Part 2: About the focus of our proposed work programme

Annual Plan 2012/13.

Our proposed work programme addresses the theme Our future needs – is the public sector ready? We chose this theme after extensive input and development of ideas from a wide range of people.

Our future needs – is the public sector ready? reflects widespread recognition that public services must change and adapt to help build the future we want. Our broader environment is one of fiscal and resource constraint. The public sector is responding to calls to deliver better public services for less and to transform the ways it delivers public services.

Through our work on this theme, we aspire to make a lasting difference; exploring issues that people told us were important to them about the future and how the public sector is preparing for it. Although the Office cannot give assurance on the broad question of whether the public sector is ready, we have designed this work programme to look at topics that people told us are of interest and/or concern for New Zealand's future.

As far as possible, we will draw on all the audit and assurance work we carry out to consider the questions and concerns raised with us about the public sector's contribution to the country's future. Our 2012/13 work programme also sets out specific initiatives that call upon most of the Auditor-General's reporting responsibilities. We will use our knowledge of public entities and draw on expertise from the public sector and the academic, non-governmental, and private sector communities to carry out our planned work.

We give considerable thought to the content of our work programme to ensure that we apply the available resources to get the best return, and to fulfil the Auditor-General's statutory responsibilities and meet her professional obligations. In particular, to arrive at these topics, we drew on feedback from people inside and outside the Office and our knowledge of recent work done or under way. We also considered how the potential topics would best contribute to the theme.

To sharpen the focus of our work, we propose to consider four cross-cutting themes for each topic: use of technology, capability and skills, prioritisation, and effectiveness and efficiency.

As illustrated in Figure 1, we have grouped our proposed work into three clusters:

  • services;
  • resources; and
  • financial.

We describe the proposed work in each cluster in Figures 2, 3, and 4.

Figure 1
Overview of proposed work on our 2012/13 theme Our future needs – is the public sector ready?

Figure 1: Overview of proposed work on our 2012/13 theme Our future nees - is the public sector ready?

Figure 2
Proposed work in 2012/13 – Services cluster

A common thread of feedback to us was that the public sector needs to plan and deliver effective public services while "future-proofing" services for our changing population and its needs.

Child obesity

Good child health is important for children and families now, and also for continued good health and active contribution to society into adulthood. Almost 30% of New Zealand children between five and 17 years old are classed as obese or overweight. This means New Zealand ranks fifth in the OECD for girls and eighth for boys. There are social disparities between obese and non-obese children, and childhood obesity increases the risk of children developing diseases such as diabetes, heart disease, and asthma when they become adults. Life expectancy may well be limited by the early onset of diseases in adulthood as a result of childhood obesity, which might have implications for the future economic sustainability of New Zealand.

We propose a performance audit to assess how the increasing prevalence of obesity in children is being tackled to improve children's health now and into their future.

We will consider the possible overlap with the Health Committee's inquiry into preventing child abuse and improving children's health outcomes, and the Māori Affairs Committee's work on determinants of well-being for Māori children, before proceeding with our proposed audit.
Māori education

It is important that the education system serves all students well. Currently, all Māori students do not take part in education as well as they might, nor do some achieve as highly as they could. Many initiatives and programmes are now in place to lift Māori participation, engagement, and achievement, under the Ka Hikitia – Managing for Success Māori Education Strategy and elsewhere.

It is important that these programmes and initiatives are designed to achieve the intended outcomes and are carried out effectively. This may involve "changing hearts and minds" of people in the Ministry of Education, other education sector agencies, schools, early childhood education providers, and other agencies and organisations involved in lifting Māori student achievement.

The Office is preparing a five-year framework for performance audits about education for Māori educational success, to be published in June 2012. We will carry out the first audit in this framework during 2012/13. To guide this process and help construct the framework, we have appointed a Māori Advisory and Reference Group, comprising eminent Māori education experts and representatives. An Advisory Group will continue to guide the Office throughout the five-year Māori education audit programme.
New migrant settlement and contribution

New Zealand depends on migrants to maintain its population and fill skill shortages, even in a time of economic slowdown. The New Zealand settlement strategy includes a goal that the contributions of migrants support economic transformation. The contributions can be by their employment and use of their skills and knowledge, and by stimulating innovation and creativity in New Zealand business. Another contribution can be by strengthening relationships in international markets.

We will carry out a performance audit to assess how well this goal is being achieved, by looking at the employment of immigrants and the use of their skills and knowledge, and their involvement in the establishment of trade links. We will focus on immigrants who potentially face the greatest barriers to finding employment that uses their skills.
Technology-enabled service delivery

New Zealand citizens have been early and enthusiastic adopters of social media. As a result, public organisations are now beginning to use social media. The Government has also signalled a focus on increasing the use of ICT to reduce the cost of services to the public and improve their quality.

We propose a performance audit to explore public entities' current use of social media and identify those conditions critical to its success. We will also examine the effectiveness and efficiency of the investments made in social media.

We plan to do further work in 2013/14 on technology-enabled service delivery.
Ageing population

The proportion of older people in the population is growing at a faster rate than ever before. This is resulting in a major shift in the population structure. The number of New Zealanders aged 65 years and over will exceed one million by the late 2020s. The different profile in the population will put different demands on public services, and present a range of challenges and opportunities for New Zealand's future. In particular, there will be a significant effect on health and social services. There will also be a growth in the older economy as more people over 65 stay in the workforce.

Since 2001, the Ministry of Social Development has had a Positive Ageing Strategy. The strategy includes considering the implications for retirement income, health, employment, housing, and transport.

We propose to carry out a performance audit that will examine whether a cross-section of public entities (including local authorities) are effectively preparing and planning for the projected growth and ethnic composition of older people.
Justice – Reduction of reoffending

The core criminal justice system is described by the Government as a "pipeline" through which offenders flow, from the police to courts to corrections. The Government aims to reduce the flow of criminals by intervening early to reduce offending, and to better control or mitigate criminal behaviour. International research indicates that earlier interventions are more effective and have a greater cost-benefit ratio to the taxpayer, leading to a safer society.

In 2009, several government departments designed a work programme to achieve this reduction in flow. Called "Addressing the drivers of crime", this programme has four workstreams focused on four points in the pipeline where intervention is necessary to reduce pressure further along.

In the context of financial constraint, the justice sector has developed the Justice Sector Sustainability Programme aimed at producing an effective and sustainable sector. For the greatest effectiveness and efficiency, it is important that the agencies involved work together well towards agreed outcomes.

Through a series of audits during the next few years, we propose to assess the overall effectiveness and efficiency of "Addressing the drivers of crime", as well as the effectiveness of each individual workstream. In our first performance audit, we propose to look at activities intended to reduce reoffending, including prisoner employment, drugs and alcohol treatment, cultural programmes, and probation. The audit will assess how successfully changes to service delivery design and activities are reducing re-offending and harm to others by offenders.

Figure 3
Proposed work in 2012/13 – Resources cluster

In this cluster, we look at the natural resources and other assets that support the delivery of public services. We will ask whether the best use is being made of those resources and whether they are being managed so that they will continue giving the service needed from them in the future.

Protecting and maintaining our biodiversity and natural ecosystems

This performance audit is under way. Globally, the increasing loss of biodiversity is a major concern. Much of New Zealand's biodiversity is unique and makes a significant contribution to our quality of life. Our biodiversity and natural ecosystems have considerable economic, social, and cultural value.

The Department of Conservation (the Department) has a lead role in working, together with other agencies, to ensure that the diversity of our natural heritage is protected and our natural ecosystems are healthy. We plan to audit the work of the Department and other agencies to protect and maintain our biodiversity and natural ecosystems.
Biosecurity: Preparedness for, and response to, incursions from unwanted organisms

This performance audit is under way. Certain plants, animals, and associated diseases can be detrimental to our social, economic, and/or physical environment if they become established. The Ministry of Agriculture and Forestry (the Ministry) is responsible for prevention (through border control), surveillance, investigation, and responding to incursions of these unwanted organisms.

We are auditing the Ministry's preparedness for an incursion of unwanted organisms and its systems for responding to an incursion. Our work is examining how the Ministry has responded to some actual incursions. Where appropriate, we are also examining how well the Ministry has worked with industry and other partners as part of the response.
Asset management by district health boards

Asset management is an essential part of public sector governance and operation, and should be part of an organisation's strategic, corporate, service, and financial planning. A complex range of property, plant, and equipment assets underpins the services provided by district health boards (DHBs). These assets need to be managed so that services are effective and efficient, in a way that considers the future utility of the assets.

We propose to audit the leadership the Ministry of Health provides to DHBs in co-ordinating asset management across the sector and integrating it with service delivery, including how this affects asset management practices by DHBs.
Management of significant assets

Many essential community services are underpinned by significant assets, such as infrastructure assets. These assets normally comprise large numbers of components that together constitute a network.

Although individual components have useful lives and require regular maintenance and eventual replacement, the network as a whole is expected to continue to deliver essential community services in the long term.

Public entities are responsible for managing their assets and typically do so through formalised asset management planning processes.

We intend to review asset management of the significant assets throughout the public sector, in both central and local government. We plan to ask our auditors to gather information about asset management as part of their annual audits of selected public entities.

We are interested in better understanding:
  • how entities describe and explain the service levels they are aiming to deliver;
  • the condition of significant assets; and
  • the extent of deferred maintenance and deferred renewals.

Figure 4
Proposed work in 2012/13 – Financial cluster

Finally, people were looking for assurance that the fiscal circumstances of the public sector are being managed to maintain the assets and deliver the services that will be needed for a changing population in the context of the devastation of the Canterbury earthquakes and the wider difficult economic climate.

Analysis of local authorities' long-term plans

During 2011/12, we audited local authorities' 10-year plans as part of the triennial review and updating of these plans. Long-term plans should provide a significant indication of the likely financial and service operations of local authorities alongside their rating and other funding intentions.

We will draw on our base of audit work to assess the future issues facing local authorities and their communities across certain areas of public concern. These areas include the current position and level of local government debt, and the choices local authorities are making about how to balance affordability for the local community with imperatives for economic growth and infrastructure maintenance and improvement.

The Social Services Committee asked that this analysis "look at the degree to which ‘social responsibility' is included in ... plans". We have considered this suggestion but, given proposed legislative change, we have decided to retain the focus on financial strategy and sustainability.

The Committee also raised questions about levels of deferred maintenance and renewals, which we think are better covered in our work on Management of significant assets.
New Zealand's Long-term Fiscal Statement

Every four years, the Treasury is required to produce New Zealand's Long-term Fiscal Statement. The Long-term Fiscal Statement provides projections of New Zealand's long-term fiscal position (covering a period of at least 40 years), and identifies and analyses a range of options to address the long-term fiscal position, but, importantly, does not make recommendations.

There have been two long-term fiscal statements produced to date, in 2006 and 2009. The next long-term fiscal statement is planned for 2013.

We intend to review the approach the Treasury has taken to produce New Zealand's Long-term Fiscal Statement. We are interested in better understanding and commenting on:
  • the Treasury's long-term fiscal model;
  • the key inputs to the model;
  • the key assumptions and the sensitivities associated with those assumptions;
  • the options available for managing New Zealand's long-term fiscal position; and
  • the links between the long-term fiscal model and the information presented in the Long-term Fiscal Statement.
Board reporting by Crown Research Institutes and State-owned enterprises

For Crown Research Institutes and State-owned enterprises, there has been a greater focus on making Boards more responsible and accountable for the companies' direction. Good decision-making at Board level about future strategies, tactics, and operations can be achieved only with the right information, in the right form, at the right time. We propose to review the form and extent of Board reporting on matters about the future issues, opportunities, and risks for these companies (excluding those targeted for mixed ownership).
Canterbury recovery

The recovery and rebuild effort in Canterbury involves significant funding, large-scale projects and contracts, and multiple entities with interacting roles and responsibilities. We propose to carry out a four-stream programme on the Canterbury recovery:

  • Procurement and monitoring – The recovery and rebuild effort includes large-scale, significant contracts for the demolition, repair, and rebuild of homes and infrastructure. We will carry out performance audit work on aspects of this procurement and how the procurement is being managed, monitored, and implemented.
  • Funding flows – There has been a wide range of new appropriations and funding arrangements put in place to finance the recovery and rebuild. Our work will include mapping the funding flows and considering the controls, the timeliness of funding, and the accuracy and appropriateness of expenditure and monitoring costs.
  • Accountability and responsibility – Multiple public entities are involved in the recovery and rebuild effort, and are accountable for large-scale public expenditure. We will map the different agencies involved and their roles and responsibilities, assessing the overall recovery framework against accepted criteria to overview and highlight any risks.
  • Insurance – through our work to assess how well insured the public sector is (see next item), we will look specifically at the insurance arrangements of public entities in Canterbury.
How well insured is the public sector?

After the Canterbury earthquakes and other natural disasters, public entities are finding it increasingly difficult to secure adequate insurance for their assets at an affordable cost.

We intend to review the insurance cover in place throughout much of the public sector. We plan to ask our auditors to gather information about insurance as part of their annual audits of public entities.

We are interested in better understanding:

  • the nature of insurance cover;
  • the extent to which assets are uninsured;
  • any significant policy exclusions that mean assets are not covered for certain types of events (for example, earthquake and tsunami);
  • the proportion of claims that entities will not be able to recover (that is, the excess under the insurance policy);
  • the cost of insurance; and
  • the main changes in insurance arrangements in the past couple of years.

Our work will also include at least four major inquiries:

  • the Kaipara District Council's management of the Mangawhai community wastewater scheme;
  • aspects of ACC's Board-level governance;
  • a citizenship decision; and
  • the Ministry of Economic Development's expressions of interest process for proposals to establish an international convention centre.

We expect to report on all of these inquiries during 2012/13.

In addition, we expect to support public entities through a range of legislative and accounting standard changes that will affect their accountability arrangements. In 2013/14:

  • public entities will begin the transition from preparing their financial statements using standards based on International Financial Reporting Standards to standards based on International Public Sector Accounting Standards; and
  • legislative changes to the Public Finance Act 1989, the Crown Entities Act 2004, and the Local Government Act 2002 may come into effect.

Looking ahead to 2013/14

A number of areas have emerged while we developed this proposed work programme for 2012/13 that are likely to form the basis of our work programme in 2013/14. The common theme is public sector service delivery, with our work in 2013/14 likely to feature performance audit work on the topics shown in Figure 5.

Figure 5
Likely performance audit work in 2013/14

Continuing our consideration of education for Māori educational success Continuing our work on the Canterbury recovery and rebuilding
Continuing our consideration of the justice supply chain looking at the overall effectiveness and efficiency of the cross-agency work programme to reduce crime Case management by the Accident Compensation Corporation and the Ministry of Social Development
Work toward our Auckland service performance reporting responsibility Local government asset and service-level management
Contracting for outcomes The e-government strategy
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