement of several experienced staff (see paragraph 3.6), the variable quality of written guidance increases the risk that Trade Assurance will be less effective and efficient.

It takes time to become experienced in trade assurance work (see paragraph 3.6), and fewer experienced staff will be available to mentor newer staff and to oversee the quality of their assurance work. Without adequate information about procedures, staff may not know how to do assurance tasks or could complete tasks poorly, meaning further work will be needed.

Adequate written guidance will help Trade Assurance to manage the risks resulting from an expected reduction in capability. Improving guidance documents will help this by:

  • recording institutional knowledge of Trade Assurance;
  • ensuring that less experienced staff can access clear and accurate information; and
  • helping staff to carry out assurance work efficiently in compliance with policy and legislation.

Where possible, written guidance should identify the information that staff need to collect to do the audit and the steps that audit staff need to take to carry out the audit.

Recommendation 2
We recommend that the New Zealand Customs Service provide clear, consistent, and up-to-date written guidance for Trade Assurance staff.

We are encouraged that Customs has begun to review its audit policy and procedures.

Efficiency initiatives

Trade Assurance has efficiency initiatives to reduce the time it spends carrying out certain types of audits. We commend Trade Assurance for this.

Improving the efficiency of transaction audits

In 2008/09, Trade Assurance changed the way it carried out transaction audits. It introduced a requirement for customs brokers to provide the needed information electronically and send it to a national email address. This means Trade Assurance has a single national work queue of transaction audits and can assign transaction work to staff in any of its offices. It allows Trade Assurance to see whether it is keeping up with work entering the work queue and allows it to divert work to where it has extra capacity. Trade Assurance introduced dual-screen computers for many of its staff who carry out transaction audits. The dual screens help staff check entries in CusMod against electronically supplied broker information and reduce the need for printing and faxing.

Trade Assurance identified many benefits from these changes, including much more efficient processing of transaction audits. It noted lower printing and document destruction costs, less use of paper, a reduction in the number of jobs waiting to be assigned from the work queue, and more even workflow. Trade Assurance reports that the changes cost $13,000 over two years. It estimates that the changes save it $98,000 worth of office supplies and staff time each year.

Planning to improve the efficiency of systems-based audits

Each year, Trade Assurance does a few systems-based audits. These large audits typically take 560 hours, but a recent systems-based audit we reviewed took 1403 hours. Trade Assurance wants to spend less time on systems-based audits. It has identified ways it can do this. It plans to revise the requirements in its systems-based audit manual and trial the revised requirements in its next planned systems-based audit. We consider this a practical approach to improving the way its work is carried out.

page top