Part 6: Transparency and accountability

Making infrastructure investment decisions quickly.

6.1
In this Part, we discuss the importance of transparency and accountability to build public confidence in the quality of investment decisions. We discuss how:

decisions were not always well documented; and
improved reporting on progress and performance is needed.

6.2
The Cabinet Manual requires that Ministers create full and accurate records of their Ministerial affairs in accordance with normal prudent business practice.³⁰ In our view, good record-keeping of the reasons for decisions and the processes that were followed is especially important when extraordinary steps need to be taken, quick action is needed, or the action is contrary to official advice provided to decision-makers.

6.3
For the SRP, the Government was making choices about funding projects from both public organisations and private organisations. This increases the risks that decisions could be challenged. In this context, it is important that there are clear records of how decisions were made so those decisions can be defended.

6.4
Clear and publicly available information about the progress of projects is also essential for Parliament and the public to be able to hold the government to account for getting the best value from those investments.

6.5
At the time of the decision-making discussed in this report, the Investment Management System required agencies to report back to Cabinet on the benefits achieved from any Cabinet-approved investment. It also required that agencies provide information to the Treasury at agreed intervals.

6.6
The Treasury was required to periodically report on the performance of all significant investments that have had or that require Cabinet-level consideration.

6.7
We appreciate that the decision-making processes that are the focus of this report were developed quickly in the extraordinary circumstances of a pandemic. Nevertheless, given the scale of the investments, we expected that:

full and accurate records of decision-making processes would be maintained to ensure transparency about how and why those decisions were made; and
the approach to monitoring, reporting, and evaluation would be proportionate to the scale of investment, and considered during the decision-making process.

Summary of findings

6.8
In our view, Ministers were not provided with enough information to be confident that the projects selected for the NZUP would meet the overall investment objectives or provide value for money. We did not see evidence that value for money was substantively considered when these funding decisions were made.

6.9
Although much of the process for the SRP was clearer, there were still gaps. After the Infrastructure Reference Group longlist was given to Ministers, project shortlists were developed and frequently amended. From the documentation we were provided with, it is difficult to trace each of these amendments to determine the basis for those decisions.

6.10
In our view, this is not acceptable for the scale of funding that was distributed through these two programmes, regardless of the circumstances the decisions were made in.

6.11
For the NZUP, some information on the progress of the funded transport projects has been publicly reported. However, there does not appear to be a complete list of projects.

6.12
Even where information is available, it is sometimes difficult to reconcile that information with the Government's original announcements. It is also not clear to us how the government intends to determine whether the overall objectives of the programme have been met or how effective they have been in improving the overall state of New Zealand's infrastructure.

6.13
Crown Infrastructure Partners co-ordinates the SRP reporting, bringing together a significant amount of information from a range of delivery agencies. The reporting has improved over time and, in our view, largely meets the reporting expectations that Ministers set.

Decisions were not well documented

6.14
Despite the lack of a clearly documented process, we were able to piece together the events that led to the decisions about the NZUP. However, there is no complete record of how or why Ministers determined the allocation of funding into sector categories or how agencies prioritised the investment options that they presented to Ministers.

6.15
In our view, Ministers were not provided with enough information to be confident that the projects selected for the NZUP would meet their overall investment objectives or provide value for money. We did not see evidence that value for money was substantively considered when these funding decisions were made.

6.16
Ministers told us that they treated decisions about the final details of the funding package as a "Budget-like process" and that discussions at Cabinet meetings are confidential. We accept that this is the case while deliberations are in progress. However, in our view, once decisions are made and announced, Ministers must be prepared to explain their rationale and justify those decisions to the public.

6.17
To ensure transparency, the method for deciding the amount of funding awarded and the reasons for awarding or not awarding the funding should be clearly explained and well documented.

6.18
Although much of the process for the SRP was clearer, there were still gaps. From the documentation we were provided with, it is difficult to determine the basis for some decisions that were made after the Infrastructure Reference Group longlist was given to Ministers and projects were added to, and removed from, the initial approved list.

6.19
A full record of why Ministers approved certain projects, or how specific investment criteria for each project were met, is not available for either programme. In our view, this is not acceptable for the scale of funding that was distributed through these two programmes, regardless of the circumstances that decisions were made in.

Improved reporting on progress and performance is needed

6.20
We expected that a proportionate approach to monitoring, reporting, and evaluation would be considered during the decision-making process and established early. As we have commented on previous occasions, it is too often left for Parliament and the public to try to piece together information to determine what has been spent and what has been achieved with that spending.

6.21
Although some information on the progress of the funded transport NZUP projects was publicly reported, we could not identify a complete list of projects that is publicly available.

6.22
In our view, when investments are packaged together as a programme or portfolio designed to meet specific objectives, the whole programme or portfolio needs to be monitored and reported against. This supports transparency and accountability to the public for the progress and outcomes of the investments.

6.23
Agencies hold information about their sectors in different forms, and some publish this information on their websites. For example, the Ministry of Education published a list of schools and the funding they received from the NZUP. Waka Kotahi reports publicly about a range of transport initiatives, and the Energy Efficiency and Conservation Authority publishes a list of all projects that have been funded through the State Sector Decarbonisation Fund.

6.24
We were not able to find any publicly available information about the package of initiatives for the health sector funded through the NZUP. The Ministry of Health was able to provide us with some internal reporting that indicates that further investments were made on top of those announced in January 2020. We were not able to find a record of those investments being publicly announced.

6.25
We were not able to find any publicly available reporting or list of projects that were funded from the regional economic development allocation of the NZUP, aside from the announcements made in early 2020.

6.26
Additionally, it is sometimes difficult to reconcile publicly available information with the original announcements made by the Government. As projects have progressed, they have sometimes changed in scope or have been packaged in different ways.

6.27
For example, about half of all the health projects were announced in January 2020. That announcement indicated that a further set of announcements would be made. We have not been able to find out whether these projects were ever publicly announced.

6.28
The Ministry of Health confirmed that, after the initial announcement, ad hoc public announcements occurred for some investments when business cases were approved or at other key delivery points. The Ministry also told us that Ministers received regular reporting on the projects' performance. However, there is no public reporting on the health package.

6.29
We have highlighted similar issues previously. In our 2020 report Managing the Provincial Growth Fund, we recommended that MBIE, the Ministry for Primary Industries, and the Ministry of Transport work together to continue to enhance consolidated reporting and more meaningfully report to Parliament and the public on the Provincial Growth Fund as a whole.³¹

6.30
We have seen some improvements. For example, the Treasury has put in place ways to track expenditure and initiatives funded through the Covid-19 Response and Recovery Fund and after the recent severe weather events in the North Island.

6.31
We note that, in late 2021, the Implementation Unit, which is part of the Department of the Prime Minister and Cabinet, carried out reviews of the progress of the transport projects within the NZUP (referred to as a New Zealand Upgrade Programme Transport Assessment) and projects within the SRP (referred to as an Infrastructure Reference Group Programme Status Update). The Department of the Prime Minister and Cabinet has since reported on these reviews publicly.³²

6.32
The Implementation Unit's work also considered opportunities to strengthen programme reporting for transport projects in the NZUP. It noted that agencies had agreed to provide additional information in their reports about "impact and materiality of issues and risk at a project level and cumulatively across the Programme". Although the Implementation Unit's work is not regular reporting, it is encouraging that steps are being taken to strengthen programme monitoring and oversight.

6.33
Nonetheless, it is not clear to us how the government intends to determine whether the overall objectives of the NZUP have been met or how effective these investments have been in improving the overall state of New Zealand's infrastructure.

6.34
Under Cabinet Office Circular (19) 6, the Treasury was required to periodically report on the performance of all significant investments that have had or that require Cabinet-level consideration.³³

6.35
Those reports were required to cover:

the status of current significant investment intentions;
an evaluation of actual benefits achieved compared with those expected from investments; and
the lessons learned from investment management practice.

6.36
Our understanding is that, when we published this report, the Treasury had provided its most recent report to the Minister of Finance on 5 September 2023.

6.37
Cabinet Office Circular (19) 6 was recently updated and replaced with Cabinet Office Circular (23) 9. The requirements set out above are no longer included. The replacement circular acknowledges the need for "high quality information about investments across the investment lifecycle". The circular also requires agencies to "report to the Treasury regularly on their investments across the investment lifecycle as required from time to time by the Treasury".

6.38
The Treasury told us that it provides quarterly reports on medium- and high-risk investments to the Minister of Finance. The Treasury also indicated that, from November 2023, these reports will be made available to Cabinet and subsequently published on the Treasury's website.

6.39
The Treasury told us that, on balance, it sees limited value in setting up bespoke reporting on the NZUP as reporting on those projects should be reflected in the quarterly reporting described above and that the Treasury is reviewing the extent to which the NZUP is reflected in this reporting to ensure visibility of the programme. In our view, given the scale and importance of the programme, it is essential that Parliament and the public can access information that allows them to understand the progress and performance of the programme as a whole.

6.40
Although this is a positive development, we consider that, when governments announce significant investments as a programme, reporting on those investments should also be made available at the whole-of programme level. This is important to ensure accountability for delivering outcomes from spending public money, and it is a concern that we have raised on many occasions.

6.41
We strongly encourage the Government to continue to closely monitor the implementation and benefits of projects in the NZUP and publicly report on progress.

Recommendation 1
We recommend that the Treasury establish regular public reporting on the progress of the full New Zealand Upgrade Programme and periodically report on the performance of all significant investments that have had or that require Cabinet-level consideration.

6.42
For the SRP, Cabinet set expectations in June 2020 that monitoring and reporting arrangements would be put in place. Crown Infrastructure Partners was allocated the task of co-ordinating and producing fortnightly and monthly reports to Ministers.

6.43
The Treasury and Crown Infrastructure Partners worked together to set up monitoring and reporting quite early in the process and have improved this over time. Crown Infrastructure Partners told us that it also used the recommendations we made about the Provincial Growth Fund to inform what was in the briefings.

6.44
Crown Infrastructure Partners brings together a significant amount of information from a range of agencies to produce the SRP reporting. The Treasury comments on the SRP reports. It helps identify data errors, ensures better visibility of the contingency funding's status, and reinforces the importance of ensuring accurate baseline data (in line with previous recommendations we made about the Provincial Growth Fund).

6.45
Once SRP projects had been announced, Crown Infrastructure Partners included them in a regularly updated list on its website. These lists of government-announced projects included the project name, owner, sector, region, total value, and funded amount.

6.46
These lists remained the primary source of public information on the individual SRP projects, other than press releases from Minister's offices, until the first regular Infrastructure Reference Group Quarterly Update Report was published in May 2021. We have reproduced summary information from the most recent of these quarterly reports in Appendix 3.

6.47
SRP reporting has improved over time and, in our view, largely meets the reporting expectations Ministers set. These expectations were that:

Crown Infrastructure Partners would co-ordinate and provide fortnightly progress reports to the Infrastructure Reference Group Ministers and the Treasury, with information on how the suite of infrastructure investments was performing as a whole;
during the contracting phase, each delivery agency would provide fortnightly data to Crown Infrastructure Partners for every project approved by the Infrastructure Reference Group Ministers; and
once contracting was complete, reporting would be monthly.

6.48
The SRP reports could provide better information about changes in the number of full-time equivalent jobs supported by individual projects over time.

6.49
It is important that the Government be transparent with Parliament and the public about what it plans to achieve and how it is performing against those plans, including when there are changes to those plans.

6.50
Crown Infrastructure Partners told us that, beginning with its September 2023 quarterly report, it would include the following additional information for completed projects in the reports:

full-time equivalent jobs supported against the target (the original target recorded in Ministerial reports) for completed projects; and
changes to scope or benefits (although Crown Infrastructure Partners told us that these have been minimal).

6.51
In our view, portfolio-level reporting is an important aspect of supporting public accountability for investment decisions and programme delivery. Effective accountability means that New Zealanders can see what governments are seeking to achieve, what is being spent, and what progress is being made.

30: See Department of the Prime Minister and Cabinet (2023), Cabinet Manual 2023, paragraph 8.108, at dpmc.govt.nz.

31: Controller and Auditor-General (2020), Managing the Provincial Growth Fund, at oag.parliament.nz.

32: Department of the Prime Minister and Cabinet (2022), Proactive release: Progress report on Implementation Unit assignments, at dpmc.govt.nz.

33: Department of the Prime Minister and Cabinet (2019), Cabinet Office Circular CO (19) 6: Investment management and asset performance in the state services, at dpmc.govt.nz.