2015/16 Annual review of the Ministry of Transport and the New Zealand Transport Agency

Transcription

1 2015/16 Annual review of the Ministry of Transport and the New Zealand Transport Agency Report of the Transport and Industrial Relations Committee Contents Recommendation 2 Introduction 2 Part A: Fraud 2 Driver licensing fraud 4 Auckland Transport fraud 4 Part B: Financial performance of the ministry and NZTA in 2015/16 5 Part C: Other issues 6 Working with KiwiRail 6 Transport projects in Auckland 6 Government Policy Statement 7 Using technology for demand management 8 Funding for public transport 8 Smart motorway 8 Social behaviour link to congestion 8 Network Outcome Contract holders 9 Appendix 10

2 Ministry of Transport and New Zealand Transport Agency Recommendation The Transport and Industrial Relations Committee has conducted the annual review of the 2015/16 performance and current operations of the Ministry of Transport and the New Zealand Transport Agency, and recommends that the House take note of its report. Introduction Much of our hearing concerned the discovery of an instance of fraud at the Ministry of Transport, which ultimately resulted in the conviction of a staff member. We discuss this issue in Part A of this report. Part B provides some general information about the ministry and the New Zealand Transport Agency (NZTA), and their financial performance in 2015/16. Part C covers other issues that touch on both organisations. Part A: Fraud Discovery of fraud at the Ministry of Transport: Office of the Auditor-General s findings During the ministry s audit, the Office of the Auditor-General raised concerns about its procurement, contract management processes, and lack of appropriate supporting evidence for some expenditure. An external forensic review of these matters concluded that fraud had probably occurred, estimated to amount to $726,000. Once the concerns were identified in April 2016, the ministry commenced an employment investigation, and informed the Police and the Serious Fraud Office (SFO). In July 2016, the ministry initiated reviews on how internal controls should be improved. In particular, these concerned the ministry s procurement, contract management, recruitment, and expenditure approval processes. The Office of the Auditor-General recommended that the ministry improve its internal controls. This includes enhancing its recruitment, approval of expenditure, procurement, and contract management procedures and associated policies. The Office of the Auditor-General also recommended that the ministry implement a programme that regularly reviews internal controls and processes to ensure that they are operating effectively. We intend to monitor the ministry s progress in acting on these recommendations. Background In 2011, the ministry employed Joanne Harrison as Manager, Change, People, and Development. She was promoted to General Manager, Organisational Development in In April 2016, the ministry was alerted to irregularities in spending approved by Joanne Harrison. The ministry passed the information to the SFO when it emerged that the spending may have been fraudulent. 2

3 In November 2016, Joanne Harrison pleaded guilty to three charges of dishonestly using a document. This involved creating fake companies to invoice the ministry between 2012 and In February 2017, Joanne Harrison was sentenced to three years and seven months imprisonment. At her sentencing, the judge revealed that Joanne Harrison had a previous conviction for a similar offence. Ministry of Justice and Police checks The ministry told us that, when it employed Joanne Harrison in 2011, it was not its practice to do Police or Ministry of Justice checks. It did only standard checks of references and credentials. It also asked individuals to declare whether they had any criminal convictions. The ministry did no additional employment checks when Joanne Harrison was promoted in 2013 because she had been employed by the ministry for two years. This was despite her financial delegation increasing from $25,000 to $100,000. Some of us suggested that the ministry would have discovered Joanne Harrison s background of fraud if it had done a Police check when it employed her. The ministry noted that, in 2011, not many agencies carried out Police checks. However, a written answer from the Minister of Police to a Labour member of the committee reported that Police in the state of Victoria, Australia, had been in contact with the New Zealand Police three times in 2011 about Joanne Harrison and investigations of fraud that had been conducted on her in Victoria. The ministry said that it was dealing with someone who was premeditated, was sophisticated, manipulative, and deceitful. It believed that it would be difficult to stop someone through an employment check if they were intent on committing fraud. We asked the ministry what checks it does now that it did not do in The ministry told us that, for the past two and a half years, it has been checking criminal records. It has also been open in talking about the fraud because it believes that one of the best ways to stop a fraud from happening is to make it harder for someone to come in with a fabricated story. We asked why, if the ministry were keen on being open about fraud, it had kept quiet for so long. The chief executive told us that he began his role on 12 July 2016 and spoke to the SFO on 13 July 2016 about wanting to be open and transparent. The SFO advised that it and the Police needed time to establish a case and to put measures in place to recover the money. Non-compliance with ministry policies The sentencing judge found that Joanne Harrison had committed the frauds between November 2012 and July We asked when questions were first raised about her performance. The chief executive told us that during that period there were a number of instances where Joanne didn t fully comply with ministry policies. However, he said that when all of the instances were followed up, Joanne Harrison gave responses that seemed sufficiently credible. He believed it would have been a big step to assume from non-compliance with departmental policies that someone, particularly in a senior role and position of trust, was committing fraud. The chief executive said he thought that her responses were great examples of her manipulation and deceit. 3

4 We were told that the chief executive initiated two independent reviews and now it is implementing the improvements. Some of us expressed concern that no action was taken against Ms Harrison until the Office of the Auditor-General reported her when there had been eight complaints with her non-compliance dating back to October Restructure of the ministry s finance team A related issue concerns the disestablishment of three positions following the introduction of automated invoice processing at the ministry in 2015/16. Some of us have heard that the three people made redundant had raised concerns about Joanne Harrison s non-compliance with policies. The ministry told us that the restructuring decision was taken by the senior leadership team. Although Joanne Harrison was a member of this team, she was not the only member, and the General Manager, Sector Performance led the review. Some of us are concerned that the people who were made redundant have had their careers ruined, and asked what compensation or redress the ministry had arranged for them. Some of us also believe that the ministry should conduct an investigation into whether Joanne Harrison had a role in the finance team redundancies or the demotion of staff members who interacted with her. The ministry told us that it would not investigate because it believes that the ministry, not Joanne Harrison, decided on the redundancies. Driver licensing fraud Some of us are concerned that the media, and not NZTA, is uncovering cases of driver licensing fraud. In March 2016 TVNZ reported a story about the fraudulent sale of driver licences. In February 2017, a Newshub report revealed fraudulent testing of heavy machinery drivers. NZTA disagreed that the media was discovering the frauds, noting that the Police had alerted NZTA to the fraud reported by TVNZ. NZTA told us that it moved quickly on the March 2016 fraud. It completed an internal investigation of all of the licences of the group of people the Police identified. NZTA also commissioned an independent end-to-end system review by KPMG. This was to ensure that the review focused on all aspects of the licensing system and not just the issues that had been raised. The KPMG review identified several areas for improvement. NZTA immediately implemented all of the short-term fixes and is working to implement the long-term changes. Some of these processes have taken longer. For example, setting up contracts was identified as an area for improvement, but it takes time to renegotiate contracts. NZTA told us that it has completed 70 audits of the more than 100 driver licensing sites. Sites that are deemed high-risk have more frequent audits. We asked what assurances NZTA could give the New Zealand public that the driver licensing system is free from corruption. NZTA told us that this is a priority for it. It has completed an independent review to ensure the integrity of the system, and it has addressed areas for improvement. It continues to monitor the situation. Auckland Transport fraud In February 2017, a senior manager at Auckland Transport was sentenced at the High Court in Auckland after being found guilty of bribery and corruption charges. Another 4

5 Auckland Transport employee pleaded guilty to accepting bribes and was sentenced in September The fraud involved receiving payments to award large roading contracts. NZTA told us that one of the men convicted worked for NZTA on safety audits quite a long time ago. We asked whether the contracts that were the subject of the court case involved any NZTA funding. NZTA said that it part-funds Auckland Transport maintenance contracts. To check the robustness of the tendering process, a team from NZTA works with the councils that it funds. An audit process checks the main elements of the procurement procedures and contracts. For larger organisations, such as Auckland Transport, this is done much more frequently. We asked whether these auditing processes had raised any matters of concern about Auckland Transport. NZTA did not believe that any were identified in the investment audits. However, it noted that the aim of audits is to check that systems are working, not to check individual transactions. Part B: Financial performance of the ministry and NZTA in 2015/16 Ministry of Transport The Ministry of Transport advises the Government on transport policy. Its purpose is to ensure that the transport system helps New Zealand thrive. The ministry s main priorities are to support economic growth and productivity, deliver better value for money, and improve road safety. Peter Mersi is the chief executive and Secretary for Transport. He replaced Martin Matthews in July Financial performance The ministry is funded through Vote Transport. In 2015/16, its total revenue was $32.9 million and its total expenditure was $32.5 million. This resulted in a surplus of $375,000, an increase on the 2014/15 surplus of $20,000. New Zealand Transport Agency The purpose of the New Zealand Transport Agency (NZTA) is to create transport solutions for a thriving New Zealand. It plans and invests in land transport, and manages the State highway network. It also provides access to, and regulates the use of, the land transport system. Financial performance Most of NZTA s revenue is from the National Land Transport Fund (NLTF). In 2015/16, its total revenue was $2.46 billion and its total expenditure was $2.42 billion. This resulted in a surplus of $39.5 million, a decrease from the 2014/15 surplus of $ million. Shared outcomes for the New Zealand transport system The ministry and NZTA have shared objectives for the transport sector and shared longterm outcomes for managing future transport pressures. Their four desired outcomes are for the transport sector to be: effective, by moving people and freight where they need to be on time 5

6 efficient, by delivering the necessary infrastructure and services to the correct level at the best cost safe and responsible, by reducing the harms from transport resilient, by meeting future needs and enduring shocks. We heard from the ministry and NZTA at a joint hearing on 9 March 2017, where we discussed the following issues. Part C: Other issues Working with KiwiRail NZTA has established a joint working relationship with KiwiRail. They are currently progressing several programme business cases that consider solutions for inter-regional routes in rail and road. Some of us note that it is in KiwiRail s interest as a business to put more freight on rail. We asked how the ministry and NZTA manage this complexity to get the best value for the New Zealand taxpayer. NZTA told us that it does not consider KiwiRail s commercial objective as part of the key criteria in the planning process. Rather, it considers what key outcomes are needed for residents, travellers, communities, and businesses. Improvements to the State Highway 2 network NZTA and KiwiRail are developing a business case on the State Highway 2 network in Wairarapa. The programme business case has identified several road and rail improvements that would, ideally, be done at the same time. Decisions on funding are made after the programme business case has identified the best solution. There are various funding options, including the NLTF, local councils, central government, and KiwiRail. We asked whether the improvements to the State Highway 2 network could be funded from the NLTF if improving the rail network could improve the functioning of the State highway network. NZTA told us that it can obviously fund certain elements from the NLTF, such as operating expenses and certain infrastructure such as passenger amenities. Below-track infrastructure cannot be funded out of the NLTF. NZTA does not put any money into freight operations and is unlikely to do so. However, there might be some subsidy for passenger services along State Highway 2. Transport projects in Auckland Ramp signals for Waterview Tunnel The Waterview Tunnel, which is part of the motorway ring route around Auckland City, is scheduled to open in April Ramp signals will be used to help regulate the number of cars entering the tunnel when there is congestion. We asked whether the ramp signals at the entrance to the Waterview Tunnel were planned when the project was designed. NZTA understands that ramp signals were not part of the original design and were added to the design a couple of years ago. NZTA said that, with projects of this size, more-detailed analysis of the operating environment happens as the project progresses. The decision was made to add ramp signals because they were needed for demand management. 6

7 Some of us do not consider ramp signals to be a form of demand management because they affect only how a car enters a motorway rather than the decision to use a car. NZTA told us that a person s decisions on their transport route or mode of transport depend on how they expect the experience to be. Adding different incentives to the network leads to different decisions. We asked whether the ramp signals aim to discourage people from using the tunnel. NZTA said that ramp signals, or any other demand management tool, aim to optimise the use of the whole network, not just the tunnel. East West Link The East West Link project will construct a four-lane road to connect State Highway 20 in Onehunga with State Highway 1 in Mt Wellington. The project also includes improvements to State Highway 1 to improve connections to East Tamaki. The project proposal is now with the Environmental Protection Authority s Board of Inquiry. Submissions are being sought from the public and stakeholders. NZTA told us that it has worked closely with the local community, particularly in Onehunga, on the project. It has also worked closely with iwi because this project will improve the water quality of the harbour. We asked how this project fits with NZTA s demand-management and whole-of-network approaches. NZTA told us that the East West Link provides a vital link between State Highway 1 and State Highway 20 and to the industrial areas of Onehunga and Penrose. AMETI Project The Eastern Busway, part of the Auckland Manukau Eastern Transport Initiative (AMETI), is a group of projects in south-east Auckland that will improve roads and create an urban busway. Some of us are concerned about plans to reduce the number of car lanes on the Pakuranga Highway and Lagoon Drive to create dedicated bus lanes. We asked NZTA to provide an example of any comparable city in the world where the solution to a congestion problem was reducing the number of car lanes. NZTA told us that New Zealand cities can best be compared with Australian cities. It said that Brisbane and Sydney have reduced the number of car lanes to provide bus lanes. Other international examples include the Cleveland bus lane in the United States, where an urban arterial roadway was reduced from four traffic lanes to two, and the London Bus initiative and Red Route Network in the United Kingdom, where general traffic lanes were converted into bus lanes. Government Policy Statement The Government Policy Statement on Land Transport (GPS) outlines the Government s priorities for expenditure from the NLTF for the next 10 years. The ministry has released the draft 2018/ /28 GPS for comment. It plans to release the final GPS in 2017/18. We note that the draft GPS looks very similar to the previous GPS, with most of the funding for new infrastructure investment allocated to new State highway improvements. The Auckland Transport Alignment Project (ATAP) sets out a clear direction for developing Auckland s transport system during the next 30 years. We note that the draft GPS has no new money for investment in new public transport infrastructure. We asked what would happen if the ATAP indicates that public transport options should be funded 7

8 to reduce congestion in Auckland. The ministry told us that there is a placeholder for funding requirements for ATAP. This is because the Government and Auckland Council are still discussing options. The ministry is unable to predict what will happen because those decisions are being worked through. The ministry does not expect the architecture of the GPS to change as a result of the ATAP decisions, but it is possible that relative priorities could change. Using technology for demand management We asked what role technology would play in demand management in the next 3 to 10 years. NZTA told us that it is focused on using data and information to consider different types of mobility, such as shared mobility and mobility as a service. It is exploring how it can provide services in a different way for example, by providing a platform where people can purchase travel for all different modes in a joined-up way. NZTA believes there is huge potential to use ride-sharing platforms to increase the number of ride sharers. This is important in Auckland where it takes years to deliver infrastructure projects. NZTA said that increasing the average car occupancy would improve congestion levels across Auckland s transport system. We look forward to hearing about the progress of this work. Funding for public transport We are interested in public transport options in other rapidly growing New Zealand cities, besides Auckland. To develop the next NLTP, NZTA will soon engage with each region about what they consider to be their key transport challenges and priorities. This is an important part of the planning and funding process because the NLTP must take account of the Regional Land Transport Plans. We asked whether NZTA had received any proposals or queries about light rail in other cities. NZTA was unaware of any proposals for light rail. As for studies about light rail, it is aware only of one in Wellington. NZTA considers that it has a balanced approach to all transport modes within the framework it operates. It does not fund maritime or coastal shipping, but can fund passenger ferry services. NZTA s approach focuses more on outcomes than on particular modes of transport. Smart motorway New Zealand s first smart motorway opened in Wellington in It aims to reduce congestion by lowering the speed limit during busy times, allowing vehicles to travel closer to each other. This means that more vehicles can fit on the road. NZTA told us that anecdotal evidence indicates that the smart motorway has improved traffic flows in particular parts of the peaks. NZTA is doing a formal before-and-after project on the effect of the motorway. It agreed to provide us with the data when the project is completed. We look forward to seeing the results. Social behaviour link to congestion We asked whether the ministry has any campaigns about the effect of social behaviour on congestion, such as drivers not letting other people into their lane. Although the ministry does not have an active research programme on changing social behaviour, it provides 8

9 signs that remind people to merge like a zip. It suggested that the smart motorway is a tool to encourage people to change their behaviour. Network Outcome Contract holders NZTA collects annual data about the road network to determine the ongoing maintenance and renewal plan. Holders of a Network Outcome Contract (NOC) are roading contractors who prepare maintenance and renewal plans, as agreed by NZTA. The NOC incentivises holders to optimise the performance of the network and keep the Road Assessment and Maintenance Management database updated with the correct data. NOC holders are held accountable for not achieving their performance targets. NZTA ensures that NOC holders achieve their performance targets through an ongoing assessment programme. This involves a crew of asset managers travelling to different parts of the network to record and check site-specific data. NZTA works with NOC holders when it finds examples of unsatisfactory performance. 9

10 Appendix Committee procedure We met on 9 and 23 March 2017 to consider the annual review of the Ministry of Transport and the New Zealand Transport Agency. We heard evidence from the ministry and NZTA, and received advice from the Office of the Auditor-General. Committee members Jonathan Young (Chairperson) Hon David Bennett Peeni Henare (until 22 March 2017) Raymond Huo (from 22 March 2017) Iain Lees-Galloway Clayton Mitchell Sue Moroney Dr Parmjeet Parmar Denise Roche Alastair Scott Hon Maurice Williamson Dr Jian Yang Advice and evidence received The documents that we received as advice and evidence for this annual review are available on the Parliament website, They are listed below: Ministry of Transport, Responses to questions, received 22 January Ministry of Transport, Responses to post-hearing questions, received 22 March New Zealand Transport Agency, Responses to questions, received 28 February New Zealand Transport Agency, Responses to post-hearing questions, received 22 March Office of the Auditor-General, Briefing on the Ministry of Transport and the New Zealand Transport Agency, dated 9 March Organisation briefing paper, prepared by committee staff, dated 7 March