Part 3: Progress in improving the governance arrangements

Effectiveness and efficiency of arrangements to repair pipes and roads in Christchurch - follow-up audit.

3.1
In this Part, we discuss the public entities' progress in addressing our 2013 recommendations to improve SCIRT's governance arrangements. In particular, we discuss:

roles and responsibilities;
leadership and strategic direction;
guidance to SCIRT;
the performance framework;
the audit framework; and
reporting to public entities.

Summary

3.2
We made six recommendations about SCIRT's governance arrangements in our 2013 report (recommendations 1-3 and 5-7). We describe progress of these in this Part. Progress on the remaining recommendation about levels of service and funding arrangements is covered in Part 5.

3.3
The public entities have made good progress in addressing our recommendations about governance. In particular:

there is greater clarity about roles and responsibilities within the governance framework;
the public entities now provide effective leadership and clearer direction;
there is improved guidance and direction to SCIRT (although SCIRT has been hampered to some degree by the time taken to make decisions about the wider rebuild of Christchurch);
the performance framework that the public entities use to assess SCIRT's performance is meeting the public entities' needs;
the audit framework (a plan of audits looking at horizontal infrastructure work) provides adequate assurance to the public entities; and
the public entities provide feedback to SCIRT on reporting and it has improved.

3.4
However, there are instances of the public entities not providing timely guidance through the governance arrangements. For example, the Horizontal Infrastructure Governance Group was hampered in giving timely direction to SCIRT because of the time the public entities are taking to make decisions about the wider rebuild.

3.5
Overall, good governance from the public entities is helping to ensure that SCIRT delivers the right infrastructure, at the right time, at the right cost.

Roles and responsibilities are clearer

The public entities have improved the governance framework by clarifying roles and responsibilities. The governance framework now meets the needs of the SCIRT programme better.

3.6
In 2013, we found a lack of clarity about the roles of the Client Governance Group and the independent Chairperson. The SCIRT Board's role was also unclear. We recommended that CERA, the Council, and NZTA change SCIRT's governance structure to address these issues.

Changes to governance groups

3.7
The public entities put in place new governance arrangements in late 2013. The public entities replaced the Client Governance Group with the Horizontal Infrastructure Governance Group. As part of this change, the Horizontal Infrastructure Management Team was formed to provide secretariat support and independent advice to the Horizontal Infrastructure Governance Group. Figure 7 shows the current governance arrangements, and Figure 8 shows the previous arrangements.

Figure 7
SCIRT's governance arrangements in 2016

Figure 7 SCIRT's governance arrangements in 2016 .

3.8
The public entities made other changes to SCIRT's governance arrangements as the needs of the horizontal infrastructure rebuild changed. In August 2014, the Horizontal Infrastructure Governance Group agreed to form the Infrastructure Programme Co-ordination Team and the Infrastructure Programme Steering Group to improve programme governance.⁵ In November 2015, the Horizontal Infrastructure Governance Group endorsed the terms of reference for the Infrastructure Programme Transition Group to plan and monitor the transition (see paragraphs 4.8-4.21) from SCIRT to the Council.⁶

Figure 8
SCIRT's governance arrangements in September 2013

Figure 8 SCIRT's governance arrangements in September 2013 .

3.9
Changes to the governance structure have led to greater clarity about roles and responsibilities. In September 2013, the public entities signed a memorandum of understanding setting out the roles and responsibilities of the Horizontal Infrastructure Governance Group. The memorandum and a letter of expectations from the Minister for Canterbury Earthquake Recovery clearly set out the independent Chairperson's responsibilities. The agenda for each meeting of the Horizontal Infrastructure Governance Group sets out the roles and responsibilities for the Infrastructure Programme Steering Group and the Infrastructure Programme Co-ordination Team.

3.10
A Gateway review⁷ in May 2015 of CERA's involvement in the horizontal infrastructure rebuild programme found that interviewees had different views on whether the Horizontal Infrastructure Governance Group was a decision-making body. In response, CERA wrote to the public entities and SCIRT staff involved in the horizontal infrastructure rebuild to clarify the Horizontal Infrastructure Governance Group's role.

3.11
Staff of the public entities and SCIRT clearly and consistently described the roles of the governance groups and teams associated with SCIRT when we interviewed them in late 2015. They also understood how the roles of these groups differed from the roles of SCIRT and the SCIRT Board.

3.12
The Horizontal Infrastructure Governance Group and SCIRT Board invested significant effort in clearly defining their respective roles and building a common understanding of the strategic direction for SCIRT. They did this through joint strategic meetings and discussions at the Horizontal Infrastructure Governance Group's monthly meetings with the Chairperson of the SCIRT Board and the Executive General Manager of SCIRT. These practices should mean the right people make the right decisions at the right time.

Independent Chairperson of the Horizontal Infrastructure Governance Group

3.13
On 14 November 2013, the Minister for Canterbury Earthquake Recovery wrote to the former independent Chairperson of the Horizontal Infrastructure Governance Group setting out the expectations for the role. The Chairperson was required, for example, to manage issues that arise between the public entities and escalate them if necessary. The former Chairperson was also required to complete a declaration about any potential conflicts of interest, and advise if the situation changed.

3.14
The current Chairperson carried out the role on a temporary basis while the former Chairperson was unwell, and was appointed full time in 2014. The current Chairperson was also an employee of CERA until it was disestablished in April 2016. There was, therefore, potential for conflicts of interest to arise because the Chairperson had responsibilities and duties as both the independent Chairperson of the Horizontal Infrastructure Governance Group and an employee of CERA.

3.15
The current Chairperson received a copy of the Minister's letter of expectations to the former Chairperson when he was appointed to the role permanently. There is no documentation recording the terms of his appointment or showing that the potential for conflicts of interest to arise was considered at the time.

3.16
The current Chairperson told us that, when he was appointed, he spoke with each of the members of the Horizontal Infrastructure Governance Group to discuss the potential for conflicts of interest to arise, and the appropriateness of him carrying out the role. None of the people we interviewed from the Horizontal Infrastructure Governance Group, public entities, or SCIRT raised any specific concerns about the way he is carrying out his role. The current Chairperson managed his potential conflict by not taking part in any discussions or meetings about horizontal infrastructure in his capacity as an employee of CERA. His involvement with horizontal infrastructure issues is, therefore, limited to his role on the Horizontal Infrastructure Governance Group.

3.17
If a conﬂict of interest arises, it does not necessarily mean that someone has done something wrong, and it need not cause problems. The conflict simply needs to be identiﬁed and managed carefully. As noted above, none of the people we interviewed from the Horizontal Infrastructure Governance Group, public entities, or SCIRT raised any specific concerns about how the current Chairperson is carrying out his role. Nor did we receive any evidence suggesting actual conflicts had arisen.

3.18
Although we appreciate the need for agility and responsiveness during disaster recovery in Christchurch, we expected there to be clear documentation appointing the Chairperson, and indicating how potential conflicts of interest would be managed at the time of his appointment. The current Chairperson was appointed in mid-2014, but there is still no documentation to this effect. We encourage all public entities to actively identify and manage potential and actual conflicts of interest, as part of good governance practice.⁸

There is more effective leadership and clearer strategic direction

CERA is more involved and the public entities now provide more effective leadership and clearer strategic direction.

3.19
In 2013, we found that CERA did not consistently send the same people to meetings of the SCIRT Board and the Client Governance Group. Some representatives from CERA did not have similar delegations to representatives from the Council and NZTA, which contributed to slower approval processes. We considered that CERA could not effectively co-ordinate and direct the wider rebuild if it did not get fully involved in governing SCIRT.

3.20
We recommended that CERA contribute more consistently to the effective leadership of, and strategic direction for, SCIRT. For our follow-up audit, we applied this recommendation to all the public entities, because they all need to contribute consistently to governing SCIRT for it to succeed.

3.21
Leadership and direction from the public entities has improved since the Horizontal Infrastructure Governance Group was set up. The Horizontal Infrastructure Governance Group sets clear goals for the programme. For example, the public entities set goals and provided strategic direction through the optimisation exercise in 2014 to reprioritise projects within the programme's remaining funds (see paragraph 5.16).

3.22
The public entities keep SCIRT informed about the strategic direction of the wider rebuild and give regular guidance to SCIRT through multiple channels. SCIRT receives guidance from the Horizontal Infrastructure Governance Group, the Infrastructure Programme Co-ordination Team, and the Infrastructure Programme Steering Group.

3.23
For example, the Chairperson of the SCIRT Board and SCIRT's Executive General Manager attend the Horizontal Infrastructure Governance Group meetings to present a report to the meeting and discuss the main issues for action or resolution.⁹ Joint strategic workshops between the Horizontal Infrastructure Governance Group and the SCIRT Board inform SCIRT about the strategic direction of the horizontal infrastructure rebuild and the wider rebuild.

3.24
The representatives of the Horizontal Infrastructure Governance Group and the SCIRT Board consistently attend meetings. However, changes in staff at CERA and the Council have meant that there has not been continuity of membership, but there is always representation from these two entities. We appreciate the staffing challenges involved. However, we encourage the public entities to manage this carefully to ensure continuity at meetings during the remaining stages of SCIRT. Having continuity at meetings allows members to build their knowledge and relationships.

3.25
Although the people attending meetings has changed recently, interviewees did not raise concerns about this. In the views of the public entities, the attendees' delegations were consistent with what was required for Horizontal Infrastructure Governance Group and SCIRT Board meetings. In our view, the public entities are now providing more effective leadership and strategic direction.

Guidance is provided to the Stronger Christchurch Infrastructure Rebuild Team

Guidance is provided to SCIRT at governance and operational levels. However, the Horizontal Infrastructure Governance Group was hampered in giving timely direction to SCIRT because of the time taken by the public entities to make some decisions about the wider rebuild of Christchurch.

3.26
In our 2013 report, we said that SCIRT's planning was ahead of other public entities working on the rebuild. We also said that the co-ordination between SCIRT and CERA was problematic. The lack of integration with the wider rebuild hindered SCIRT's ability to do the right thing, at the right time, to the right standard. To address this, we recommended that CERA, the Council, and NZTA use the governance arrangements to provide timely guidance to SCIRT about the priorities and direction of the rebuild.

3.27
The public entities now give SCIRT improved guidance through the governance groups. This includes through Horizontal Infrastructure Governance Group meetings, instructions from the Horizontal Infrastructure Management Team, and advice from other governance groups. SCIRT also requests guidance and direction from the governance groups. For example, in June 2015, SCIRT asked for direction on several matters from the Horizontal Infrastructure Governance Group so they could plan their programme.

3.28
At an operational level, the public entities provide guidance through information-sharing tools, liaison, and planning. The "Forward Works Viewer" is a software programme that allows users, including SCIRT, to see links between the repair of the horizontal infrastructure and the wider rebuild. The Forward Works Viewer shows details of current and planned projects, including information about what stage each project is at and which projects might clash.

3.29
The Construction Management Office (formerly of CERA) co-ordinates the central city rebuild with partners and stakeholders, including SCIRT and utility providers. SCIRT and the public entities used a delivery management plan to co-ordinate their work in the central city. This work is mostly complete.

3.30
However, the Horizontal Infrastructure Governance Group was hampered in giving timely direction to SCIRT because of the time taken by the public entities to make decisions about some of the wider rebuild work. For example, the time taken to make decisions about the future use of residential red zone properties contributed to about four to six projects being reduced in scope so the SCIRT programme can be completed by December 2016.

3.31
The Horizontal Infrastructure Governance Group needs to manage the risks associated with the time taken in decision-making. Although guidance at the operational level is good, the time taken by the public entities to make decisions about the rebuild means that SCIRT's work is not fully integrated with the wider rebuild.

The performance framework is meeting the public entities' needs

The public entities use a performance framework to assess SCIRT's performance that meets the needs of the programme.

3.32
In 2013, we found that the public entities had not fully prepared a performance framework to monitor SCIRT's performance. For example, SCIRT and the public entities were still working on ways to define the value of SCIRT and to measure its performance.

3.33
A form of earned-value reporting was being prepared to provide a more strategic view of progress.¹⁰ We recommended that CERA, the Council, and NZTA use a coherent framework for measuring the main aspects of SCIRT's performance that:

integrates project-level delivery team performance with the objectives of the Alliance Agreement and overall programme delivery; and
is based on sound measures, tested through SCIRT's auditing regime.

3.34
The Horizontal Infrastructure Governance Group now has a clear framework for measuring SCIRT's performance. SCIRT and the delivery teams measure and report their performance against the five key result areas in the Alliance Agreement ‒ safety, customer satisfaction, ensuring value for money, minimising environmental impact, and promoting a strong positive team culture. This performance information is reported to the SCIRT Board and included in the monthly report from the SCIRT Board to the Horizontal Infrastructure Governance Group along with information such as earned-value analysis and progress against budget.

3.35
The Horizontal Infrastructure Management Team and CERA report to the Horizontal Infrastructure Governance Group on SCIRT's performance separately. These reports integrate overall programme delivery with project-level delivery. In its reports, the Horizontal Infrastructure Management Team gives its view on the main issues for the horizontal infrastructure rebuild and on SCIRT's performance.

3.36
CERA provides a "dashboard" report to the Horizontal Infrastructure Governance Group showing SCIRT's performance against measures of effectiveness, efficiency, and economy. The dashboard report includes CERA's earned-value analysis (based on data from SCIRT) to show overall programme delivery against time and cost. Combined with reporting from SCIRT and the Horizontal Infrastructure Management Team, this gives the Horizontal Infrastructure Governance Group what it needs to monitor SCIRT's performance.

3.37
In our 2013 report, we recommended that SCIRT's internal auditing regime test the performance measures. SCIRT regularly reviews its key performance indicators (its performance measures) to ensure that they are fit for purpose. The SCIRT Board approves changes to the indicators. SCIRT also checks the information that is provided by the delivery teams on how they are performing against the key performance indicators.

3.38
SCIRT made changes in June 2015 to encourage behaviours appropriate for the final phase of the SCIRT programme. For example, a new key performance indicator was created within the environmental management key result area to encourage delivery teams to submit lessons learned, good practices, and case studies, so they can be shared with the wider construction industry.

3.39
In August 2014, a consultant found that the information SCIRT and the Council provided to CERA and the Horizontal Infrastructure Governance Group was accurate and timely enough for the Horizontal Infrastructure Governance Group to make good decisions. The consultant found that SCIRT's reporting to the public entities enabled them to meet reporting requirements to monitoring agencies, such as the Treasury.

3.40
The consultant also identified areas for improvement. In particular, the consultant thought the Horizontal Infrastructure Management Team needed to play a greater role in collating reporting for the Horizontal Infrastructure Governance Group and in ensuring that reported information was tested for accuracy. In response, the Horizontal Infrastructure Management Team agreed with the consultant's recommendations, including playing a greater role in collating the reporting and working collaboratively with staff at the Council and SCIRT to test the reporting for accuracy.

3.41
The consultant's conclusions were consistent with what we found. Interviewees thought the quality of reporting and the performance framework was good but raised concerns similar to those raised by the consultant. Despite these concerns, we consider that the overall performance framework meets the public entities' current needs.

The public entities receive assurance from the audit framework

The public entities have an audit framework that provides them with adequate assurance. The audit framework is regularly updated based on the risks to the horizontal infrastructure rebuild.

3.42
In 2013, we reported that the proposed audit framework had good coverage of important SCIRT systems and processes and that implementing the audit framework would provide a much needed layer of assurance. We recommended that CERA, the Council, and NZTA ensure that their framework for auditing SCIRT provides adequate assurance that SCIRT is well managed and delivering value for money.

3.43
The public entities now have an audit framework that consists of 20 audits. As at April 2015, 14 audits have been completed, and eight of the completed audits are being followed up. Audits can be done by internal auditors from the public entities or an external audit provider. This framework is separate from SCIRT's own internal auditing regime.

3.44
The Horizontal Infrastructure Governance Group formed the Audit Framework Group to manage and report on the risk and assurance framework (including the audit framework). The Group, with members from CERA, the Council, NZTA, and the Horizontal Infrastructure Management Team, reviews completed audits before their summaries are sent to the Horizontal Infrastructure Governance Group. The Horizontal Infrastructure Governance Group discusses the audit and SCIRT's response to the findings. The Audit Framework Group also reviews and updates the audit work programme and identifies shared risks to the horizontal infrastructure rebuild.

3.45
The public entities continually review and revise the audit framework to improve and target the assurance it provides. For example, in April 2015, the public entities started a review of the audit framework. They conducted a risk workshop and updated the shared risk register for the horizontal infrastructure rebuild. The Horizontal Infrastructure Governance Group then gave its feedback on the updated risk register, and the Audit Framework Group revised the audit plan to cover the main risks. The Horizontal Infrastructure Governance Group also regularly receives reports from the Audit Framework Group, and it reviews the audit framework and work plan at its meetings.

3.46
In 2014, CERA commissioned a consultant to review the audit framework to see whether it provided the right level of assurance. The consultant:

found that the audit framework was structured around addressing key questions based on key risk areas for the programme funders and asset owners;
found that the scope of the framework, if delivered as designed, would cover the key risk areas; and
made observations and recommendations to CERA and the other public entities on minor issues. For example, it recommended that there should be a process to follow up on completed audits.

3.47
SCIRT responds to audit recommendations and often resolves issues before audit reports go to the Horizontal Infrastructure Governance Group. SCIRT staff said the audit framework and practices had improved as the auditors gained a better understanding of SCIRT. However, they had some concerns about the usefulness of some audits. For example, there are differences of opinion about whether auditors have raised issues that pose a high risk and have a major effect on the effectiveness of SCIRT. However, all audits under the audit framework follow a risk matrix that the public entities have agreed on.

3.48
The public entities said the audit framework gave them adequate assurance that SCIRT is well managed and delivering value for money. They also identified some areas for improvement, including receiving more assurance about financial information. To strengthen the audit framework, we encourage the public entities to look into concerns raised about both financial reporting and how they decide risk levels for specific issues.

There has been ongoing improvement in reporting

The public entities provide feedback to SCIRT on reporting, and reporting has improved as a result.

3.49
In 2013, we found that the reporting to the Client Governance Group (now replaced by the Horizontal Infrastructure Governance Group) and the SCIRT Board was detailed and involved a lot of paper. The reporting did not help the governance bodies understand how well SCIRT was performing at a programme level. We recommended that CERA, the Council, and NZTA provide feedback to SCIRT to improve the analysis and information included in reports to the SCIRT Board, to make these reports more useful.

3.50
SCIRT has received feedback from the Horizontal Infrastructure Governance Group, the SCIRT Board, and the public entities to help improve the quality of its reporting. SCIRT has changed its reports in response to this feedback.

3.51
As a result, SCIRT's reports to the Horizontal Infrastructure Governance Group now include information about SCIRT's performance against health and safety measures, and the status of assets being handed over to the Council. Staff from SCIRT told us the public entities' feedback on reporting was useful, and that they had good communication with staff from the public entities.

3.52
The Horizontal Infrastructure Governance Group and the SCIRT Board consider that SCIRT's reporting now meets their needs better. Interviewees said the reporting is of higher quality. However, some concerns were raised about the reporting not explaining changes in financial figures from month to month well enough. Over time, SCIRT has increased its discussion of major financial movements between months in its monthly report to the Horizontal Infrastructure Governance Group.

3.53
In our view, although feedback has resulted in improved reporting, the Horizontal Infrastructure Governance Group and the SCIRT Board will need to consider whether reporting on financial information needs to be changed for the rest of the programme.

5: The Infrastructure Programme Co-ordination Team confirm that project designs accord with approved guidelines and direction from the public entities. The Infrastructure Programme Steering Group reviews, approves, and endorses projects as appropriate within the delegated authority provided by the Horizontal Infrastructure Governance Group.

6: The Infrastructure Programme Transition Group's purpose is to provide transition planning and management of the horizontal infrastructure Transition Implementation Plan.

7: A Gateway review is a short, intensive review managed by the Treasury at critical stages in the life of a project and at intervals during a programme.

8: Office of the Auditor-General (2007), Managing conflicts of interest: Guidance for public entities, Wellington, especially Part 4. Available on our website www.oag.govt.nz.

9: Generally the NZTA representative on the SCIRT Board also attends the Horizontal Infrastructure Governance Group meeting with the Chairperson of the SCIRT Board and SCIRT's Executive General Manager.

10: The earned-value reporting data is combined from individual projects to provide the programme overview.