G.3. State Services Commission. Te Komihana O Ngā Tari Kāwanatanga. Annual Report

Transcription

1 G.3 State Services Commission Te Komihana O Ngā Tari Kāwanatanga Annual Report For the year ended 30 June

2 Presented to the House of Representatives pursuant to the Public Finance Act CROWN COPYRIGHT ISSN (Print) ISSN (Online) This work is licensed under the Creative Commons Attribution 3.0 New Zealand licence. In essence, you are free to copy, distribute and adapt the work, as long as you attribute the work to the State Services Commission and abide by the other licence terms. To view a copy of this licence, visit Please note that neither the State Services Commission emblem nor the New Zealand Government logo may be used in any way which infringes any provision of the Flags, Emblems, and Names Protection Act Attribution to the State Services Commission should be in written form and not by reproduction of the State Services Commission emblem or New Zealand Government logo.

3 G.3 State Services Commission Annual Report Minister of State Services I present to you the report of the State Services Commission for the year ended 30 June. It is comprised of: the Annual Report of the State Services Commissioner on the operations of the Commissioner, provided under the State Sector Act 1988 the Annual Report of the Chief Executive on the operations of the State Services Commission and its audited financial statements, provided under the Public Finance Act Iain Rennie State Services Commissioner 1

4 G.3 State Services Commission Annual Report Contents Annual Report of the State Services Commission... 3 Foreword of the State Services Commissioner... 4 Performance... 6 Reporting on Operating Intentions... 6 Leading the System 8 Delivering Performance Excellence 14 Building System Capability 19 Strengthening Trust and Integrity 23 Organisational Health and Capability 25 Managing Risk 28 Financial and Non-financial Performance Statement of Responsibility Independent Auditor s Report Statement of Objectives and Service Performance Output Class: Chief Executive and Agency Performance Management Statement of Cost of Services (GST exclusive) 37 Service Performance Output Class: Chief Executive and Agency Performance Management 38 Output Class: Public Management System Statement of Cost of Services (GST exclusive) 41 Service Performance Output Class: Public Management System 42 Statements: Departmental Statement of Comprehensive Income 44 Statement of Changes in Equity 45 Statement of Financial Position 46 Statement of Cash Flows 47 Statement of Commitments 48 Statement of Contingent Liabilities and Contingent Assets 48 Statement of Departmental Expenditure and Capital Expenditure Against Appropriations 49 Statement of Departmental Unappropriated Expenditure and Capital Expenditure 49 Notes to the Financial Statements 50 Statements and Schedules: Non-departmental Statement of Non-departmental Expenditure and Capital Expenditure Against Appropriations 68 Statement of Non-departmental Unappropriated Expenditure and Capital Expenditure 69 Schedule of Non-departmental Expenses 69 Schedule of Non-departmental Revenue and Receipts 70 Schedule of Non-departmental Assets 70 Schedule of Non-departmental Liabilities 71 Schedule of Non-departmental Commitments 71 Schedule of Non-departmental Contingent Liabilities and Contingent Assets 71 Notes to the Non-departmental Financial Statements 72 Further Information Legal Responsibilities 77 Glossary of Terms 78 2

5 G.3 State Services Commission Annual Report Annual Report of the State Services Commission Provided under the Public Finance Act 1989 for the year ended 30 June Introduction In past Annual Reports I have provided the Annual Report on the operations of the State Services Commissioner as required under the State Sector Act 1988, and then separately presented an overview on the State Services Commission as foreword to the Annual Report on the operations of the State Services Commission. This year I have combined my reports as the State Services Commissioner and as Chief Executive of the State Services Commission and integrated information on the performance of the State Service with that of the State Services Commission itself. This reflects that in my role as Head of State Services, with the support of the State Services Commission, I have responsibility for working in partnership with other central agencies and collaboratively across the system to ensure that we continually improve the performance of the State sector. The State Services Commission only performs well if the State sector has performed well. In addition, the information containing remuneration of Chief Executive and State sector senior staff is no longer presented in the Annual Report and can be found online at 3

6 G.3 State Services Commission Annual Report Foreword of the State Services Commissioner In the past year New Zealand has hosted the Rugby World Cup, had a general election and continued to be challenged by the global economic outlook and the effects of the Canterbury earthquakes. Individuals and organisations across New Zealand rose to these challenges and the State Services played key roles. The Government recognises the importance of a high performing State Service, and has tasked the State Services Commission (SSC), with our central agency partners, to lead the implementation of the Better Public Services programme. Better Public Services requires the State sector to work together and think differently to deliver better public services for less. The Government has outlined ten result areas for the State sector to achieve on over the next five years. The result areas address complex social issues which have challenged New Zealanders for many years. These include reducing long-term welfare dependence, supporting vulnerable children, boosting skills and employment and reducing crime. The result areas also include making it easier for businesses and for New Zealanders to interact with government. Each result has a lead Minister and Public Service chief executive who is accountable for demonstrating real progress towards achieving that result. Targets have been published for each result. Every target is relevant and challenging. Achieving on these targets will make a real difference for New Zealanders. To achieve on the Better Public Services targets government and non-government agencies and individuals will need to work collaboratively. While agencies are still central to how the State sector operates, focussing our practice and interventions at the level of sectors and the system will enable the State sector to leverage off its combined resources and perspectives. This system and sector-based approach influences how I select Public Service leaders. Expectations on chief executives have risen. In the past year I have made nine appointments and reappointments of high quality individuals who have the capability to meet those increased expectations. SSC cannot stand still if we hope to provide credible leadership and support for the State sector. To guide our work in leading a State sector that New Zealand is proud of, and to reposition SSC to meet rising Government and public expectations for improved services, SSC has implemented a new business strategy. We have made a number of changes in the way we work, and in what we deliver. As examples: we worked with chief executives to review the way we identify and develop future Public Service leaders and have implemented a new programme in this area. We also reviewed the Performance Improvement Framework (PIF) and will continue to develop the PIF framework as we look to further raise performance expectations. New Zealanders can be proud of the integrity and conduct of their public servants. Vigilance is always crucial as the ability of government agencies to carry out their work is directly dependent on the trust held in them by New Zealanders. SSC s work programme maintains its focus on ensuring we have a state sector that is trusted by New Zealanders. I will continue to drive improvements in all of SSC s work programmes to make sure they are effective in driving improvements from the system, and are cost efficient. 4

7 G.3 State Services Commission Annual Report Much of SSC s work is undertaken with its central agency partners. Collectively, SSC, the Treasury and the Department of the Prime Minister and Cabinet (DPMC) work as the Corporate Centre and are responsible for improving performance across the State sector. In early the three central agencies launched Central Agencies Shared Services (CASS). CASS provides finance, ICT and human resources functions for the three Corporate Centre agencies and is the first of its kind in the Public sector. It is a demonstration of the commitment of these agencies to effective service delivery, efficiency and value-for-money. The year in review has been an especially challenging, yet rewarding one for SSC. We have developed and implemented a new business strategy and are well advanced with our organisational transformation programme. We have, with our central agency partners, developed and implemented the Better Public Services Programme and CASS initiative while continuing to provide high quality advice to Ministers and agencies. The year ahead will be equally challenging and rewarding for SSC as it works with Ministers, agencies, sector leads, functional leaders and as part of the Corporate Centre to deliver results and better services for New Zealanders. Iain Rennie State Services Commissioner 5

8 G.3 State Services Commission Annual Report Performance The New Zealand State Services is a complex system covering 29 Public Service departments, six non-public Service departments, Crown entities, the Reserve Bank and entities on the Public Finance Act Schedule 4 (such as Fish and Game Councils). With over 220,000 State servants and total budgets in the billions of dollars, the performance of the State Services is critical to the performance of New Zealand. Reporting on Operating Intentions In 2011/12 SSC developed a new strategic direction. The SSC Business Strategy was developed to refocus SSC, taking into account the current environment and priorities of the Government and to ensure the State sector and SSC are delivering quality services for New Zealanders. While SSC s outcomes framework has changed, the majority of interventions have not changed; however the way SSC delivers them has shifted to align to the new strategic direction. The focus is on results, being proactive, focusing on sectors not individual agencies, and moving to confident and strategic leadership of the system. As a result of the change in strategic direction this section of the Annual Report sets out SSC s progress in achieving the objectives set out in the Operating Intentions section of SSC s Statement of Intent In the Statement of Intent, SSC sets out the operating intentions that would contribute to the achievement of our outcome: The performance of the State Sector is improved and its integrity is strengthened. The outcome supports SSC s purpose statement: Leading a State sector New Zealand is proud of. The outcomes framework below illustrates how SSC s activities, framed as interventions, collectively impact the performance of chief executives, agencies, sectors and the public management system to contribute to this outcome. 6

9 G.3 State Services Commission Annual Report Our Purpose Leading a State sector New Zealand is proud of Our Outcome The performance of the State sector is improved and its integrity is strengthened Our Pillars Impact: What do we want to achieve? Leading the System Our impact: To lead a State Services that can deliver better public services. Through system, structural or functional improvements to the State Services, SSC will design and steer a State Service that is innovative, efficient and focussed on results that matter to New Zealanders (pg 8) Delivering Performance Excellence Our impact: To set, support achievement of, and monitor clear expectations for the State Services that ensure excellent performance and encourage innovation, efficiency and a focus on results (pg 14) Building System Capability Our impact: To build a resilient, responsive and adaptable State sector through improving the capability and tools available across people, processes and systems (pg 19) Strengthening Trust and Integrity Our impact: To set and advise the State Services on maintaining high standards of integrity, which are integral to ensuring the State Services are trusted by government and the public (pg 23) Our Outputs What will we do Implement Better Public Services Ensure the organisations and structures of the system are fit for purpose Monitor the cap on the size of the core government administration Advise Ministers and agencies on sector and system performance improvement Manage chief executive performance Assess the effectiveness of agency performance Provide assurance over major government projects Appoint Public sector chief executives Identify and develop current and future senior leaders Ensure agencies are developing effective workforce strategies Provide advice on employment conditions and employment relations Set standards of integrity and conduct Investigate issues regarding the integrity and conduct of State servants Our Organisation Transforming SSC Our impact: We are building an SSC that has the capability and tools to confidently and effectively lead the system. We hold ourselves to account for driving excellent performance and delivery of results across the State sector Our Vote Output Class 1 Chief Executive and Agency Performance Management Output Class 2 Output Class 3 Public Management System State Services Policy Advice 7

10 G.3 State Services Commission Annual Report Leading the System A results-driven focus is at the heart of State sector reform. SSC is responsible for leading the system to deliver better public services for New Zealanders. This includes leading the implementation of Better Public Services with our central agency partners. This is generational change, which is supported by a review of the State Sector Act 1988 to deliver enduring levers for SSC to lead the system. To ensure these changes to the system are successful, SSC will lead and support the State sector to be innovative, efficient and focused on results that matter to New Zealanders. Measuring success Ten key results for New Zealanders In March, the Prime Minister announced the Better Public Services programme, and five result areas containing 10 challenging results for New Zealanders. In June, the Government set targets for the each of the results. These require groups of agencies and sectors to work together in fundamentally different ways from how they currently operate, as well as publicly report on their progress towards achieving these goals. These are priorities for the Public sector and involve concrete actions results, targets and progress against them will be published. The targets are not easy. The five result areas the Public sector is focused on to deliver better public services are: Reducing long-term welfare dependency. Supporting vulnerable children. Boosting skills and employment. Reducing crime. Improving interaction with government. Reporting against the results will indicate whether the system is performing to deliver, and will in future be a key indicator for State Sector System Performance. New Zealanders satisfaction with the public services they receive The Kiwis Count survey is an all-of-government survey that measures New Zealanders satisfaction with, and trust in, public services. The third iteration of the Kiwis Count survey started collecting data in February. What was a biennial point-in-time survey, is now being run as a continuous survey with work taking place continuously throughout the year. Quarterly reports, based on a six-month rolling average, are produced from the survey. The overall service quality score for public services between February and June was 72, an increase over the 2009 score of 69. This improvement in the quality of service delivery is a good result, particularly given the environment public services have been operating in since the 2009 survey. The survey was completed by 1,121 New Zealanders and achieved a response rate of 46%. 8

11 G.3 State Services Commission Annual Report Service quality score trend: All services (2007 to ) (February to June) Delivering results Implement Better Public Services During , SSC worked with the Treasury and DPMC on the development and implementation of the Better Public Services programme. Better Public Services is a five-year change programme to reform the Public sector, which aims to deliver public services that are more responsive to the needs and expectations of New Zealanders, within tight financial constraints. During 2011, the Government asked a Better Public Services Advisory Group to provide advice on a programme of reform of the State sector. SSC contributed to a joint central agency team that provided analytical and secretariat support for the Better Public Services Advisory Group. The Better Public Services Advisory Group delivered its report to the Government in December The Advisory Group found that many aspects of New Zealand s State services were working well but that State services were not doing well in some areas where there are complex and long-term problems. The way the system was organised made it difficult for agencies to work together effectively on these types of issues. In addition there were growing pressures facing the State services, from the international economy, changing expectations of the New Zealand public and businesses, and complex societal issues that do not fit into bureaucratic silos. State services need to be fit for purpose into the future and continually seek new ways to deliver better and more responsive services for less. The Advisory Group made a number of recommendations, under three main themes: delivering better results developing a culture and practice of better services and value for money strengthening leadership. 9

12 G.3 State Services Commission Annual Report The Advisory Group s recommendations were a key input to the Government s decisions on a programme of State sector reform during. During January to May, SSC contributed to a joint central agency team which developed the Better Public Services change programme for the Government. This included: Working with Ministers and departments to develop the results framework and action plans for delivering the results. Ten challenging results to be achieved in the next five years were announced by the Prime Minister in March. Targets for each of the results were set in June. Initial work on proposed legislative policy changes needed to support Better Public Services. This included amendments to the State Sector Act 1988, the Crown Entities Act 2004, and the Public Finance Act Clarifying the role of the State Services Commissioner as Head of State Services, with the ability to appoint leaders for sectors and functions and to move leaders to where they are needed most in the system. Work was also done on looking at how the central agencies could work more closely together to deliver the Better Public Services programme, including providing support for agencies to deliver the benefits of the reform. Proposals for strengthening functional leadership, that is, leadership across government on areas of business that are common to most agencies in order to create efficiencies through economies of scale, improve coordination, strengthen capability and improve services. This included working with the Government Chief Information Officer, the Ministry for Social Development and the (then) Ministry for Economic Development on strengthening functional leadership in the areas of ICT, property and procurement. Proposals for strengthening leadership and collaborative working within sectors, that is, groups of agencies whose work is closely inter-related and/or need to work together to deliver a result. An example is the justice sector consisting of the Ministry of Justice, Department of Corrections and the Police, who are working together on the results relating to reducing crime. This work included the development of proposals for Specific Purpose Boards these are boards that can be established by Cabinet, to facilitate agencies working together in sectors. Proposals were also developed for Departmental Agencies, a new departmental form that can help improve the coordination of policy and resources. Developing a programme of work in relation to better services and value for money. This focuses on developing demonstration projects relating to best-sourcing, innovation and continuous improvement, especially building on lessons from Christchurch innovations. Developing and supporting a structure for governing and implementing the Better Public Services change programme, and planning and supporting communications and stakeholder engagement for the programme. 10

13 G.3 State Services Commission Annual Report Key changes already made Delivering results: Organising the system more directly around results that matter to New Zealanders, including reconfiguring roles of Ministers and senior government leads (results leads). Better services and value-for-money: Demonstration projects relating to best-sourcing, innovation and continuous improvement, especially building on lessons from Christchurch innovations. Strengthening leadership: State Services Commissioner given role as Head of State Services with ability to appoint leaders (results and functions) and to move leaders and people around to where they are needed most. Central agencies to work more collaboratively together, helping to ensure delivery of the programme and support for agencies across the reform agenda. Accelerating functional leadership in the areas of ICT, property and procurement. From May, implementation of the Better Public Services programme got into full swing. A Better Public Services programme team was established, hosted by the Commission, to lead and coordinate the programme as well as to drive comprehensive engagement and communications across State services to support the programme of change. Work is continuing in the three programme areas: Delivering results: delivery of the Government s 10 Better Public Services results for New Zealanders, including public reporting on action plans for delivery and progress against targets. Better services and value-for-money: supporting the development of a culture of better services and value for money by providing active demonstrations of: more contestability in service provision and use of alternative providers greater use of technology and shift to online channels greater responsiveness to the needs and expectations of New Zealanders, and a willingness to do things differently. Strengthening leadership: focus on performance and across sector and system accountability, including the operation of functional, sector and result leadership and the role of the Head of State Services. 11

14 G.3 State Services Commission Annual Report State sector legislation To support delivering Better Public Services, in May Cabinet made a range of substantive policy decisions for a State Sector Reform (Public Finance) Bill to amend the State Sector Act 1988, Public Finance Act 1989 and Crown Entities Act The Bill is to be referred to a Select Committee in. The nature of the amendments to the State Sector Act 1988 is such that they are not designed to form a detailed prescription for the implementation of Better Public Services reforms, nor to set out related policy statements or to prescribe in legislation for culture change. The amendments are designed to be facilitative and to enable changes to occur within the framework of an Act that is enduring and allows for new policy initiatives in the future. Examples of facilitative or enabling provisions that support the Better Public Services reforms include, but are not limited to: signalling a rebalance from agency-specific to sector and system-wide performance by making it an explicit function of the State Services Commissioner (the Commissioner) to review the State sector system in order to advise on possible improvements to agency, sector and system-wide performance signalling a shift towards more collaborative behaviour by making this an explicit responsibility on chief executives building system capability with renewed emphasis on senior leadership and management capability, including provisions for designating key positions (because they are critical to the Public Service or because of their potential to develop senior leaders) that must be filled only with the Commissioner s agreement building system flexibility by enabling the Commissioner to transfer an existing chief executive (with his or her agreement and after consulting the Minister) into a vacant chief executive position if it would be in the public interest to do so expanding the range of service delivery options by giving chief executives broader powers to delegate the exercise of functions or powers (for which they remain responsible) putting workforce matters on a more strategic footing by enabling the development of government workforce policies from a State sector system perspective enhancing the range of structural options for the delivery of services by providing for departmental agencies that can also serve as a vehicle to reduce fragmentation by avoiding the need for a fully separate department or Crown entity or by absorbing functions that are currently performed by separate agencies. This non-exhaustive list of proposed amendments to the State Sector Act 1988 will ensure that the Act is fit for purpose and meets the current and longer-term needs of the State Services. Ensure the organisations and structures of the system are fit for purpose SSC provides high-quality machinery of government advice to Ministers. This work includes reviewing the allocation of functions to and between departments and other agencies, and the desirability or need for new agencies, amalgamation or abolition of existing departments or agencies. 12

15 G.3 State Services Commission Annual Report SSC advised Ministers throughout the decision-making process that led to the merger of four agencies into the Ministry of Business, Innovation and Employment. Following Cabinet s approval in principle of the merger, SSC brought together a transition team of SSC representatives and secondees from affected agencies to conduct due diligence on the proposed entity. Implementation of the merged entity took effect from 1 July. Capping the size of core government administration The cap on the size of core government administration is designed to make resources available for improved frontline services which are better value for money for New Zealanders. Supporting agencies to do this continues to be a key priority for SSC. The cap was reset in March at the lower level of 36,475 full-time equivalent (FTE) positions (FTE staff and vacancies). This was the number of positions as at 30 June As at 30 June there were 35,901 FTE positions within core government administration 1. Total FTE positions (staff and vacancies) in core government administration 39,500 39,000 38,500 38,859 38,000 37,500 37,000 36,500 37,455 37,379 36,771 36,973 36,475 36,456 36,000 35,500 35,901 35,000 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun 2011 Dec 2011 Jun

16 G.3 State Services Commission Annual Report Delivering Performance Excellence In a period of fiscal restraint, excellent performance is needed to meet rising government and public expectations. SCC has improved its chief executive and agency performance services, and broadened them to provide a system-wide focus. With chief executives, this means ensuring they have a system focus to deliver on results through greater efficiency, innovation and improvement. SSC is also leveraging off its experience, monitoring programmes and expert networks to provide system level advice to Ministers and chief executives to drive sector and system improvement. Measuring success Overall performance improvement A Performance Improvement Framework (PIF) review is a review of an agency s fitness-for-purpose today and for the future. It looks at the current state of an agency, then how well placed it is to deal with the issues that confront it in the medium-term future. It looks at the areas where the agency needs to do the most work to make itself fit-for-purpose. The PIF provides a good indicator for assessing performance excellence. As at 30 June, 16 PIF reviews have been completed. At an aggregate level it appears that agencies do a number of things really well. For instance, agencies are responsive to Ministers and are good at delivering against government priorities; they work well with a number of external stakeholders, and are good around the probity of the financial management systems. These are positive characteristics of the New Zealand public management system. In terms of where agencies might need to do better, so far reviews have a very common theme; they show a need for the wider State Services to get better at working across boundaries, as well as a need to take a longer-term view to what agencies need to do, which in many cases means anticipating the issues that the Public Service needs to deliver on for New Zealanders in the future. PIF ratings for core areas of organisational management 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Leadership, Direction & Delivery External Relationships People Development Financial & Resource Management strong well placed needing development weak unable to rate 14

17 G.3 State Services Commission Annual Report Well-articulated strategy SSC is focused on an improvement in agencies ability to articulate and share organisational strategy. Using the PIF methodology Purpose, Vision and Strategy is a component of Leadership, Direction and Delivery and key to realising improved performance as a well-articulated strategy, supported by strong leadership generally flows through organisations into the operational environment, resulting in better decision making. There has been a slight increase in the proportion of agencies being well placed or strong in the Purpose, Vision and Strategy element of the PIF (from 12.5% to 25% between 2010/11 and 2011/12). However, there is much room for improvement in this area. PIF ratings for delivery of Government priorities and core business 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Government Priorities Core Business Effectiveness Core Business Efficiency strong well placed needing development weak unable to rate Affordable State Services The quality of expenditure, regulation and other interventions by State sector agencies has a significant impact on the living standards of New Zealanders. It impacts both directly and indirectly on New Zealand s stocks of financial and physical capital, human capital, social capital and natural capital. Given the significant impact it has, the State sector needs to do the right things in the right ways at the right time and they must be affordable. The size of the State sector has grown dramatically over the past decade, both in terms of expenditure and the size of the balance sheet. The Fiscal Strategy Report (FSR) specifies the Government s long-term objective to reduce core Crown expenses to below 30% of gross domestic product (GDP). Current forecasts show an improvement in the reduction in core Crown expenses as a proportion of GDP compared with the Budget Economic and Fiscal Update (BEFU) in

18 G.3 State Services Commission Annual Report Core Crown expenses % of GDP BEFU BEFU 2011 Sources: BEFU 2011, BEFU Delivering results Advise Ministers and agencies on sector and system performance improvement Each year SSC provides advice on a number of issues across the system. SSC, with its role in the centre, provides an objective insight to both Ministers and agencies on sector- and system-wide issues. Many of the system- and sector-wide discussions are being driven out of Better Public Services reform discussions on issues such as sector and functional leadership. There were, however, a number of reviews and advice sought and provided by SSC around a range of issues. SSC has now also completed over 16 PIF reviews, which have provided significant information on systemwide opportunity to lift performance. System-wide results and analysis are released regularly, and SSC provides assistance on developing action plans which leverage off system information. Much of this is reflected in raising expectations within the PIF model itself to improve on areas such as financial management, with improved expectations developed in conjunction with chief financial officers across the system. Manage chief executive performance Better Public Services requires a significant shift in leadership with a sharper, more collaborative focus on results and sector-first thinking. SSC s role, as employer of chief executives, provides an important lever to influence the leadership, performance and productivity improvements of agencies. SSC s performance management process has recently shifted to a modern, efficient and credible performance management system that better aligns to government priorities. The new system, which has been developed in consultation with a group of chief executives, emphasises driving achievement of results through expectations that take a longer-term view, real-time feedback for chief executives, and a closer link between their performance and development. Central agencies have begun working together to provide the support necessary to ensure chief executives success. 16

19 G.3 State Services Commission Annual Report SSC completed performance reviews for 31 chief executives in 2011/12, and will be moving to an ongoing performance management approach in /13. Assess the effectiveness of agency performance In the last 12 months the PIF team has completed six reviews. These reviews were completed while the PIF business strategy and operating model were fundamentally redesigned and implemented. Redesign decisions were taken in October Implementation began in November On top of the redesign the central agency chief executives also agreed a programme of innovation and continuous improvement in April. The programme includes a new product called the Follow Up review. The Follow Up review occurs 12 to 18 months after a Formal review. It has been designed to ensure each agency has an opportunity to take stock, ensure it is realising the benefit of its most recent PIF review and to provide assurance to Ministers that the agency is still well placed to deal with the future challenges. The Follow Up review complements the monitoring work done by the Sector and Agency Performance Group; however, this product has the advantage of formalising the expectation for continuous performance improvement and makes sure that such improvement is demonstrable and routinely made public. Two informal Follow Up reviews were completed in 2011/12. The first formal Follow Up was published in June. Provide assurance over major government projects In the last 12 months, the project monitoring function has been expanded significantly to include non-ict projects, with a particular focus on construction projects required to re-build Christchurch (both at the Canterbury Earthquake Recovery Authority [CERA] and at other departments with large rebuilding programmes, such as Justice and Education) and large Defence acquisition projects. This has meant the number and value of monitored projects has increased from an historical average of around 28 projects with an investment value of approximately $8 billion to the current total of 47 projects with an investment value of $14.5 billion. This has been achieved without any increase in base staffing levels, but instead by taking a risk-based approach and focusing efforts predominantly on the highest risk projects being monitored (such as Housing New Zealand s Enterprise Transformation Project and the major programmes being driven out of CERA), whilst still maintaining effective monitoring across the full portfolio of projects. In addition, the Gateway Review process exceeded target levels set for the year (completion of 20 Gateway Reviews) and successfully completed 23 reviews in the 12-month period. The Major Projects Assurance function (which includes both Project Monitoring and Gateway) is committed to continuous improvement and responding to Ministers needs, as evidenced by: substantial changes to the Ministers Quarterly Report during the year, to improve readability and provide additional information requested by Ministers; add more value by analysis of patterns across the portfolio of monitored projects to identify and address systemic issues; inclusion of additional data of specific interest to Ministers, including documenting private sector engagement to identify potential solutions before development commences, upcoming Cabinet Decision points for each monitored project and expected FTE savings to be achieved at project implementation 17

20 G.3 State Services Commission Annual Report commissioning of an independent (private sector) review of both the Project Monitoring and Gateway functions to assess effectiveness and to identify any additional opportunities for improvement. This was completed in June and will result in a programme of continuous improvement that will be implemented over the next 12 months strong engagement with the Treasury, Office of the Government Chief Information Officer (O-GCIO) and DPMC to establish a seamless and effective Corporate Centre structure around project selection and assurance functions. Particular focus on using current and new processes to identify and assess potential projects before development commences active leadership/support for several government-wide initiatives that have been implemented to improve the overall quality of project development and increase the chances of success, including Better Business Cases, Investment Logic Mapping and establishment of a new expert panel to provide Quantitative Risk Assurance services for the next three years. 18

21 G.3 State Services Commission Annual Report Building System Capability The Public Service employ over 45,000 employees engaged in delivering services for New Zealanders. Building better public services and driving performance excellence relies on strengthening the leadership and the workforce of the State sector. Building system capability will underpin efficiency and effectiveness improvements expected of the Public Service and broader State sector. SSC appoints and develops current and future leaders as well as ensuring agencies have effective workforce strategies. In addition, SSC provides advice on employment conditions and employment relations to ensure that increases in remuneration of the State sector are tied to performance improvements. Measuring success Improvement in people development People development is a key indicator for building system capability. The major elements in people development are: Leadership and workforce development 33% Management of people performance 29% Engagement with staff 38% The percentages represent the proportion of agencies being well placed or strong in a PIF review. Findings so far indicate that people performance management is reasonably good for high-performing staff, but not so good for lower performing staff. Staff engagement, as measured by engagement surveys, is often lower than is desirable. For many agencies, it is clear they can do better at managing and developing their people. Delivering results Appoint Public sector chief executives Better Public Services requires effective leadership. Chief executives are expected to drive improvement by taking on roles across the system as well as within their individual agencies. Public Service chief executive roles are difficult and demanding; they call for a special range of skills, qualifications, experience and leadership behaviours. To meet these requirements SSC has improved the recruitment process. This has strengthened the focus of recruitment on the ability to lead departments while simultaneously leading across sectors to achieve results for New Zealanders. It has also realised some efficiencies for recruitment processes and improve the experience for applicants. Recruitment processes for eight new chief executives ran in parallel beginning in the second quarter of. This convergence of vacancies has provided SSC with an opportunity to appoint (or reappoint) a cohort of high-performing leaders equipped with the skills to drive the system to achieve new levels of performance over the next five years. These eight recruitment processes benefited from the insights of our system-wide work on talent identification. In 2011/12, the Commissioner appointed four new chief executives, two current chief executives were appointed to other chief executive positions, and three chief executives were reappointed. The Commissioner is confident that the quality of the chief executives appointed and reappointed will ensure the State Services are well led. 19

22 G.3 State Services Commission Annual Report The continuing recognition of the quality of SSC s appointment process is demonstrated through Ministers asking SSC to undertake appointments on their behalf, for appointments SSC is not responsible for. Public Service chief executive appointments, reappointments and departures During 2011/12 the following chief executives were appointed under section 35 of the State Sector Act 1988 and commenced in their roles: Mr Brendan Boyle Mr Andrew Bridgman Mr Andrew Kibblewhite Ms Lesley Longstone Mr Colin MacDonald Ms Carolyn Tremain Ministry of Social Development Ministry of Justice Department of the Prime Minister and Cabinet Ministry of Education Department of Internal Affairs New Zealand Customs Service During 2011/12 the following chief executives reappointments took effect under section 36 of the State Sector Act 1988: Ms Katrina Bach Mr Geoffrey Bascand Mr Graham Stoop Department of Building and Housing Statistics New Zealand Education Review Office The following chief executives left their positions during the 2011/12 year: Ms Katrina Bach 2 Department of Building and Housing Role disestablished Mr Murray Bain 3 Ministry of Science and Innovation Role disestablished Mr Christopher Blake Department of Labour Resigned Mr Brendan Boyle 4 Department of Internal Affairs Resigned Mr Leith Comer Ministry of Maori Development Term ended Mr Peter Hughes Ministry of Social Development Term ended Mr Colin MacDonald 5 Land Information New Zealand Resigned Ms Rowena Phair Ministry of Women s Affairs Resigned Mr David Smol 6 Ministry of Economic Development Role disestablished Mr Colin Tukuitonga Ministry of Pacific Island Affairs Term ended Mr Maarten Wevers Department of the Prime Minister and Cabinet Retired 2 Department of Building and Housing was disestablished and its functions transferred to the Ministry of Business, Innovation and Employment. 3 Ministry of Science and Innovation was disestablished and its functions transferred to the Ministry of Business, Innovation and Employment. 4 Appointed Chief Executive of the Ministry of Social Development. 5 Appointed Chief Executive of the Department of Internal Affairs. 6 Ministry of Economic Development was disestablished and its functions transferred to the Ministry of Business, Innovation and Employment. 20

23 G.3 State Services Commission Annual Report Identify and develop current and future senior leaders Strengthening leadership is one of the foundations to delivering Better Public Services. In 2011/12, SSC worked with chief executives to review its programme to identify and develop current and future senior leaders. In February SSC launched the Senior Leader Career Development programme for chief executives and their direct reports. We invited the 188 second tier leaders to participate in the programme. To date 136 senior leaders have opted into the Senior Leader Career Development programme, which will involve active career management. This includes: building of personal development plans with the support of the Learning Development Centre and their chief executives consideration given to career opportunities within the State sector further Top 200 events to discuss leadership development. From the 17 February gathering has come the concept of Top 200 events involving chief executives and their direct reports to engage the senior leaders of the Public Service in their development. Top 200 events are one of the many ways we engage with senior leaders to support the implementation of the Better Public Service programme. Ensure agencies are developing effective workforce strategies In June 2011 Cabinet determined that agencies would be required to develop Workforce Strategies in support of their Four-Year Budget Plans (4YBPs) and SSC was charged with developing guidance to assist agencies in this work. A Workforce Strategy Framework and supporting guidance were established and rolled out in late 2011, with seven agencies and three sectors submitting Workforce Strategies in the first year. A measure of the success of this work was the decision in mid to combine the Workforce Strategy and 4YBP processes into one planning product, to enable an integrated approach to planning, aligned to agencies business objectives. The new Four-year Plan framework and guidance was released in early September for the 2013 Budget cycle. Provide advice on employment conditions and employment relations There were 36 State sector agencies involved in collective bargaining in 2011/12. SSC has a role in ensuring bargaining outcomes are consistent with the Government s Expectations for Pay and Employment Conditions in the State Sector. All Bargaining Strategies and Terms of Settlement were approved by SSC as consistent with the Government s Expectations. SSC uses the Labour Cost Index (LCI) published by Statistics New Zealand as an indicator of its success in meeting its target of moderating Public Service wage growth to the same or less than the private sector over time. LCI tracks the salary and wage growth of industries in New Zealand. 21

24 G.3 State Services Commission Annual Report Salary movements in the Public Service and private sector 35% 30% 25% 20% 15% 10% 5% 0% Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar June Sep Dec Mar June Sep Dec Mar Jun Sept Dec Mar Jun Sep Dec Mar Jun Public Service Private Sector Source: LCI Unadjusted LCI growth 7 in the Public Service for the year ending 30 June was 1.2%. This compares with growth in the private sector of 2.2% for the same period. This is consistent with the 2010/11 year, and is indicative that Public Service agencies are responding appropriately to the need to show restraint in wage movements. 7 The unadjusted LCI includes the cost of performance-based, as well as general wage movement 22

25 G.3 State Services Commission Annual Report Strengthening Trust and Integrity At the heart of the Public Service system of New Zealand is a professional and politically neutral Public Service. This is especially so during an election year, such as occurred in This political neutrality underpins New Zealand s form of democracy. According to the Transparency International Corruption Perceptions Index, New Zealand is seen as having the least corrupt Public Service in the world. Integrity is something that SSC remains vigilant of to ensure New Zealanders can trust their Public Service. Measuring success Transparency International Corruption Perceptions Index The most recent Transparency International Corruption Perceptions Index was published in December The index measures perceived levels of Public sector corruption in 183 countries and territories. New Zealand was ranked first as the country with the lowest perceived level of corruption, topping the table with Denmark and Finland at second equal. The index is compiled from different assessments and business opinion surveys carried out by independent institutions. This is the fifth consecutive year that New Zealand has ranked first or first equal on the index. Trust in public services The Kiwis Count survey asks New Zealanders about their trust in public services based on both their perceptions and most recent experience. In the survey, when asked to think about their most recent service experience, 74% of New Zealanders gave a 4 or 5 out of 5 when asked Overall you can trust them to do what is right (1 is strongly disagree and 5 is strongly agree ). This was up from 70% in Perceptions of trust in public services also increased between 2009 and. The Kiwis Count survey asks respondents to rate their overall impressions of trust in the Public Service on a 5-point scale (1 is Do not trust them at all and 5 is Trust them completely ). Between January and June, 42% of survey respondents gave a 4 or 5 out of 5 (up from 33% in 2009) 23

26 G.3 State Services Commission Annual Report Experience and perception of trust 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Perception of Trust Trust based on experience Delivering results Set standards of integrity and conduct SSC has developed a new integrity and conduct work programme. The programme embraces the Commission s new Business Strategy and recognises the need to be more impactful in the way we lead the State Services in the integrity space. The programme recognises that having high levels of integrity within agencies is a critical enabler to high performance, and that high levels of trust generate higher levels of economic and social benefit for all New Zealanders. To achieve this, the programme seeks to embed integrity as a foundation in all of SSC s work. It also seeks to strengthen and co-ordinate integrity work by establishing greater links and working with State sector agencies and others on integrity and conduct issues. SSC continued to promote the Code of Conduct for the State Services and assist with its implementation and interpretation. In July 2011, the Code was formally applied to seven new agencies that became operational in SSC has consulted with a further four that have become operational in with a view to applying the Code. Induction sessions for newly appointed departmental chief executives have all included a component on the Code of Conduct and related integrity expectations of employees. SSC has also implemented two rounds of the chief executive expense, gifts and hospitality disclosure initiative. The regime promotes transparency and accountability for public spending by requiring chief executives of Public Service departments and statutory Crown entities to publish their incurred expenses, gifts and hospitality on a six-monthly basis. All chief executives made the disclosures. SSC runs an integrity helpdesk responding to queries from State servants and members of the public about matters of integrity and conduct. In the 12 months to 30 June, SSC responded to 104 individual queries. A small proportion of these related to complaints from members of the public about alleged integrity breaches in a State Services agency. In these cases, SSC made preliminary enquiries into the allegations and worked with the agencies and complainants to find a resolution. 24

27 G.3 State Services Commission Annual Report Together with DPMC and the Treasury, SSC carried out a work programme issuing advice and guidance to State servants over the election period (August November 2011). SSC s primary responsibility is to safeguard the political neutrality of the State Services during this time. SSC ran a helpdesk responding to queries from State servants about interpretation of the election year guidance 114 election-related queries were dealt with during Queries were diverse, ranging from advice on communications and advertising, conflicts of interest, to the balance between State servants political rights and their employment responsibilities. Investigate issues regarding the integrity and conduct of State servants The State Sector Act 1988 establishes that the State Services Commissioner may conduct investigations and make reports in respect of the Public Service. These inquiries and reviews provide assurance not only to the Government but also to the public that the activities of agencies and individual State servants are being carried out within the law and within the bounds of proper conduct. In 2011/12, SSC commenced one formal investigation under the State Sector Act 1988, into the possible unauthorised release of information relating to the Ministry of Foreign Affairs and Trade. That investigation is ongoing. Organisational Health and Capability Our organisation Over the past year SSC has worked to implement its new Business Strategy and purpose: Leading a State sector New Zealand is proud of. Achieving the Business Strategy requires transformational change within SSC. SSC simply cannot deliver on a large, challenging and rapidly evolving work programme without changes in the way it works and in the working environment provided for SSC people. SSC made significant changes to its organisational structure in 2011/12, moved to more fit-for-purpose working premises and began work on a number of new organisational development initiatives which flow on from its previous People Strategy. Our people SSC s Business Strategy establishes a shift in emphasis from providing operational services and technical guidance to exercising stronger leadership around delivering better performance. Work is now underway to ensure that SSC has the capability to achieve this change. This includes: ensuring SSC people have the skill levels and experience to be persuasive influencers with Ministers and State Services leaders making sure that SSC s way of working is characterised by a focus on the big strategic issues facing the system and, working in collaboration with others, a relentless pursuit of innovative solutions to support achievement of results across the system empowering and enabling SSC staff to make the greatest contribution possible through a work environment characterised by a shared view of direction, clarity of accountabilities and business systems that support excellent performance. 25

28 G.3 State Services Commission Annual Report The Transforming SSC programme focuses on development of organisational capability, addressed through an all-of-organisation programme to increase the capability of the workforce. The intention is that all SSC people lead from where they stand and are empowered to make a difference as they contribute to SSC work programme. The introduction of a behavioural competency framework derived from the Business Strategy has enabled a deliberate focus on how SSC people do their jobs, and on how SSC is viewed across the State sector by our stakeholders. The Business Strategy supports the development of a culture of personal leadership and accountability. Employee engagement SSC recognises that high employee engagement leads to increased individual and organisational performance. The Business Strategy and operating model is an ambitious undertaking, and critical to its success will be the close and active involvement of all SSC people. As part of the Transforming SSC programme SSC has demonstrated a renewed focus on employee engagement. Key initiatives begun in 2011/12 include: design and implementation of a new performance management framework, which focuses on what SSC need to achieve and development of our workforce to ensure we have capability now and into the future new management development and staff development programmes and a renewed focus on use of coaching skills within teams development of a Workforce Strategy that is aligned to SSC s Business Strategy and 4YBP design of new health and wellbeing policies to support SSC people establishment of staff focus groups to provide input into policies, practices and matters affecting SSC people generally, so SSC people are actively involved in important decisions affecting them. SSC will continue its commitment to building staff engagement and capability, to ensure that it is well placed to take a key leadership role in addressing the challenges and opportunities facing the State Services. SSC will continue to measure and report staff engagement levels through both formal (survey) and informal means. The annual engagement survey, originally scheduled for August 2011, was deferred to September to better align with SSC Business Strategy implementation timeframe. Since the last survey in 2010 SSC has undergone significant changes in organisational and team structure the survey will reflect this new structure. Equal employment opportunities and diversity SSC will continue its commitment to the four groups identified in the Equal Employment Opportunities policy for the Public Service Māori, ethnic or minority groups, women and people with disabilities and to appointment on merit. It focuses on ensuring the varied needs of its workforce are met. As an example, a number of SSC people have flexible working hours and arrangements so they are able to balance their work and other commitments. We monitor our workforce by collecting data on gender and ethnicity distribution at each tier of management. When SSC identifies issues that need to be addressed, appropriate response plans are developed. 26

29 G.3 State Services Commission Annual Report Our processes SSC, the Treasury and DPMC have implemented CASS. From March CASS provides corporate functions for the central agencies including Finance, Information Technology, Information Management and Human Resources. This shared services model aims to improve performance and effectiveness through: developing better corporate services, including the capability to innovate, build job satisfaction and career development building strong corporate services which will deliver services that exceed the sums of their parts minimising risk through building greater resilience and strengthening capability. Another key benefit for SSC following a period of transformation will be a reduction in overall costs for corporate services. Departmental Internal Control Evaluation SSC set and exceeded its 2011/12 target, 4.05, for the Departmental Internal Control Evaluation score. Overall, Audit New Zealand assessed SSC as having a rating of 4.09 or good. This represents an improvement from the previous year, with a rating of Improvements reflected the clarity that the new Business Strategy provided and improvements in performance measurement. For /13 further improvements are expected as the benefits of CASS are realised. Our infrastructure High quality infrastructure is critical to supporting our people to deliver on our work programme. The results of the Better Administrative Support Services (BASS) process and the fact that our headcount has decreased considerably in the last five years prompted a review of our accommodation needs. As a result, SSC moved to new fit-for-purpose and cost-effective premises in March. As part of CASS implementation, SSC, the Treasury and DPMC continue to progress the development of common IT infrastructure, finance, payroll and Human Resource systems. Delivery of these integrated systems will progress across /13 and beyond. Integrated systems will mean the three agencies benefit from combined support and a consequent reduction in support costs. Better Administrative and Support Services During 2010/11, SSC received its first benchmarking results through BASS. The report identified that, overall, SSC compares favourably in the provision of its support services with other similar agencies in its cohort and with the general BASS average (see table below). SSC uses benchmarks from annual BASS assessments to inform and direct further improvements in corporate services and costs. SSC expects improvements in BASS results for the 2011/12 year, particularly due to changes in its accommodation provisions. Initial baseline measures SSC NZ peer group (median) NZ full cohort (median) Total amount of running costs directed at administrative and support services functions % 15.64% 11.46% 27

30 G.3 State Services Commission Annual Report Feedback from our stakeholders The service SSC provides to our stakeholders (Ministers, chief executives and senior managers) is a direct reflection of the health and capability of SSC. We are seeking to improve the services we provide and the value we add. SSC recently conducted a series of interviews with 34 external stakeholders including two Ministers of the Crown, 27 chief executives, and five PIF lead reviewers. It asked about the value that SSC adds, and whether stakeholders had seen a difference in SSC s performance following implementation of the new Business Strategy. The comments made during interviews were considered and constructive. These included positive comments on improved engagement with stakeholders and improved value SSC is providing in areas including supporting chief executives, work on machinery of government initiatives, work on the new Senior Leader Career Development programme and through PIF. Stakeholders also identified a number of areas where they considered SSC could add further value or work differently, including: leading more deliberately and demonstrating a stronger strategic focus setting even clearer direction for chief executives, to motivate and challenge them providing more clarity around the role and functions of the Corporate Centre (SSC, the Treasury and DPMC) and around what Better Public Services means for agencies. SSC is working on a number of fronts to address these and other suggested areas for change. It is also looking at more effective ways to solicit, receive and respond to stakeholder feedback in real time. Managing Risk SSC has amended its risk management framework to ensure consistency with the international standard ISO31000, and make it more integrated with SSC s management systems. Risk management discipline and tools are embedded within performance and planning mechanisms and project methodology. The externally chaired Risk and Audit Committee s role is to challenge and provide assurance to SSC that risk management practices, particularly at the strategic level, are appropriate. The framework ensures risks to achieving our outcomes or delivering our outputs are mitigated appropriately. SSC manages much of its significant work as projects using a project management methodology. This ensures appropriate governance over our key initiatives, including appropriate risk management practices to ensure the successful delivery of our projects. This is closely administered by our Programme Delivery Office. In addition, SSC undertakes regular management reporting to provide an assessment of progress against stated performance expectations. This reporting provides an opportunity for the Senior Leadership Team to have discussions on whether there are any operational risks or issues that need to be managed. In 2011/12, SSC also reviewed its strategic risks around delivery on the Business Strategy. The strategic risks are outlined below. 28

31 G.3 State Services Commission Annual Report Strategic risks Strategic risks are those that would prevent the achievement of SSC s strategic direction. The five strategic risks identified below, include risks across the system and to SSC s ability to impact on the system. Mitigation strategies, which include many key interventions, have been developed. These will be actively managed and monitored quarterly. In addition, SSC will continue to monitor achievement of its strategic direction and actively identify and manage any emerging risks that may impact on its ability to deliver. Risk Risk description Key mitigations SSC is unable to lead the system The system is unable to deliver key results The State Services lose the confidence of the public and government SSC fails to deliver SSC fails to implement Better Public Services Leadership is an important factor to high performance, particularly during time of change. SSC needs to step up and lead the system to ensure the system delivers on its potential Government has moved to a resultsdriven focus, with 10 key results which the State Services are expected to deliver. SSC must be in a position to lead, support and provide the tools for the State Services to succeed Lack of confidence in the State Services has the potential to undermine our public institutions. SSC has a role in strengthening trust and delivering a high performing State Service This risk focuses on SSC as an agency, and our ability to deliver as we transform ourselves to ensure we have the capability, tools and resources to achieve our outcomes Better Public Services is at the centre of the change and reform programme of the State Services. SSC needs to manage and support the programme of work as it is essential for achievement of our outcomes Ensure Better Public Services has sufficient resources and leadership so that SSC can lead and deliver on Better Public Services Engage with Ministers on their expectations Build system leadership capability both within SSC and across the system Develop clear expectations for chief executives Revise processes to ensure we employ high-performing leaders who can manage across sectors and functions Central agencies actively support result teams Sector and functional organising mechanisms are delivered Maintain the State Services Code of Conduct Evaluate performance of agencies through PIF and establish performance improvement action plans Review and, where appropriate, investigate any integrity or conduct matters Review our suite of services to ensure they are fit for purpose and meet future needs Develop workforce strategies to improve our people capability to meet our needs Establish appropriate governance, accountability and mechanisms to confirm and manage programme scope Establish risk and issues management process Regularly evaluate programme using assurance methodology System-wide resources are used to resource projects 29

32 G.3 State Services Commission Annual Report Financial and Non-financial Performance This section of the Annual Report sets out financial and non-financial performance through a series of statements, as required by the Public Finance Act The first statement is the statement of responsibility signed by the State Services Commissioner as Chief Executive and countersigned by the Chief Financial Officer. The second series of statements encompass the statement of service performance, levels of service achieved and financial information on the costs of the activities undertaken. They are grouped under the two classes of outputs that SSC produced in the 2011/12 year. The third series of financial statements sets out the accounting policies, statements of financial position, movements in taxpayers equity, comprehensive income and cash flows. This section of the report has been audited by Audit New Zealand on behalf of the Controller and Auditor- General. 30

33 G.3 State Services Commission Annual Report Statement of Responsibility In terms of the Public Finance Act 1989, I am responsible, as Chief Executive of the State Services Commission, for the preparation of SSC s financial statements and statement of service performance, and the judgements made in the process of producing those statements. I have the responsibility of establishing and maintaining, and I have established and maintained, a system of internal control procedures that provides reasonable assurance as to the integrity and reliability of financial reporting. In my opinion, these financial statements and statement of service performance fairly reflect the financial position and the operations of the State Services Commission for the year ended 30 June. Iain Rennie State Services Commissioner Sara Brownlie Chief Financial Officer 28 September 28 September 31