Part 1: Introduction

Earthquake Commission: Managing the Canterbury Home Repair Programme - follow-up audit.

1.1
In this Part, we describe:

Why we are following up on the Earthquake Commission's performance

1.2
In October 2013, we reported on the findings of a performance audit (our 2013 report) 1 examining EQC's performance in managing the programme. In our 2013 report, we said that we would carry out follow-up work to assess the progress EQC has made with our recommendations in that report.

1.3
Our 2013 report said that EQC's management of the programme had been mixed. EQC had performed well in managing repair costs and setting the programme up quickly, but it had not performed as well in dealing with homeowners.

1.4
Our 2013 report provided background information on EQC, the programme, and the circumstances in which the programme was operating. Readers should refer to that report for the detail.

1.5
In summary, EQC's Board and Ministers decided on a home-repair programme because of its potential to contain inflation in the cost of repairs, ensure that funds were used for repairs, and maintain the quality of housing stock in Canterbury. Maintaining the quality of housing stock was considered important in encouraging people to stay in the region (because the equity in their homes would be maintained).

1.6
In this follow-up report, we:

  • describe the progress that EQC has made since our 2013 report in response to each of our recommendations; and
  • assess the effect of EQC's progress on the achievement of the programme's overall objectives and ongoing value-for-money risks.

Our objectives and expectations

1.7
The overall objective of our work was to assess and report on EQC's progress with addressing our recommendations in our 2013 report. In doing so, we wanted to assess whether EQC has:

  • improved the programme where needed; and
  • continued the more positive aspects of its management of the programme.

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We expected that EQC would have improved each of the areas we identified in our 2013 report and that the improvements would contribute positively to the effectiveness and efficiency of the programme.

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We also expected that the programme would repair people's homes to the required quality within acceptable costs and time frames, and be carried out efficiently.

1.10
We did not make a recommendation in our 2013 report about how EQC manages complaints. However, we have looked at this as part of our work because it is of considerable public interest. It is also, in part, related to EQC's communication with homeowners that was the subject of a recommendation in our 2013 report.

The scope of our work

1.11
EQC's main objectives are set out in section 5 of the Earthquake Commission Act 1993 (the Act). They are to:

  • administer the insurance against natural disaster damage provided for under the Act (EQC handles residential claims, not commercial claims);
  • facilitate research and education about matters relevant to natural disaster damage; and
  • manage the Natural Disaster Fund, including arranging reinsurance.

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As part of addressing the first objective, EQC used a reinstatement option in the Act to put the programme in place in Canterbury. We looked at EQC's responsibilities for the first objective in relation to dwellings, excluding land and contents claims.

How we carried out our work

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To carry out our work, we obtained and analysed:

  • the findings of an EQC internal audit examining EQC's progress with the recommendations from our 2013 report, including independently reviewing the main documentary evidence used by EQC; 2
  • time-series information from EQC on various aspects of its performance, including on complaints, vulnerable people, customer satisfaction, costs, and number of repairs completed;
  • investigations by the Ministry of Business, Innovation and Employment (MBIE) into home repairs in Canterbury;
  • an EQC-commissioned consultant's report on EQC's customer interactions;
  • the Building Research Association of New Zealand's New House Owner Satisfaction Surveys from 2011 to 2014;
  • EQC's accountability documents, including annual reports and statements of intent;
  • the contractual arrangements between Fletcher Construction Limited and EQC;
  • a 2010 Research New Zealand survey on residential consumers' experience of commissioning building work;
  • external reviews on asbestos exposure and management;
  • the Review of EQC's Customer Satisfaction Survey commissioned by the State Services Commission and published in November 2013;
  • Quotable Value's cost builder information;
  • information given to us by members of the public; and
  • information about project management costs in other building and construction projects.

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We spoke with:

  • EQC staff in Wellington and Christchurch;
  • Fletcher Construction staff in Christchurch;
  • representatives from the Canterbury Communities' Earthquake Recovery Network (CanCERN), the Canterbury Earthquake Recovery Authority (CERA), the Residential Advisory Service in Christchurch, and Southern Response Earthquake Services Limited (Southern Response);
  • representatives from MBIE in Wellington;
  • a representative from the Office of the Ombudsman;
  • representatives from a major international reinsurer; and
  • representatives from the Building Research Association of New Zealand, the Master Builders Association of New Zealand, and Rawlinsons Limited (on behalf of the New Zealand Institute of Quantity Surveyors).

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We also observed an EQC "circuit breaker" meeting. 3

The structure of this report

1.16
In Part 2, we outline our overall findings about the performance of the programme. This includes our assessment of EQC's performance against the value-for-money dimensions of timeliness, quality, quantity, and cost of repairs. We also describe some of the characteristics and changes in the environment that EQC has been working in since 2013.

1.17
In Parts 3-7, we describe the improvements that EQC has made. We set out our conclusions about EQC's progress against each of the recommendations we made in our 2013 report. The topics covered are:

  • repair quality (Part 3);
  • informing homeowners (Part 4);
  • key performance indicators (Part 5);
  • programme configuration (Part 6); and
  • complaints (Part 7).

1.18
In Part 8, we discuss the lessons that EQC has learned from managing the programme and identify what we consider to be the most important lessons.

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In the Appendix, we describe what we found and recommended in our 2013 report. The information is organised around each of the recommendations we made in our 2013 report.

1: Earthquake Commission: Managing the Canterbury Home Repair Programme. Available on our website: www.oag.govt.nz.

2: This included looking at management reports, EQC Board papers, minutes, and standard operating procedures.

3: These are meetings to progress claims that have been difficult to progress – the meetings involve crucial decision-makers and specialist staff.