Part 2: Overview of the social sector

Public entities in the social sector: Our audit work.

The Auditor-General's mandate includes examining whether public entities are carrying out their activities effectively and efficiently. It covers matters of waste, probity, legislative compliance, and financial prudence in the public sector. Understanding a sector's operating environment and lines of governance and accountability is a prerequisite for forming judgements on whether public entities in that sector are performing as intended.

This Part focuses on providing this context. We briefly describe the public entities in the social sector. We also discuss structural changes in the social sector, the social sector's operating environment, and recent relevant changes to public sector governance and accountability arrangements.

Entities in the social sector

Figure 1 set out the entities covered by this report:

  • the Ministry of Social Development (MSD);
  • the Children's Commissioner;
  • the Families Commission;
  • the New Zealand Artificial Limb Service;
  • the Social Workers Registration Board; and
  • Housing New Zealand Corporation (Housing New Zealand).

MSD is not only the largest entity in the social sector but also, in terms of staff numbers, the largest central government department. MSD is the Government's lead provider of policy advice and services for children and young people, working-age people, older people, families and communities. It delivers, or purchases from third-party providers, most of New Zealand's social services and administers benefits and New Zealand Superannuation. MSD's other main role is that of Cabinet-mandated lead agency for the social sector.

MSD has statutory functions for the care and protection of children. These functions are delegated to its Child Youth and Family (CYF) business unit. MSD also administers the Office for Disability Issues and the Office for Senior Citizens. They promote and monitor the implementation of the New Zealand Disability Strategy and the New Zealand Positive Ageing Strategy respectively. The Ministry of Youth Development, a business unit within MSD, leads young people's input into policy development throughout government.

MSD is the monitoring department for four Crown entities in the sector:

  • the Children's Commissioner;
  • the Families Commission;
  • the New Zealand Artificial Limb Service; and
  • the Social Workers Registration Board.

The Office of the Children's Commissioner was first set up under the Children, Young Persons, and Their Families Act 1989. Since 2003, the Commissioner has acted under the Children's Commissioner Act 2003. The Children's Commissioner's responsibilities include monitoring and reporting on services provided under the Children, Young Persons, and Their Families Act 1989 – in particular, the policies and practices of CYF. The Commissioner also advocates for children's rights and investigates particular issues compromising the health, safety, or well-being of children and young people.

The Families Commission was set up in 2004 under the Families Commission Act 2003. The Families Commission Amendment Bill will change the Commission's governance and its functions, expanding its focus to social policy research, evaluation, and monitoring as well as advocacy.1

The New Zealand Artificial Limb Service (also known as the New Zealand Artificial Limb Board) was set up under the Social Welfare (Transitional Provisions) Act 1990. It provides national prosthetic limb services for New Zealand amputees.

The Social Workers Registration Board was set up by the Social Workers Registration Act 2003. Its four main functions are:

  • managing the registration of social workers;
  • considering complaints against registered social workers;
  • enhancing the professionalism of social workers; and
  • promoting the benefits of registration.

Housing New Zealand is a statutory corporation set up under the Housing Corporation Act 1974. Housing New Zealand's objective under the Act is "to give effect to the Crown's social objectives by providing housing, and services relating to housing, in a businesslike manner". One of its principal functions is "providing rental housing, principally for those who need it most". Housing New Zealand has two subsidiaries: Housing New Zealand Limited and Hobsonville Land Company Limited. It manages a portfolio of 68,710 houses, with total assets valued at $16.371 billion as at 30 June 2013.

Housing New Zealand is responsible to the Ministers of Housing and Finance. The Minister of Finance is responsible for approving borrowing. The Treasury is the monitoring department for Housing New Zealand. Housing policy is the responsibility of the Ministry of Business, Innovation and Employment (MBIE).

Government resources are also invested in the Tāmaki Redevelopment Company Limited (TRC), a special-purpose company. TRC was established in 2012 as New Zealand's first urban redevelopment company. It brings together public and private sector investment within a commercial framework. Under a Heads of Agreement between the Crown and Auckland Council, the Government has a 59% share and Auckland Council a 41% share. TRC is charged with urban regeneration of Tāmaki. Shareholders have requested that the company deliver a number of housing-led regeneration projects by 30 June 2014. The successful delivery of these projects will help inform decisions by shareholders about longer-term urban regeneration in Tāmaki.

Structural change in the social sector

Recent structural changes have affected the social sector. On 1 July 2012, the Department of Building and Housing merged with three other departments to form MBIE.2

There has been recent structural change within agencies in the social sector. The Families Commission restructured in 2012/13, giving effect to the Ministerial announcement of its new functions and in anticipation of the passing of the Families Commission Amendment Bill. The changes are aimed at ensuring that the organisation is well placed to respond to the impending legislative reform. There have been significant changes at both governance and management level, with a new chief executive and a new chairperson of the Board appointed. In 2012/13, 13 staff received compensation in relation to cessation totalling $607,000.

More changes for social sector entities are expected. Responsibility for assessing the need for social housing will be transferred from MBIE to MSD. Within MSD, the assessment function will sit with Work and Income, reflecting its close links to benefit assessments. The target date for the transfer is 14 April 2014.

The social sector's operating environment

Better Public Services programme

This section outlines some of the Government's main expectations for public entities in the social sector. Part 4 looks at the changes made to meet the Government's expectations and why the Auditor-General is interested in how these are being implemented.

Delivering better public services within tight financial constraints is one of the Government's four priorities for this term. Since the Prime Minister announced the Better Public Services programme in March 2012, a work programme has been set up to drive Better Public Services reforms. The work programme's components are:

  • a focus on results;
  • people-centred service design and delivery;
  • delivering effective spending and efficiencies through agencies; and
  • building capability to deliver services in the best way.

Under the Better Public Services programme, the Government has identified 10 results that it expects the public sector to achieve by 2017. Thematically, the results fall into five areas:

  • reducing long-term welfare dependence;
  • supporting vulnerable children;
  • boosting skills and employment;
  • reducing crime; and
  • improving interaction with government.

These constitute the priorities that Vote Social Development's high-level objectives are structured around. MSD's outcomes framework in its Statement of Intent 2013-16 is also organised around these priorities.

Housing is not a Better Public Services result area, but since 2010 the Government has pursued significant reforms of social housing. The Social Housing Reform Programme aims to improve the effectiveness of social housing support. This includes transferring responsibility for assessing housing need and associated functions from Housing New Zealand to MSD, so that social housing is considered alongside a person's other social support needs. The main Government objectives for housing are to increase the housing supply, increase home ownership, and have a greater share of social housing provided by the community sector.

The Social Housing Reform (Housing Restructuring and Tenancy Matters Amendment) Act 2013, was passed in November 2013. It amends the Housing Restructuring and Tenancy Matters Act 1992. The amendments are intended to promote contestability by increasing the amount of social housing provided by "community housing providers" and increasing the housing choice available to tenants and prospective tenants. The amendments make income-related rent subsidies available to eligible new tenants of approved community housing providers.

More broadly, the Better Public Services programme focuses on achieving better and more efficient public services. The Government expects the public sector to perform better, work innovatively, improve the way it delivers services, and find new ways of working to reduce costs.

Functional leadership is a main pillar of the Better Public Services programme. It aims to improve the effectiveness and reduce the overall costs to government of common business functions. Functional leadership roles have been given to three chief executives to drive performance throughout the state services in information and communications technology (ICT), procurement, and property respectively. The Chief Executive of MSD is responsible for the Property Management Centre of Expertise and the Government National Property Strategy.

Finding efficiencies has been a focus for several years. MSD put in place a Value for Money Programme in 2007 to manage its departmental cost pressures. This programme aimed to achieve productivity and efficiency gains of 2% to 3% each year while improving the quality of services to clients. MSD has stated that the programme has enabled it to manage departmental cost pressures of $255 million between 2008/09 and 2011/12. Housing New Zealand's financial objective is to optimise its return to the Crown, and it seeks to do this by managing resources effectively and efficiently. It delivered savings of $36 million during 2011/12 and 2012/13.

Shared services arrangements achieve efficiencies and cost savings. After an administrative efficiency review in 2009/10, the Children's Commissioner and the Families Commission have realised savings by sharing office accommodation in Auckland and Wellington, and sharing telecommunications and administrative/corporate services. MSD provides ICT services to the Families Commission and the Children's Commissioner.

Changes to public sector governance and accountability

Significant changes to public sector governance and accountability requirements have been made recently. Parliament enacted legislation in July 2013 that amended the State Sector Act 1988, the Public Finance Act 1989, and the Crown Entities Act 2004. Among other changes, the new legislation provides an institutional framework for agencies to share accountability for sector outcomes, giving chief executives responsibility for the collective interests of government. Detailed information is available from the Treasury, at

There has also been change to financial planning. For Budget 2012, central government departments produced four-year budget plans (and, in 2013, four-year plans). These are intended to support strategic and flexible planning and financial management to enable more effective delivery of long-term outcomes. They also encourage prioritisation and alignment of financial resources with priorities. They also identify anticipated fiscal pressures over the four-year period.

The State Services Commission's and the Treasury's guidance on four-year plans for Budget 2014 includes a strong emphasis on supporting government decisions about priorities, including between Votes. This creates an opportunity to produce four-year budget plans that would reflect the reality of entity collaboration, drawing on different Votes, towards shared sector outcomes.

Social sector governance and leadership

The current Vote structure includes separate Votes for Social Development, Health, and Education. Departments remain accountable for funding appropriated under Votes they administer. At the same time, governance arrangements in the social sector have been changing, with a shift from agency co-ordination to shared governance. In some instances, chief executives share accountability for outcomes.

MSD is the lead agency for the social sector. The Chief Executive of MSD is formally mandated by Cabinet to chair the Social Sector Forum (the Forum) of Chief Executives.3 The Forum, which reports to the Cabinet Social Policy Committee, was mandated to oversee the development and/or implementation of a number of initiatives that involve several agencies.4

The MSD Chief Executive also chairs the Joint Venture Board, set up to oversee Social Sector Trials,5 and a Chief Executives' Group on Disability Issues, which supports the Ministerial Committee on Disability Issues.

New governance arrangements have been put in place for work associated with vulnerable children. These arrangements make relevant agencies collectively responsible for that work. As part of the decisions on the White Paper for Vulnerable Children, Cabinet agreed in 2012 to establish a Vulnerable Children's Board of Chief Executives as part of the governance arrangements. This arrangement replaced the previous lead role of the Forum.

In 2013, the Government put forward a Vulnerable Children's Bill that will make the shared responsibility of chief executives legally binding. The Bill introduces a new obligation on chief executives to collectively prepare, and report progress against, a vulnerable children's plan, and sets out how the chief executives will work together.

New governance arrangements were also made to implement welfare reform. First, the Treasury is exercising a monitoring function that extends beyond its standard Vote analysis and advisory function. Secondly, the Minister for Social Development appointed a six-member Work and Income Board in May 2012 to:

  • advise and support the Chief Executive of MSD in implementing welfare reforms; and
  • report to the Minister for Social Development, the Minister of Finance, and the Minister of State Services on Work and Income's performance.

1: When this report was being prepared, this Bill was before Parliament awaiting its third reading.

2: There have also been changes to the Community and Voluntary Sector. The Office for the Community and Voluntary Sector moved from MSD to the Department of Internal Affairs (DIA) on 1 February 2011 and the Charities Commission merged into DIA on 1 July 2012. DIA's operations, in particular its grants administration, affect the social sector. However, DIA is not covered in this report because it is funded from Vote Internal Affairs and is overseen by the Government Administration Committee.

3 Currently, the Forum consists of the Chief Executive of MSD (Chairperson), the Secretaries for Justice and Education, the Director-General of Health, the Deputy Chief Executive of MBIE responsible for housing, and Te Puni Kōkiri. Central agencies provide advice.

4 In 2013, the Forum agreed on eight priorities related to Better Public Services result areas, Social Sector Trials, youth mental health, and a simplified approach to contracting.

5 The Trials are a joint agency initiative to change the way that social services are delivered. A local organisation or individual co-ordinates cross-agency resources, local organisations, and government agencies to deliver collaborative social services. The Board reports to a Ministerial subcommittee. Its membership comprises the chief executives of MSD, Health, Education, Justice, and the New Zealand Police.

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