Office of the Auditor-General Briefing to the Local Government and Environment Committee. Vote Conservation. 2010/11 Year.

Transcription

1 Office of the Auditor-General Briefing to the Local Government and Environment Committee Vote Conservation /11 Year 17 June 2010

2 2 Assistance to the Committee The Local Government and Environment Committee is conducting an Estimates examination of Vote Conservation for the 2010/11 financial year in accordance with Standing Order 330. The Controller and Auditor-General provides Parliament with assurance on the performance and accountability of public entities. The Office of the Auditor-General s assistance to select committees with their Estimates examinations is guided by the Code of Practice for the Provision of Assistance by the Auditor-General to Select Committees and Members of Parliament. Our suggested lines of enquiry are informed by the Auditor-General s mandate under the Public Audit Act This mandate covers matters of performance, accountability, waste, probity and authority within public entities. Improving the quality of performance reporting by public sector entities is an area of strategic focus for the Auditor-General. Over the past few years, we have increased our emphasis on public entities performance reporting by: carrying out in-depth reviews over the past three years of government departments and Crown entities Statement of Intent and, where relevant, the Information Supporting the Estimates; as part of the 2008/09 annual audit, issuing grades for the first time on government departments and Crown entities service performance information and the related systems and controls; and issuing a revised auditing standard on performance information, which will be phased in for government departments and Crown entities over three years starting with the 2010/11 audit. We will continue to report our audit findings on government departments and Crown entities performance information systems and reporting in our letters to Ministers and in our briefings to select committees for their financial reviews of public entities. In preparing our Estimates briefing we have reviewed the following documents: the 2010/11 Estimates of Appropriations (Estimates); the 2010/11 SOI for Department of Conservation (the Department); the Department 2008/09 Annual Report; and the Minister s response to the Standard Estimates Questionnaire (SEQ). We have also drawn from other sources, including information we have received in the course of our duties as the Department s statutory auditor. In developing the advice within this briefing, the Office of the Auditor-General consulted with such parties as was necessary to ensure that the advice was correct. This process involved providing factual information of audit interest to the parties concerned (in either oral or written form), and obtaining confirmation of those facts, before giving advice to the Committee. The process did not involve providing to the parties any contemplated or actual advice. If any Member of the Committee would like further explanation or elaboration of any aspect of this report, please contact Sarah Lineham, Sector Manager, on (04) or on sarah.lineham@oag.govt.nz at the Office of the Auditor-General.

3 Summary of Key Issues 3 Background to the Vote The Vote Minister is the Minister of Conservation. The Department of Conservation (the Department) is the administering department. The total appropriation sought for Vote Conservation for the 2010/11 year is $ million. For the 2010/11 year, Crown revenue in Vote Conservation is estimated to be $ million. Overview of the Vote The Vote for 2010/11 is made up of seven Departmental Output Expenses, five Non-Departmental Output Expenses and 10 Non-Departmental Other Expenses. The Vote also includes Departmental and Non-Departmental Capital Expenditure. The Vote includes a baseline reduction of $13.5 million for 2010/11. The baseline reduction is at the same level as the reduction established in 2009/10 and will continue at this level through to 2013/14. The baseline reduction equates to 3% of the total appropriation sought for Vote Conservation. Suggested Lines of Enquiry for the Committee We have suggested lines of enquiry for the Committee as detailed in the body of this briefing. A summary of the suggested lines of inquiries is provided below. The lines of inquiry are in the following areas: impact of the second year of baseline reductions on the achievement of the Department s operational goals; any underlying issues related to the ongoing significant expense transfers from year to year evident across a number of major appropriations; specific work being undertaken to assess the impact of the increased commercial and revenue generation focus of the Department; and evaluation process established to assess progress in achieving Performance Improvement Actions (PIAs) agreed between the Minister and the Department.

4 4 1 Vote Administration 1.1 The Vote Minister is the Minister of Conservation. 1.2 The administering department is the Department of Conservation (referred to as the Department for the rest of this briefing). 1.3 The Department is part of the Sector Environment which includes the Ministry for the Environment and the Parliamentary Commissioner for the Environment. 1.4 Vote Conservation provides support for the Department and the purchase of other services which support the outcome of New Zealanders gain environmental, social and economic benefits from healthy functioning ecosystems, from recreation opportunities and from living our history. 2 Trends in Appropriations 2.1 The total appropriation s sought for Vote Conservation in 2010/11 amount to $ million. 2.2 This is an increase of $ million from the estimated actual for 2009/10 1 and an increase of $ million over the amount budgeted for 2009/10 2. This represents an increase of 7.7% over the estimated actual expenditure for 2009/10 and 4.4% on 2009/10 budget including supplementary estimates. 2.3 The main items making up the increase are expense transfers of $ million due to timing delays in projects, these are offset by the purchase of Queen Mary Hospital for $9 million and $7.079 million received from the Office of Treaty Settlements regarding Port Nicholson, both of which occurred in the 2009/10 year and were one off items. 2.4 The trend in the Vote is depicted in the following graph. Fig 1: Trends in Appropriations $ million /07 Actual 2007/08 Actual 2008/09 Actual 2009/10 Est Actual 2010/11 Vote 1 2 $ million (budget 2010/11) less $ million (estimated actual 2009/10). $ million (budget 2010/11) less $ million (budget 2009/10 including supplementary estimates budget).

5 2.5 For the 2010/11 year, Crown revenue in Vote Conservation is estimated to be $ million (primarily revenue from Concessions). 5 3 Details of Appropriations 3.1 The Vote for 2010/11 is made up of seven Departmental Output Expenses, five Non- Departmental Output Expenses and 10 Non-Departmental Other Expenses. The Vote also includes Departmental and Non-Departmental Capital Expenditure. 3.2 The breakdown of the Vote by appropriation type is shown in the table below: Appropriations % of Vote Departmental Output Expenses Conservation with the Community 15, % Crown Contribution to Regional Pest Management Strategies 3, % Management of Historic Heritage 5, % Management of Natural Heritage 158, % Management of Recreational Opportunities 128, % Policy Advice, Servicing the Minister and Statutory Bodies, and Statutory Planning 5, % Recreational Opportunities Review % Non-Departmental Output Expenses Identification and Implementation of Protection for Natural and Historic Places 20, % Management Services Natural and Historic Places 1, % Moutoa Gardens/Pakaitore % New Zealand Biodiversity Funds 11, % Stewart Island Infrastructure % Non-Departmental Other Expenses 3, % Departmental Capital Expenditure 49, % Non-Departmental Capital Expenditure 19, % Total 423, % 3.3 The two largest are Management of Natural Heritage and Management of Recreational Opportunities. Management of Natural Heritage is limited to maintaining, restoring and protecting ecosystems, habitats and species. Management of Recreational Opportunities is limited to recreational facilities and services, and the management of business concessions. Please refer to sections 5.3 and 5.4 below for discussion of the changes within these appropriations which reflect the most significant parts of the total Vote.

6 6 4 Baseline reduction 4.1 Vote Conservation baseline reductions identified as part of the 2009 line-by-line review of expenditure amount to $13.5 million on an ongoing basis. 4.2 The baseline reduction is distributed across six of the seven Departmental Output Expense categories, two of the five Non-Departmental Output Expense categories. 4.3 The two appropriations with the largest baseline reductions are Management of Natural Heritage and Management of Recreational Opportunities. 4.4 The baseline reduction for the Management of Natural Heritage appropriation ranges from $7.314 million to $9.316 million over the next four years, with the reduction for the 2010/11 year being $7.314 million. There was a reduction of $6.146 million in the 2009/10 year. 4.5 The baseline reduction for the Management of Recreational Opportunities appropriation ranges from $2.240 million to $3.499 million over the next four years with the reduction for the 2010/11 year being $3.499 million. The reduction for the 2010/11 year amounts to approximately 2.7% of this appropriation. There was a reduction of $2.843 million in the 2009/10 year. 4.6 During the 2009/10 year the Department agreed with the Minister of Conservation on three performance improvement actions (PIAs) for the medium term. The significant aspects of the PIAs are discussed below in section 6. It is primarily through efficiency and effectiveness initiatives and the PIAs that the baseline reductions are being managed. Efficiency and effectiveness initiatives are focussed on, for example costs associated with regional pest management are being controlled through increased use of aerial rather than ground control techniques, maintenance cycles have been extended and other refinements made to operations. The Department has confirmed that no aspects of their operations have ceased as a result of the baseline reduction. 4.7 The Committee may wish to ask: During 2009/10 baseline reductions were largely able to be absorbed through efficiency and effectiveness initiatives. In 2010/11, the second year of baseline reductions, what processes does the Minister intend to implement to ensure that ongoing reductions do not have any significant impact on the delivery of services and programs and particularly on the outcomes intended from those services and programs? 5 Significant Changes in Appropriations 5.1 The following table summarises changes to the Departmental Output Expenses from the 2010/11 Estimates compared to the 2009/10 Supplementary Estimates.

7 Appropriation 2010/ /10 Increase (Decrease) 7 Conservation with the Community 15,048 15,933 (885) Crown Contribution to Regional Pest Management Strategies 3,006 2, Management of Historic Heritage 5,603 5,616 (13) Management of Natural Heritage 158, ,254 1,483 Management of Recreational Opportunities 128, ,587 4,321 Policy Advice, Servicing the Minister and Statutory Bodies, and Statutory Planning 5,606 5,858 (252) Recreational Opportunities Review Total Departmental Output Expenses 317, ,606 4, The significant changes are in the Management of Natural Heritage Output and the Management of Recreational Opportunities Output. Management of Natural Heritage 5.3 The main reason for the increase (refer above) in appropriation is expense transfers. This is offset by the reduction in baseline funding of $7.314 million noted above. Expenses transfers impacting this appropriation primarily relate to delays related to consultation with communities prior to commencing some projects and also to delays in obtaining regulatory consents. Management of Recreational Opportunities 5.4 The main reason for the increase (refer above) in appropriation is an increase in budget for maintenance of visitor assets (increase of $2.667 million per annum until 2012/13). There is also an expense transfer of $0.885 million for projects to be completed in 2010/11. This is offset by a baseline reduction of $3.499 million. 5.5 The following table summarises changes to Non-Departmental Output Expenses from the 2010/11 Estimates compared to 2009/10 Supplementary Estimates. Appropriation Identification and Implementation of Protection for Natural and Historic Places 2010/ /10 Increase (Decrease) 20,010 12,231 7,779 Management Services Natural and Historic Places 1,506 1,506 0 Moutoa Gardens/Pakaitore New Zealand Biodiversity Funds 11,661 4,315 7,346 Stewart Island Infrastructure Total Non-Departmental Output Expenses 33,969 18,075 15,894

8 8 5.6 As highlighted above, the significant changes are in the Identification and Implementation of Protection for Natural and Historic Places and the New Zealand Biodiversity Funds Outputs. Identification and Implementation of Protection for Natural and Historic Places 5.7 The main reason for the increase in the appropriation is due to an expense transfer of $9.558 million from 2009/10 to 2010/11. This transfer relates to the South Island Landless Natives Act (SILNA) due to delays resulting from the complexities of multiple ownership of the land areas involved. Expense transfers have been partly offset by a reduction in the budget from 2009/10 to 2010/11 for the funds in this output class. New Zealand Biodiversity Funds 5.8 This increase is due to expense transfers from 2009/10 to 2010/11. All Non-Departmental biodiversity projects experience a lag between committing to expenditure and completion of projects due to the private landowner or community group involvement in projects. Projects can also be influenced by climatic conditions. 5.9 The following table summarises changes to Non-Departmental Other Expenses and Capital Expenditure from the 2010/11 Estimates compared to 2009/10 Supplementary Estimates. Appropriation 2010/ /10 Increase (Decrease) Total Non-Departmental Other Expenses 3,433 4,579 (1,146) Total Departmental Capital Expenditure 49,603 50,337 (734) Crown Land Acquisitions 500 9,510 (9,010) Milford Flood Protection 12, ,194 Purchase and Development of Reserves 6,800 9,652 (2,852) Total Non-Departmental Capital Expenditure 19,347 20,015 (668) 5.10 As shown in the table above, the significant changes are in the Crown Land Acquisitions and Milford Flood Protection. Crown Land Acquisitions 5.11 The decrease in appropriation from 2009/10 to 2010/11 is due to the purchase of Queen Mary Hospital for $9 million in 2009/10. Milford Flood Protection 5.12 There are major capital works underway in the 2010/11 year. This work was provided for through policy initiatives in the 2007/08 budget. The major portion of the work was expected to be completed during 2009/10, however this was delayed. The project is now due for completion in 2011/12.

9 Purchase and Development of Reserves 5.13 The decrease in appropriation from 2009/10 to 2010/11 is due to a carry forward from 2008/09 included in the trust balance in 2009/10 of $5.773 million The Committee may wish to ask: On an ongoing basis there are significant funds transferred from year to year (expense transfers). These transfers impact a number of appropriation categories as noted above, such as Management of Natural Heritage, Management of Recreational Opportunities, and Identification and Implementation of Protection for Natural and Historic Places. These transfers are mainly explained as being necessary due to time needed to consult, negotiate etc. for the establishment of projects and community programs. Are there any administrative or operational process changes that could be made in future to improve the accuracy of the timing of fund allocations and reduce the need to ongoing fund transfers? Are there any impacts on service levels as a result of the expense transfers? 6 Performance Improvement Actions 6.1 As noted in section 4.6 above during 2009/10 the Department agreed with the Minister of Conservation on three Performance Improvement Actions (PIAs) for the medium term. 6.2 The PIAs are for the medium term but are closely aligned to the priorities that the Minister has set for the Department for the 2010/11 year. The 2010/11 priorities have been designed to align to the governments driving goal of growing the New Zealand economy in a sustainable fashion in order to deliver greater prosperity, security and opportunities to all New Zealanders. To achieve this goal the government is focused on delivering policies that lift productivity, increase employment and deliver better public services. This has been further expressed by the government through identifying six drivers of growth. The Minister s priorities for the Department have been determined with particular attention to contributing to the six drivers of growth particularly by increasing tourism, recreation opportunities and revenue generation in ways that balance both conservation and economic goals The first performance improvement action is establishing a commercial business unit to improve the Department s ability to deliver positive commercial outcomes, including building productive business partnerships that deliver conservation gains, increasing net revenue flows, and enabling business opportunities consistent with conservation to raise New Zealand s prosperity. 6.4 This action is to be substantially completed during the 2010/11 year. Work during the 2010/11 year will also be undertaken to implement the results of the review of the concession processing system that was completed during the 2009/10. The objective of any change 3 Further information on the Minister s priorities for DOC for 2010/11 are set out in the Statement of Intent , pages

10 10 implemented is to improve efficiency and effectiveness of the system by improving the speed of processing, increasing transparency and certainty and reducing compliance costs for businesses. 6.5 The second performance improvement action is in relation to continued development of the natural heritage management system (NHMS). The ongoing development of the NHMS is progressively improving the Department s ability to identify natural heritage work that will provide better conservation returns for the available resources and also to measure and report on the impacts of its management. 6.6 The third performance improvement action is the development of a destination management framework. The framework will help the Department assess which areas should be focused on in order to effectively grow and develop people s participation in tourism and outdoor recreation activities on public conservation land. The overall aim is increasing participation by New Zealanders and international visitors through providing appealing experiences and meeting visitor expectations. 6.7 The Committee may wish to ask: What specific work is being undertaken to ensure, and to assess, that the impact of the increased commercial and revenue generation focus is balanced against core conservation values, particularly the 100% pure and clean green branding that is so integral to the New Zealand tourism industry? The Performance Improvement Actions (PIAs) have been set as medium term goals. What is the specific timeframe for the completion of these actions and what process has been established to evaluate whether the PIAs have been successful? Will the evaluation process include an assessment of the contribution of the PIAs to the government s drivers of growth?

11 Glossary 11 The following information is sourced from the Estimates of Appropriations and the Guide to the Public Finance Act (PFA). 4 Appropriation Benefits and Other Unrequited Expenses Capital expenditure Explanation of Movements in Departmental Net Asset Schedules Output Expense appropriations Other Expense appropriations Outcomes A parliamentary authorisation for the Crown or an Office of Parliament to incur expenses and capital expenditure, for a specified purpose. Appropriations are limited by their scope (purpose of use and any conditions on use), amount (the maximum amount of expenditure allowed), and period (the timeframe over which the appropriation applies). Payments by the Crown (generally made to individuals for their benefit) for which no direct exchange of value is expected in return. Examples include the unemployment benefit and student allowances. Capital expenditure to acquire or develop Crown assets, including the purchase of equity, or making a loan to a person or organisation that is not a department. Departments are authorised, under the PFA, to incur capital expenditure by using the proceeds of the sale or disposal of any of its assets together with any working capital held. The effective constraint on capital expenditure by departments is the total amount of its net assets projected in the Appropriation Act (and shown in the departmental net asset schedule). This level can be exceeded only in certain circumstances. A schedule showing the opening balance, projected movements, and closing balance of a department s net assets. Specifically, it includes the details of any retained surplus, capital injections, or withdrawals. Departmental: Appropriations for expenses to be incurred by departments and Offices of Parliament in providing a group of similar outputs (goods and services). Non-departmental: Appropriations for expenses to be incurred by the Crown in purchasing a group of similar outputs (goods and services) from Crown entities/other third parties. Multi-class Output Expense appropriation (MCOA) A single appropriation that covers more than one class of output expenses. Departmental: Appropriations for any expenses to be incurred by departments not related to producing outputs. Non-departmental: Appropriations for any expenses to be incurred by the Crown (excluding departments) that are not output expenses, benefits, or borrowing expenses. States or conditions of society, the economy, or the environment, including change in that state or condition. 4 Published by the Treasury in August 2005.

12 12 Portfolio Minister Responsible Minister Vote Vote Minister The Minister responsible for specific appropriations within a Vote. As several Ministers may now hold appropriations within a single Vote, each appropriation has a tag (M1.2 etc) identifying the Minister responsible for that line item. The Minister responsible for the financial performance of a department or Crown entity. In relation to an Office of Parliament, the Speaker is the Responsible Minister. A grouping of one or more appropriations that are the responsibility of one Minister and are administered by one department. The Minister responsible for the appropriations being sought for a Vote.