IPMN Newsletter 2003
Number 2
Reform Implementation in New Zealand
Based upon interviews with colleagues in New Zealand conducted in February and March 2003 there a few evelopments to report about recent changes in the nation that everyone watches for reform initiatives.
1. The Public Audit Act of 2001 (PA 2001, No. 10) was passed by Parliament
and signed by the Governor-general April 6, 2001 to enhance the ability
of the Office of the Auditor General to perform effectiveness evaluations
of New
Zealand public sector programs. Although the AG website is the best source
for this (www.oag.govt.nz), the gist of the legislation is to give the
AG authority to audit virtually all entities within New Zealand government,
plus those it sponsors or provides authority to, including non-governmental
organizations. The law was passed in response to criticism that not enough
evaluation of reform effects had been or was being performed. Critics
of the manner in which the new AG authority has been implemented note
that the AG budget has been augmented by amounts in the hundreds of thousands
rather than the several million dollars necessary to conduct wide scale
evaluations as the Act would seem to intend. Additionally, some critic
mention that while effectiveness evaluations of government programs are
needed, it appears that better payoff might come from auditing NGOs, most
notably those where fiscal improprieties have been widely covered in the
media.
2. The contracting for services system, subject to much international attention, wherein services have been agreed to by contract between the Government, Parliament and departments has been modified to move away from formal contracting as the basis for provision of service. Departments are now required to engage further in strategic planning, reported in Statements of Intent (SOIs). And, while New Zealand Treasury still ties outputs to dollars, the current government headed by Prime Minister Helen Clark has emphasized the importance of relating outputs to outcomes. Treasury New Zealand has instituted the "Pathfinder Project" to assist agencies on how to produce intended outcomes (this is similar to efforts by the U.S. Office of Management and Budget to teach agencies how to improve their scores in OMB's Program Assessment Rating System - PART). In giving greater emphasis to outcomes, New Zealand has moved in the opposite direction from its neighbor Australia and other nations where relating outcomes to budgets has been abandoned in favor of outputs that are more easily measured.
3. The "corporatization" of government has been recognized
to cause some problems including (a) weakening linkages and communication
between departments providing services in the same general areas, and
(b) reduced feeling of "belonging to government service" in
New Zealand and perhaps reduced loyalty of public servants to New Zealand
as a nation. Under contracted government, the "corporatized"
department with its specified outputs and direct authority lines under
the departmental CEOs are the decision drivers to whom accountability
is owed. To address these problems
the government has stressed the importance of networking issues and dialogue
within and between departments, agencies and NGOs. The Clark government
has supported the formation of what are termed "super-networks"
to solve problems and to renew the linkages in government. The State Services
Commission is promoting informal mechanisms to overcome fragmentation
in government (see www.ssc.govt.nz). The NZ Treasury has established interagency
"circuit
breaker" teams to work on solutions to hard-to-resolve problems.
Critics have pointed out the absence of any demonstrable results from
these initiatives, leading to the conclusion that there is a gap between
what the government
says it is doing and what is actually being accomplished. Does this sound
familiar? Haven't we read accounts of similar problems elsewhere?
4. Critics of the implementation of accrual accounting in New Zealand
over the past decade contend that many gimmicks were played with the numbers
by Treasury accounts and budgeteers, possibly without the knowledge of
governments, the PM, Ministers, Ministry staffs and the public. These
critics include IPMN members Professor June Pallot and colleague Dr. Susan
Newberry (See for example S. Newberry, "New Zealand's Responsibility
Budgeting and Accounting System and Its Strategic Objective: A Comment
on Jones and Thompson (2000)." International Public Management Review,
6/1, 2003: 75-82) of the Department of Accountancy, Finance and Information
Systems at the
University of Canterbury in Christchurch, NZ. They point out, among other
things, that when system developments were made claiming improved visibility
and transparency, in fact the opposite occurred (e.g., with valuations
and
asset/liability reporting) to the detriment of department budgets and
service provision capability. Their view is that some reform in New Zealand
was intended bluntly to shrink the size of the public service but was
never explicitly stated as such in policy pronouncements or documents.
They warn that vague rhetorical claims, for example, about transparency,
should not be accepted at face value, and that a search for the opposite
may be required, i.e., decisions made by very few participants with little
or no consultation, hidden agendas and little or no attention no identification
given to the
consequences of various seemingly insignificant accrual accounting and
budgeting decisions. In what might be termed "creeping accrual gimmickry"
very small changes are made that seem inconsequential and are invisible
to all but agency accountants, most of whom have little recourse to appeal
and no access to upper level ministerial staff to warn them of "death
by a thousand cuts." However, the cumulative effects of a myriad
of small, incremental adjustments erode the budget base of departments
and agencies and reduce government capability.
Representatives in government including officials from Treasury New Zealand
have responded to such criticism to the effect that although the calculations
and consequences identified by Pallot, Newberry, and others (including
Tyrone
Carlin, Macquarie Graduate School of Management, Sydney in research on
the State of Victoria) are accurate, none of the changes were intentional
nor were their consequences anticipated. There appears to be a need for
critics and defenders of Treasury and past government practices to engage
in further dialogue on these and other issues related to the implementation
of accrual accounting. Critics do not dispute many of the advantages of
accrual accounting, only the ways in which it has been implemented in
New Zealand.
Are there lessons here for other jurisdictions contemplating or in the process of implementing accrual accounting and/or budgeting? It would appear the answer is -- be wary -- watch and learn, and don't remain silent about the potential results of seemingly insignificant methodological issues.
Best Regards,
Larry Jones
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Last Modified: May 13, 2003