Part 7: The focus on stewardship and well-being in New Zealand
7.1
To remain relevant and effective in maintaining public trust and confidence, systems of public accountability must adapt to changes in public expectations.
7.2
Central agencies in New Zealand sector are proposing reforms to improve the stewardship of New Zealanders' intergenerational well-being. As happened with the 1980s reforms, these changes will not lessen the public sector's accountability obligations but could change their focus, form, and approach. As part of those changes, the public audit function might also need to adapt.
The recently announced reforms to public management and public finance systems
7.3
The State Services Commission and the Treasury are currently looking to reform the public management and public finance system. The objective of the reforms is to improve New Zealanders' intergenerational well-being through "a more modern, agile, flexible, innovative, and joined-up public sector".197
7.4
There is also a significant focus on supporting the Māori/Crown relationship and improving the public sector's capability to engage in this relationship. An important part of the reforms is making senior public officials to accountable for supporting this relationship.
7.5
These reforms seek to support the State sector to take more of "a medium to long-term, stewardship perspective to support New Zealand".198 This involves a "philosophical and cultural shift from a ‘management' approach to a ‘system stewardship' approach".199
7.6
According to a 2013 amendment to the State Sector Act 1988, stewardship is the "active planning and management of medium- and long-term interests, along with associated advice".200 This means public officials acting together with a set of shared interests rather than separately with different interests.
7.7
Aligned with these reforms, the Department of the Prime Minister and Cabinet has also been working for some time on improving public policy by helping "the New Zealand public sector to develop a deeper and more consistent understanding of what good engagement with the public means".201
7.8
Research suggests that public trust and confidence will be an important part of this stewardship approach. For example, Saltman and Ferroussier-Davis observe that "notions of trust, ethical behaviour and good decision-making are inherent in the concept of stewardship".202
7.9
For Ranson and Stewart, a stewardship approach in the public sector involves "not merely giving an account by the steward but also that the steward can be held to account and that how that can be done is known to the public to whom accountability is due".203
Implications for the public accountability system
7.10
Because of the emphasis of stewardship on trust and the wider focus on well-being outcomes, the public sector might need to consider how best to plan for and manage the reforms' implications for public accountability.
7.11
For example, Dormer and Ward and also Gill and Boston argue that a move towards more collaboration and accountability for outcomes means that new accountability models, such as joint or shared accountabilities, might be needed.204
7.12
Well-being outcomes are dynamic, connected, uncertain, and long term. Encouraging and supporting public sector objectives, such as learning, adaptability, strategic thinking, representation, and innovation, become just as important as focusing on incentivising good decision-making, internal control, and performance.
7.13
Different ways of describing and assessing what success looks like will also be needed. These could include, for example, measuring the sustainability, resilience, and fairness of well-being outcomes, where the focus is on issues of equity and legitimacy rather than just on performance. Frieling and Warren believe that resilience and sustainability are important factors to consider because of the complex risks New Zealand faces domestically and globally.205
7.14
Accountability information about outcomes, when compared with output or activity information, will be less precise, sometimes qualitative, and subject to change. It will also need to reflect the aspirations of multiple parties who could be affected by those outcomes. This could mean more targeted information and less reliance on averages or majority populations.
7.15
Waring has warned that approaches to preparing well-being outcome indicators should avoid "the all-too-common approach of trying to raise averages and not worrying enough about those left behind".206
7.16
Outcomes will be of more interest to people and wider communities because of their direct and diverse impacts on people's daily lives. The mechanisms and forums through which an account is given might need to adapt to more familiar, convenient, and relevant ways of interacting. For example, more direct, collective, and community-based accountability forums might be more relevant when dealing with Māori/Crown relationships.
7.17
Parliament's fundamental scrutiny role and the role of the independent institutions that support Parliament will also need to be considered. The Office of the Clerk of the House of Representatives and the Institute for Governance and Policy Studies at Victoria University of Wellington have recently published a book about improving parliamentary scrutiny of long-term governance and stewardship in government.207
7.18
James believes that Parliament needs to be modernised so it can better connect with the public. He suggests using collaborative governance, citizen juries, assemblies, and wider polling practices to achieve this. He also discusses using "citizen internet panels", which would bring together several people from throughout the country to discuss and prepare policies and/or legislation.208 As we discussed in Part 2, these ideas are all examples of taking a more direct approach to public accountability.
7.19
To maintain Parliament's scrutiny role, it is important to ensure that Parliament, its independent institutions, and other review agencies are able to effectively examine and challenge long-term outcomes.
7.20
Perrin suggests that, to implement a long-term outcome focus, a significant change in the approach to management for all aspects of government, including reward mechanisms and accountability approaches, is needed.209
7.21
For example, in Wales, the focus of the Well-being of Future Generations (Wales) Act 2015 is to ensure that all "public bodies take account of the long-term, help to prevent problems occurring or getting worse, take an integrated and collaborative approach, and considers and involves people of all ages".210 Public accountability processes have changed in response, and collective accountability is now emphasised.
7.22
Under the Act, there is more focus on how public organisations plan and track delivery of outcomes rather than on organisational performance level outputs. For example, there are five new measures of agency success – long-term thinking, prevention, integration, collaboration, and involvement.
7.23
These new measures are not traditional measures of agency performance, but each is audited by the Welsh Audit Office. Public accountability structures have also been strengthened, including new and/or expanded review roles for the Future Generations Commissioner, Overview and Scrutiny Committees, and the Auditor-General for Wales.211
Implications for the role of public audit
7.24
The public audit function continues to be an important part of the public accountability system.
7.25
Hay and Cordery observe that the "role of public sector auditing in Westminster systems continues to evolve".212 INTOSAI acknowledges that, when focusing on citizen-centred outcomes, new approaches to auditing might be needed.
7.26
Looking at how the audit function can support the implementation of the Sustainable Development Goals, INTOSAI is clear that audit offices throughout the world have "an important supporting and leveraging role to play in national, regional, and global efforts to implement the [goals] and to follow-up and review progress that is made".213
7.27
As the public sector moves towards greater stewardship, shared values, collaboration, and wider well-being outcomes, the public audit function will need to adapt.
Auditing in a stewardship environment
7.28
Stewards are motivated by common objectives, have shared interests, and work together to achieve shared goals. Auditing in a stewardship environment could require a closer relationship between the auditor and the audited organisation. There could be benefits in focusing more on supporting and demonstrating good management and governance, and less on ensuring impartial compliance and conformity.214
7.29
This could mean, for example, that an audit of a set of financial statements would focus on helping to ensure that the financial story is understandable, engaging, and useful rather than simply accurate at one point in time. In a stewardship environment, auditing could become less "feared", as Norman put it,215 and more supportive.
7.30
Power also believes that the audit process will need to change to make audits more useful and engaging, and less remote and disciplinary. He notes that:
… [e]xternal forms of audit will need to be more modestly conceived. This will require a broad shift in control philosophy: from long distance, low trust, quantitative, disciplinary, ex-post forms of verification by private experts to local, high trust, qualitative, enabling, real time forms of dialogue with peers.216
7.31
In discussing performance audit models, Tillema and Bogt argue that, although auditor independence is critical when the interests of the parties are different, emphasising auditor responsiveness becomes important in a stewardship context, where the interests of the parties are shared.217
7.32
Being more responsive involves listening to the organisation and incorporating its requirements and expectations into the design and implementation of audits. This means that the auditor might need a closer relationship with the audited organisation as the "primary goal is to support the joint efforts of the elected body and the executive to achieve the shared goal of satisfying citizens' needs".218
7.33
Patton also states that, in "situations where organizational or task complexity, size, environmental uncertainty, etc. make direct responsibility difficult to trace", socialising or interacting with the audited organisation might be more effective in achieving accountability than monitoring or auditing.219
7.34
In a stewardship environment, the tension between auditor independence and responsiveness will need to be managed with care because independence remains an essential part of public audit activities. However, if the public audit function does not adapt to this new environment, it could also become a less relevant part of the public accountability system.
7.35
Stace and Cumming argue that a stewardship's "attention to shared goals means less emphasis is required on auditing and monitoring".220 Van Slyke observes that, when interests are common, shared, or collective, less intensive monitoring is needed as trust and reputation become more important.221
Auditing long-term outcomes
7.36
Traditional audit practices, including performance audits, help organisations improve performance by independently reviewing management and governance disciplines for internal controls, processes, reporting, guidelines, and policies. A greater focus on intergenerational well-being outcomes might extend the audit across time and into areas of long-term strategic insight, evaluating issues of equity and legitimacy, and advising on risk management and strategy.
7.37
Perrin argues that traditional audit and accountability approaches will need to change because long-term outcomes are fundamentally different to processes, inputs, and outputs. There is not always a "cause and effect" relationship between them. Perrin observes that relying on pre-defined targets or measures will not be enough because long-term outcomes are uncertain.222
7.38
Totterdill and others, in discussing how to measure and manage long-term social innovation outcomes, warns that "[t]his raises profound and difficult questions about how to audit outcomes and what forms of measurement are most appropriate".223
7.39
Bringselius also argues for the need to have ethical audits. She observes that "The reluctance to address issues of ethical misconduct has taken the audit practice of SAIs to a critical juncture, where the legitimacy of these audits ultimately is at stake."224
7.40
Ethical audits are already being carried out in various countries. For example, in 2014, the European Organisation of Supreme Audit Institutions reviewed the increasing use of ethical audits by its audit institutions.225 Zyl, Ramkumar, and Renzio noted that the Brazilian Court of Audit used "enhanced audit approaches" to help reduce social inequalities. The audits focused on three issues of equity:
- geographical distribution of resources;
- access to goods and services; and
- results achieved by programmes.226
197: Little, S (2018), "Taking a stewardship approach to the public finance system", a speech at the Victoria University of Wellington: School of Government.
198: State Services Commission (December 2018), State Sector Act review – Consultation document, page 38.
199: Little, S (2018), "Taking a stewardship approach to the public finance system", a speech at the Victoria University of Wellington: School of Government.
200: Section 2 of the State Sector Act 1988.
201: Open Government Partnership New Zealand (2018), National Action Plan 2018-2020, page 24.
202: Saltman, R and Ferroussier-Davis, O (2000), "The concept of stewardship in health policy", Bulletin of the World Health Organization, Vol 78 No 6, page 733.
203: Ranson, S and Stewart, J (1994), Management for the public domain: Enabling the learning society, Red Globe Press, page 241.
204: Dormer, R and Ward, S (May 2018), "Accountability and public governance in New Zealand", Working Paper Series, No 117, pages 2 and 3.
Gill, D and Boston, J (2011), "Joint or shared accountability: Issues and options", Institute of Policy Studies Working Paper.
205: Frieling, M and Warren, K (2018), "Resilience and future wellbeing", Treasury Working Paper (DP 18/05), executive summary.
206: Waring, M (2018), Still counting: Wellbeing, woman's work and policy-making, Bridget Williams Books, page 83.
207: Boston, J, Bagnall, D, and Barry, A (2019), Foresight, insight and oversight: Enhancing long-term governance through better parliamentary scrutiny, Institute for Governance and Policy Studies, Victoria University of Wellington.
208: James, C (November 2018), "The wisdom of crowds versus the madness of crowds", Policy Quarterly, Vol 14 Issue 4, page 41.
209: Perrin, B (March 2015), "Bringing accountability up to date with the realities of public sector management in the 21st century: New view of accountability", Canadian Public Administration, Vol 58 No 1, pages 186-187.
210: The Welsh Government (2016), Shared purpose: shared future: Statutory guidance on the Well-being of Future Generations (Wales) Act 2015, page 3.
211: The Welsh Government (2016), Shared purpose: shared future: Statutory guidance on the Well-being of Future Generations (Wales) Act 2015, pages 6, 13, and 34.
212: Hay, D and Cordery, C (2017), "The value of public sector audit: Literature and history", Journal of Accounting Literature 2017, page 30.
213: International Organisation of Supreme Audit Institutions, Strategic plan 2017-2022, page 6.
214: Kaars Sijpesteijn, F (2011), The value relevance of auditors' communications, Masters thesis, Erasmus Universiteit Rotterdam, page 21.
215: Norman, R (2003), Obedient servants? Management freedoms and accountabilities in the New Zealand public sector, Victoria University Press, page 167.
216: Power, M (1994), The audit explosion, Demos, page 40.
217: Tillema, S and Bogt, H (2016), "Does an agency-type of audit model fit a stewardship context? Evidence from performance auditing in Dutch municipalities", Financial Accountability and Management, Vol 32 Issue 2, pages 136 and 139.
218: Tillema, S and Bogt, H (2016), "Does an agency-type of audit model fit a stewardship context? Evidence from performance auditing in Dutch municipalities", Financial Accountability and Management, Vol 32 Issue 2, page 139.
219: Patton, J (1992), "Accountability and governmental financial reporting", Financial Accountability and Management, Vol 8 Issue 3, page 175.
220: Stace, H and Cumming, J (2006), "Contracting between government and the voluntary sector: Where to from here?", Policy Quarterly, Vol 2 No 4, page 15.
221: Van Slyke, D M (2007), "Agents or stewards: Using theory to understand the government-non profit social service contracting relationship", Journal of Public Administration Research and Theory, Vol 17 Issue 2, pages 164 and 166.
222: Perrin, B (2015), "Bringing accountability up to date with the realities of public sector management in the 21st century", Canadian Public Administration, Vol 58 No 1, page 186.
223: Totterdill, P, Cressey, P, Exton, R, and Terstriep J (December 2016), Stimulating, resourcing and sustaining social innovation (2) – Towards a new mode of public policy production and implementation, page 20.
224: Bringselius, L (2018), "Efficiency economy and effectiveness but what about ethics: Supreme audit institutions at a critical juncture", Public Money and Management, Vol 38 Issue 2, page 105.
225: European Organisation of Supreme Audit Institutions (2014), Auditing ethics in the public sector – A general overview of SAIs' practices.
226: Zyl, A, Ramkumar, V, and Renzio, P (2009), Responding to challenges of Supreme Audit Institutions: Can legislatures and civil society help?, U4 Anti-Corruption Resource Centre, page 9.