Service Delivery: The Audit Dimension

Reporting of performance information on public sector services has increased substantially in recent years. The audit of such information, however, is still relatively uncommon. In 1989 the Audit Office in New Zealand was confronted with a legislative requirement to audit Statements of Service Performance (SSPs). This paper backgrounds New Zealand's shift in emphasis from program effectiveness audits to the audit of non-financial performance information, describes the development of audit methodology in this area and identifies lessons learned.     

Performance and Accountability: Budget Reform in New Zealand

Since 1984, New Zealand has made major changes in public sector management. This article describes the perceived problems with the previous New Zealand system and discusses the reforms designed to address these problems. The changes attempt to increase efficiency by: (1) separating commercial functions from other government operations; (2) strengthening lines of ministerial and executive accountability; and (3) designing budget and financial management systems to improve measurement of public sector performance. This last reform includes shifting from an input to an output-based system, changing from cash to accrual accounting, and creating different forms of appropriations for different types of government activities. While it is too early to assess whether the reforms are successful, we note potential problems.     

Capacity Building as an Instrument of Institutional Reform: Improving the Quality of Higher Education through Academic Audits in the UK, New Zealand, Sweden, and Hong Kong

As countries convert from state to market-centered public policies, there is increasing interest in new forms of public accountability. Capacity building initiatives that reform institutional frameworks are useful policy instruments during this period of transition. What are the impacts and implementation problems characteristic of this approach? This article reviews the experience with "Academic Audit," a capacity building accountability instrument for universities adopted in the UK, Sweden, New Zealand, and Hong Kong. Academic audits altered the incentives for cooperative behavior among faculty members to improve student learning. Identified implementation problems included: training for the new process, the uncertainty of capacity building benefits, and the central role of information.     

Balanced Scorecard Use in New Zealand Government Departments and Crown Entities

While the concept of a balanced scorecard (BSC) has been extensively documented, there is limited research on the application of the balanced scorecard in a public sector environment and in New Zealand. This article examines how the BSC is being used as a performance management system, a strategic management system and to discharge external reporting obligations in three New Zealand public sector organisations. The findings are relevant to both the academic community and managers by highlighting how the BSC has been adapted to reflect the unique characteristics of public sector organisations.     

Improving Performance in New Zealand's Public Corporations: The Effect of Governance Practices

This article examines whether the corporate governance practices recommended by the New Zealand Securities Commission (NZSC) in 2004 have affected the financial performance of public sector corporate entities in New Zealand. The findings indicate that these entities have universally adopted the Securities Commission recommendations by establishing subcommittees for audit and remuneration, and having a majority of independent directors on the boards. The results show that leverage has a statistically significant positive effect on all performance measures. Both the Remuneration Committee and dividend payout have positive effects on performance when measured by sales to total assets. Board size and an Audit Committee have a positive effect on reducing agency cost. Results also show that entity risk and industry type also have a positive effect on performance and agency cost reduction. Entity size has a consistent negative effect across all performance measures.     

From managerial reform to democratic reformation: Towards a deliverative public administration

In the State of Victoria, Australia the Kennett government implemented a radical public sector reforms matched perhaps only in Britain and New Zealand. Responding to fiscal crisis, the Government balanced the budget, attracted new investment and capital projects, and instilled new economic confidence. However, the revolution had its costs. This article examines the effects of managerial reform on accountability and democracy. The structures, systems and methodologies of the Government eliminated real deliberation over options, benefits and costs. The quality of public discourse between government and constitutents about the democratic process was stifled. An economic and fiscal perspective replaced a political and legal understanding of public bureaucracy. The article provides a case study of Victorian reforms, and a theoretical examination of the case, suggesting that public administration should be reconceptualized in more pluralistic and democratic terms.     

Public management reform and lessons from experience in New Zealand

This article is edited from a speech delivered to the University of Victoria, Wellington—IPMN Workshop on the theme lessons from experience in New Zealand. The author articulates a number of lessons that have been learned, and identifies some lessons that should have been learned. Scott writes from the perspective of having been directly and centrally involved in the development and implementation of what has been characterized as “the New Zealand model” of public management for more than twenty years, a record of service that continues to date. The views expressed also benefit from extensive consulting by the author for governments around the world. Among the lessons learned are (a) the need for clarity of roles, responsibilities and accountability in the implementation of management reform, (b) the importance of matching decision capacity to responsibility, (c) the significance of ministerial commitment and clarity on expectations, (d) the advantages gained from structural innovations within the New Zealand cabinet, (e) the need to analyze disasters carefully for what they teach, (f) approaches to embrace and foibles to avoid in implementing performance specification, (g) problems caused by confusion over ownership and improper assessment of organizational capability, (h) the fact that actually doing strategic management in the public sector is hugely complicated, (i) that it is time to put an end to the notion that there is an “extreme model” of public management in application in New Zealand, and (j) that public management, government and governance innovations in New Zealand are no longer novel compared to those advanced in other nations. With respect to lessons not learned satisfactorily, many are simply the dark shadow of positive lessons, i.e., having not understood or implemented the successes achieved in some parts of New Zealand government into others. The author concludes with an admonition to avoid jumping too quickly, in response to post-electoral rhetoric, to the conclusion that past reforms in have to be modified quickly and radically, and that the New Zealand Model has failed.     

Searching for Efficiency in the Public Sector: Interim Evaluation of Performance Budgeting in New Zealand

In this article I examine the efforts to promote performance measurement in the public sector with particular reference to New Zealand. In section two I examine the State Sector Act of 1988 and the Public Finance Act of 1989, which together brought about changes in the New Zealand public sector. In section three I examine the problems of implementing the reform. In section four I discuss the experience of developing statements of performance measurement required under the Financial Administration Act of 1989 and in section five I develop an alternative scheme on the basis that a uniform approach is less likely to be applicable to a range of public sector agencies. The final section contains a brief conclusion.     

The Use of Contracting in the Public Sector—Recent New Zealand Experience

This research note examines the expanding use of contracting within the public sector in New Zealand. The term 'contracting' is interpreted broadly to include both external contracting (ie outsourcing) as well as the use of more explicit or formal 'contracts' within and between public sector organisations. No attention is given here to the separate, albeit related, processes of corporatisation, commercialisation and full privatisation (ie asset sales and the termination of public funding as well as provision). The empirical data, although limited, suggest that the recent increase in contracting in New Zealand has brought significant gains in terms of fiscal savings, productive efficiency, consumer choice and managerial accountability. Recent trends, however, have also posed some important policy issues, among them the limits to contracting out and the potential dangers associated with 'hollow' government.     

How Well Does Accrual Accounting Fit the Public Sector?

In this 'controversy' we challenge the unqualified application of full accrual accounting within the Australian public sector. In particular, attention is directed to the recognition and valuation for financial reporting purposes of public sector resources that are of a non-financial nature, such as library and museum collections. Our main contention is that attempting to recognise such resources at monetary values within the financial reports of public sector organisations is a contrived, imprecise and inappropriate practice that threatens to occlude rather than enable the accountability of public sector institutions and their managers. Building from this accountability theme, we present perspectives on promoting accountability for the technical accounting practices which have been imposed within the public sector.     

Enhancing Public Accountability for Developing Countries: Major Constraints and Strategies

Many Asian countries are attempting to promote public accountability as a part of public-sector reform, but their situation remains unsatisfactory compared to advanced countries. Except for a few, many Asian developing countries are still struggling with political and socioeconomic weaknesses. Indeed, the nature of public sector reform in many Asian developing countries differs substantially from that of advanced countries. Furthermore, the concept of accountability is not interpreted equally throughout the world. Accordingly, the purpose of this article is to review the major constraints to enhancing public accountability in Asian developing countries and to discuss major strategies to promote such accountability from the perspective of developing countries. This article first reviews the concept of accountability and its development, followed by discussion of constraints in enhancing public accountability and public sector reform, key measures to enhance public accountability, and implications and conclusions.     

Effectiveness: the next frontier in New Zealand

Central agencies face a critical test on how to approach the resolution of issues and problems related to improving the New Zealand public sector management systems from the author’s perspective. A decade has passed since the legislative changes were approved that initiated major financial management reform, and much of the initial reform energy has faded. It is time to assess what has and has not been achieved, and to search for ways to continue to move forward. There is a sense of anticipation, as well as some apprehension, across the New Zealand public sector, particularly in light of the election of a new Government. As New Zealand moves into a new phase of reform, one of the key challenges is to take advantage of what has already been achieved. New Zealand has one of the world’s leading public sector management systems, and should take advantage of that foundation. The key issue focused on in this article is effectiveness. A critical part of raising effectiveness is enhancing information. Better information is needed on outcomes, and it should be packaged in more accessible and relevant ways. More disciplined evaluation of the effectiveness of what is done is necessary. Systems that encourage public servants to raise their horizons should be improved or put in place. Managers who understand what they are doing and why are critical to reform success. Purchase agreements—or output agreements—will play a pivotal role, but they need to be improved. A fresh approach to output specification to better accommodate the range of output relationships that exist is required. Central agencies can facilitate customization of output specifications by being clearer about the basic output framework, and more flexible about how that framework is applied. Outcome measures should be refined and used along with outputs where feasible. Better ways must be found for managing problems of inter-agency coordination. Technology offers a new set of tools, but IT facilitates rather than creates effective relationships. Other coordination mechanisms that help agencies to communicate and to make trade-offs must evolve. New Zealand can move into a new phase of building a “world’s best” public sector. The public sector has an appetite for action at the moment, and a willingness to debate the issues. How this potential will be used is, to a great extent, the critical issue faced by the new Government.     

Public Sector Priority Setting Using Decision Support Tools

The public sector is in transition in many countries, including New Zealand, and many government departments have been restructured so as to increase transparency and accountability in their decision‐making by implementing fundamental changes to governance, accountability regimes and information systems. New frameworks are also needed for tasks such as priority setting, and this paper describes the framework developed to assist the then NZ Ministry of Agriculture (MAF) in setting priorities for the allocation of research funds. This comprised a participative process including a series of workshops using both GroupSystems software for electronic meeting support and Visual Interactive Sensitivity Analysis (VISA) software to facilitate a multi‐criteria decision analysis.     

New public management reform in New Zealand: The collective strategy phase

This paper examines the New Public Management movement in New Zealand. Specifically the focus is on the financial management of central government departments and the shift in emphasis from management in the public sector to management of the public sector, that is, from defining management in terms of where it takes place to defining it in terms of the nature and outcome of the task.     

Entrepreneurship-driven public management reforms in Southeast Asia: Critical implications for public accountability

In recent decades, public management has been restructured worldwide for greater efficiency and innovation based on entrepreneurship-driven models such as Reinventing Governance, New Public Management, and post-NPM frameworks. The primary intent of these business-like models is instilling entrepreneurship, which would encourage risk-taking innovation, managerial autonomy, performance orientation, and customer choice. Such entrepreneurial orientation is embedded in organizational-managerial reforms related to human resource management, budgeting framework, performance benchmarking, and so on. These entrepreneurship-driven reforms have significant impacts on administrative structure, procedures, and norms affecting the process of public sector accountability. In line with such global trends, most countries in Southeast Asia have embraced some of these pro-market business-type reforms in public management to enhance its entrepreneurship, innovation, and competition, which have implications for managerial control, neutrality, regulation, and integrity required for public accountability. This article explores these entrepreneurship-driven reforms in the region and evaluates their critical implications for the long-established institutions, structures, and procedures of public accountability.     

Contracting Out and Accountability

Governments are increasingly moving to contract out the provision of public services which have previously been delivered by public service departments. Contracting out typically implies provision by private sector contractors. However, it may also include in-house provision by public service departments or other public agencies where the right to provide is won through competitive tendering and is governed by contract. At the Commonwealth level, the trend has been given added impetus by the Coalition government elected in 1996 (Reith J 996; National Commission of Audit 1996).
The main rationale for contracting out is to improve efficiency in service provision by harnessing the virtues of competition, in particular the superior productivity engendered among competitive providers (Industry Commission (IC) 1996, B3.4; Appendix E). At the same time, there is a legitimate expectation that providers of public services paid for by public funds will be publicly accountable (IC 1996, BI). However, contracting out has the potential to reduce the extent of public accountability by transferring the provision of public services to members of the private sector who are generally not subject to the same accountability requirements as public officials. Indeed, reduction in such accountability requirements may be one of the reasons for the greater efficiency of the private sector.     

With the Benefit of Foresight and a Little Help from Hindsight

This article is about New Zealand's recent experience in public sector reform. New Zealand became seized with economic rationalism about the same time as Australia did but at the national level we went faster and farther than Australia towards the creation of a commercial culture in the public sector. Here I discuss what might be learned from what has happened in New Zealand.     

'Managing for Outcomes': Accountability and Thrust

Central agencies in New Zealand are now defining public management performance to include both the quality of a manager's 'account' of output-outcome links and the manager's record of delivering efficient outputs. This article: (1) argues that the hard edge of accountability for deliverables must be dulled somewhat in order to pursue outcomes more vigorously; (2) shows how managers can use evaluation tools known as theories-in-action or logic models to give accounts of policy and management thrust; (3) proposes preliminary performance criteria for outcomes-focused management; and (4) attempts to sketch a new 'managing for outcomes' accountability bargain. The conclusions apply broadly to any jurisdiction interested in holding managers accountable for outcomes-focused management.     

THE FINANCIAL ACCOUNTABILITY FRAMEWORK OF AUSTRALIAN PUBLIC ENTERPRISE

Abstract: This paper is concerned with the complexities of accountability for Australian public enterprise and analyses some of the conceptual issues which need to be addressed in developing a framework for reform. The analysis suggests that the matrix of financial accountability relationships is quite complex in terms of its objectives, its concern for both public interest and commercial viability issues and the number of participants. Furthermore, it operates in an intricate environment of political, administrative and control structures. Although the general financial reporting objectives for public and private enterprises may be similar from a conceptual viewpoint, the assumptions underlying the private sector agency model (a simple one-to-one shareholder-manager relationship based on profit maximisation and individual self-interest) may not allow a realistic or suitable modelling of the intricacies of this process at an operational level at least.
The analysis identifies some of the difficulties encountered when modelling the financial accountability processes for public enterprises. It then suggests a framework which takes into account the multi-layered nature of performance objectives and the unique operational environment of public enterprises. The model encompasses performance responsibilities at both the macro- and micro-economic levels, and operates through a linked chain of participants, each with distinct financial accountability obligations and information needs. It identifies several tiers of participants together with the appropriate accountability responsibilities at each level.     

Reforming the public sector for leaner government and improved performance: The New Zealand experience

Over the 10 year period from 1984 to 1994 New Zealand has gone through an intense period of restructuring, both of the public sector and of the wider economy. In the process New Zealand has been transformed from a highly protected and regulated economy with a range of intrusive and expensive interventions, to an open and deregulated economy with an efficient and leaned down public sector. The article presents the “New Zealand experience” in restructuring, not necessarily as an example to be copied but as a benchmark to be used in examining the most appropriate restructuring to apply in other circumstances. The stages in the reform are described and the three key success factors set out. One of the key factors is the establishment of a set of clear principles which are then applied with determination. The principles developed in the New Zealand context are set out. The article examines the restructuring of the science sector in New Zealand as one case study; in part because of the author's personal involvement but also because it is a particularly complete example. Areas where work remains to be done are identified including the reforms in education and health and the need for collective action across government. Finally lessons to emerge from the New Zealand experience are discussed. These include especially putting time into fully understanding market characteristics before a market oriented reform is started, carrying reforms through to their conclusion rather than stopping partway, and establishing clear principles to guide the reform process.