Part 1: Introduction

Roles, responsibilities, and funding of public entities after the Canterbury earthquakes.

In this Part, we discuss:

Since the major earthquakes in Canterbury on 4 September 2010, 22 February 2011, 13 June 2011, and 23 December 2011, the region has moved from a state of national emergency and crisis response to a focus on repair, recovery, and rebuilding.

Internationally, natural disasters are managed in four phases – mitigating, preparing, responding, and recovery. In New Zealand, these phases are known as reduction, readiness, responding, and recovery (the "four Rs"). The United Nations Development Programme says that:

Recovery is about shifting focus from saving lives to restoring livelihoods, effectively preventing the recurrence of disasters and harnessing conditions for future development.1

The different phases often overlap because of the different time frames and complexities of tasks involved. Canterbury is moving into the recovery phase but we recognise that some Cantabrians are still experiencing the response phase. In this report, we refer to the efforts to reorganise, restore, repair, and rebuild greater Christchurch as Canterbury's recovery. We use the Canterbury Earthquake Recovery Act 2011 definition of greater Christchurch as "the districts of the Christchurch City Council, the Selwyn District Council, and the Waimakariri District Council, and ... the coastal marine area adjacent to these districts".

The public sector has a significant role in Canterbury's recovery. Much public money (from national and local sources) is funding a programme of large projects and contracts that are being managed by many public entities with interacting roles and responsibilities. Public entities must manage funds from insurance and re-insurance contracts from New Zealand and overseas. How effectively and efficiently these funds are managed may influence future contracts.

During the time it takes Canterbury to recover, we will look closely at how effective, efficient, and appropriate the public spending on, and managing of, the recovery is. In 2012/13, our work will consider the recovery from four perspectives.

These are:

  • the roles and accountabilities of public entities;
  • public funding of the recovery;
  • public sector procurement; and
  • the effect of the earthquakes on insurance in the public sector.

This report details responsibilities, funding flows, and accountabilities. It reports on some of the progress on the recovery and sets out the main challenges that public entities face and the main risks that they must manage to ensure that the Canterbury recovery is effective and efficient.

In future reports, we will look further at whether public entities carry out their recovery work effectively and efficiently, and how they manage the main risks.

Carrying out our work

For this report, we chose five significant aspects of Canterbury's recovery:

  • horizontal infrastructure (for example, roads and water systems);
  • redeveloping the Christchurch central business district (CBD);
  • the residential red zone – where damage was extensive, the risk of further damage is high, and repairing properties is uneconomic;
  • Technical Category 3 (TC3) areas considered to be suitable for continued residential occupation but likely to be significantly affected by liquefaction and lateral movement in a future earthquake; and
  • the Port Hills – where the earthquakes caused rock falls, cliff collapses, and landslides.

For each of these, we sought to understand:

  • what happened;
  • the roles and responsibilities of public entities involved;
  • the costs and funding arrangements for the public sector; and
  • the effect on people.

In Part 2, we list the public entities working on the recovery and their core responsibilities. Part 5 outlines five case studies that helped us to identify those public entities.

In Part 3, we look at the costs of the recovery to the public sector. In Part 4, we look at insurance and the recovery.

The importance of collaborating effectively

The United Nations Development Programme, the World Bank, and the Organisation for Economic Co-operation and Development, as well as other state and national audit offices, have separately studied efforts to recover from natural disasters. Their work has identified some factors that contribute to effective recovery.2 These factors include:

  • public confidence and trust, gained through being transparent and communicating openly;
  • clear relationships between different levels of government to manage risks of duplicating work and lacking co-ordination; and
  • recovery authorities having a strong focus on gaining and maintaining cohesion, co-ordination, and consensus.

For Canterbury to recover successfully, public entities must work collaboratively. Experience from other international natural disasters has shown how important it is to properly co-ordinate and govern how the public sector responds. If collaborating fails, recovery efforts can be hampered, causing delays and – in the end – poor outcomes for affected communities.3

It is important for the public sector to work well with the private sector and non-governmental organisations such as charities and community organisations. The Auditor-General's mandate is for auditing public entities only, but we consider how public entities work with other agencies in the recovery and in providing public services in general.

We found instances of public entities working collaboratively in new ways. One example is the alliance between the Canterbury Earthquake Recovery Authority (CERA), Christchurch City Council (CCC), the New Zealand Transport Agency (NZTA), and private construction companies to rebuild infrastructure in Christchurch. This Stronger Christchurch Infrastructure Rebuild Team (SCIRT) alliance is meant to:

  • ensure value for money;
  • help control costs; and
  • ensure that work is timely and of a high quality.

In our view, governance and oversight must be appropriate to ensure that these new ways to collaborate are effective. Purposes, roles, and responsibilities must be set out clearly. Governance needs the right skills, competencies, and ways to monitor performance. Good governance ensures that the interests of Cantabrians and New Zealanders are managed effectively and efficiently.

Collaboration is essential for the right entities to make timely decisions. In Part 5, we highlight a complex situation in the Port Hills that requires public entities to have a wide range of expertise. Those public entities work hard to provide clarity to the people of the Port Hills. However, many people whose lives have been severely affected told us that they have found the process to be long and frustrating.

We have heard examples of public entities communicating well, but also criticism that communication is lacking in some instances. To be effective, central and local government need to lead communication in a co-ordinated way.

For the recovery to be effective and efficient, it is important that all the agencies involved know what each is doing. Without clarity, there are risks that:

  • their work might not be mutually supportive;
  • their work could lack direction;
  • they could duplicate work;
  • their work could conflict with that of other agencies;
  • accountability could be unclear; and
  • in the end, public funds might not be used effectively.

Because rebuilding in a changing environment is complex, leaders in Canterbury must continually monitor these risks and take appropriate action to manage them.

Insurance and the rebuilding effort

Insurance is vital in helping and paying for the rebuilding of Canterbury. Many people are experiencing delays and complications with their earthquake-related insurance claims, which have proved challenging for insurance providers. Reasons for the complications include:

  • difficulty in attributing damage to a particular earthquake amid ongoing aftershocks that keep increasing the number of claims;
  • complications from the need to apportion damage to several claims for one property because there have been so many events – where the apportionment to one claim for a property is more than the Earthquake Commission (EQC) cap ($100,000 for building claims), the EQC and insurer must agree about who is liable for what;
  • insurers having to understand new requirements and costs of changes to building and foundation standards since the earthquakes;
  • geotechnical data having to be collected to understand the condition of land before rebuilding;
  • different options being available to claimants for repairing or rebuilding their property; and
  • some undamaged dwellings being uninhabitable because of hazards at neighbouring properties.

With no easy solution and many insurance claims, delays in settling claims with property owners have caused widespread frustration.

Since the Canterbury earthquakes, insurance premiums have increased substantially. Some public entities cannot get insurance. In 2012/13, we will report on how the earthquakes have affected the cost of insurance throughout the public sector.

Costs of, and funding for, rebuilding

There is considerable public funding of Canterbury's recovery, with central and local government contributing significant amounts.

The Crown has set up a $5.5 billion Canterbury Earthquake Recovery Fund (CERF), which the Treasury monitors. This is meant to be a way to transparently track the costs of the earthquakes. Central and local government will share much of the cost of rebuilding. International best practice in recovering from natural disasters highlights the need to have appropriate pre-agreed thresholds and cost-sharing formulas.4 The World Bank has noted that funding needs to be "efficient, transparent, and firmly directed toward realizing the physical results envisioned in the reconstruction policy" and has identified the following conditions for successfully financing recovery efforts:

  • having clear objectives;
  • the sources of financing and the agencies working on the recovery co-ordinating well; and
  • administering the receiving and distributing of funds carefully.5

Central and local government have agreed to share the cost of restoring essential local infrastructure after a natural disaster. Under the agreement, local authorities will usually spend and lodge a claim with central government later. However, this has put a significant onus on the Canterbury local authorities to pay to repair essential infrastructure before recouping some of the cost from central government.

To help the recovery, funds must be available quickly. However, there must be appropriate systems and controls to manage and track the public money spent.

Our role

In our role as auditor of the public entities involved in the recovery, we will consider the systems and controls to transparently manage and track the public money being spent. We will seek assurance that funds are being used, or will be used, appropriately.

We will examine the controls and monitoring of funding of the recovery through our annual audits of public entities and in future reports on the recovery.

Strong procurement, project management, and value-for-money principles must be built into planning and reporting to minimise the risk of using public funds poorly. We will consider this aspect of the recovery in future performance audits and other work.

1: United Nations Development Programme, Bureau for Crisis Prevention and Recovery, Post-Disaster Recovery Guidelines (Version 1), New York.

2: Organisation for Economic Co-operation and Development (2004), Large-scale Disasters: lessons learnt; United Nations Development Programme, Bureau for Crisis Prevention and Recovery, Post-Disaster Recovery Guidelines (Version 1), New York; and World Bank (2011), Queensland Recovery and Reconstruction in the Aftermath of the 2010/2011 Flood Events and Cyclone Yasi, Washington.

3: See, for example, Government Accountability Office (2009) Disaster Recovery, Experiences from Past Disasters Offer Insights for Effective Collaboration after Catastrophic Events, Washington.

4: See, for example, World Bank (2011), Queensland Recovery and Reconstruction in the Aftermath of the 2010/2011 Flood Events and Cyclone Yasi, Washington.

5: World Bank (2010), Safer Homes, Stronger Communities: A Handbook for Reconstructing after Natural Disasters, Washington.

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