Management, monitoring, and evaluation of the Provincial Growth Fund

The Provincial Growth Fund (the Fund) allows for $3 billion of public money to be invested over three years, with the aim of lifting productivity potential in New Zealand’s regions.

The speed with which the Fund was established and continues to be developed, the nature of many of the funding proposals, and the high level of public interest have meant that the processes and types of funding provided might be different from traditional public sector arrangements. The Fund also requires appropriations to be managed by multiple government departments and organisations, which increases the risk of unappropriated expenditure.

As part of the 2017/18 annual audit, and acknowledging the short time frame for the Ministry of Business, Innovation and Employment (MBIE) to develop the necessary processes and procedures, we carried out some preliminary work to review how it was administering the Fund. In the final report to MBIE on the audit, my auditors made recommendations aimed at improving the overall management of the Fund.

The Fund will continue to be a focus for my Office in 2018/19 and beyond. I intend to carry out two separate but related pieces of work.

2018/19 audit work

As part of our 2018/19 audit of MBIE, we will follow up on the recommendations we made about the management of the Fund.

We will also, as part of the 2018/19 audits of MBIE, the Ministry for Primary Industries (MPI), and the Ministry of Transport (MOT), carry out additional work on the accounting treatment for the various contracts that are being entered into, and the management of the risk of unappropriated expenditure. We will also review the systems and controls in place (within the department, and between the department and the key agencies involved in the delivery of contracts) to evaluate applications, disburse funds, manage contracts, and monitor the outcomes achieved. Our findings will be reported as part of these three audits, and will also feed into our overall work on the Fund.

Auditors of public organisations receiving money from the Fund will also be alert to any matters that might arise from the use of that funding.

Additional review work in 2019

We are of the view that, as the agency with responsibilities for administering the Fund, monitoring its operation, and working with other government agencies, MBIE’s Provincial Development Unit (PDU) has the responsibility for overall monitoring and reporting on the Fund.

I have asked that, as well as the additional 2018/19 audit work, a more specific in-depth review be carried out of the PDU’s role in, and systems and processes for, managing, monitoring, and evaluating the Fund across the three main departments: MBIE, MPI, and MOT. This work will have a wider scope than that being carried out through the annual audits of each department, and reflects the Fund’s importance as a cross-agency programme of work, and the PDU’s role in it.

The review work will look at processes and policies in place for:

• administration and management of the Fund by the PDU, working with other government agencies, and including processes and systems to ensure effective reporting at all levels, and against the appropriations that Parliament has allocated to the Fund;
• governance arrangements;
• contract management; and
• the evaluation framework for the Fund.

Preliminary work is under way, and the review is likely to take until October 2019. This will align with the annual audits of these organisations, and be integrated with them where possible. Further work will be considered at that point.

The work will provide an opportunity for us to make timely recommendations on any improvements to the administration and accountability arrangements for the Fund, both through the annual audit and through the additional review work. The findings and recommendations from the latter work will be incorporated into our annual audit reporting to each of the departments, where relevant. We also intend to report separately on our overall findings on the management, monitoring, and evaluation of the Fund.

John Ryan
Controller and Auditor-General