Part 1: Introduction

1.1
This report follows up on a performance audit of New Zealand Trade and Enterprise (NZTE) in 2004 that examined NZTE’s administration of grant programmes.¹

1.2
We did a follow-up audit to provide assurance to Parliament that NZTE has responded appropriately to the recommendations we made in 2004, and is effectively and efficiently administering its grant programmes in accordance with the Government’s intentions.

Overview of New Zealand Trade and Enterprise

1.3
NZTE is the Government’s national economic development agency. It was set up as a Crown entity in July 2003 out of the merger of three predecessor entities - Industry New Zealand, Investment New Zealand, and Trade New Zealand.

1.4
An important purpose of NZTE is to support the development of internationally competitive business performance.² This role includes administering a wide range of grant and awards programmes on behalf of the Crown. In 2007/08, NZTE is responsible for administering more than $95.6 million of grants and awards.³

Our findings in 2004

1.5
Our performance audit in 2004 examined five of NZTE’s grant programmes to see whether they were being administered effectively and efficiently, and in keeping with the policy direction set by the Government. Some of the grant programmes were being administered better than others, but all could have been administered better in some areas. In his foreword to the 2004 report, the Auditor-General concluded that:

NZTE has not yet established a framework to ensure that, for each grant programme, consideration has been given to important aspects of grant administration, including the assessment of risk, data collection and reporting, documentation, and monitoring practices.

1.6
We made 47 recommendations for improvements or changes to NZTE’s administration of grant programmes. Six of the recommendations applied to all grant programmes, five applied to the evaluation of grant programmes, and the remaining 36 applied specifically to the five different grant programmes we examined.

How we conducted our follow-up audit

1.7
For our follow-up audit, we grouped our original recommendations into six themes instead of specifically assessing NZTE’s response to each individual recommendation. We took this approach for two reasons:

• Our 2004 report contained general and programme-specific recommendations covering similar issues because we found the same issues in several of the five grant programmes we examined.
• Two of the five grant programmes examined in 2004 have been disestablished, and our recommendations concerning those programmes are no longer directly relevant.

1.8
We did not examine grant programme evaluation in our follow-up audit. This was because evaluation was not a main area of concern identified in 2004. In addition, several of the five evaluation recommendations in our 2004 report were directed at the Ministry of Economic Development and Ministry of Foreign Affairs and Trade, whereas our follow-up audit focused only on NZTE.

1.9
The six themes this follow-up audit examined were:

• an overall framework for administering grant programmes;
• guidance for interpreting, and adhering to, government criteria for grant programmes;
• quality of data collection and reporting;
• documentation standards and guidance;
• assessment of risk; and
• monitoring of grants.

1.10
For each of the six themes, we set up audit expectations derived from our 2004 findings and recommendations. We set out these expectations when we discuss our detailed findings in Parts 2 to 4.

1.11
We:

• examined NZTE documentation relevant to grant administration;
• interviewed NZTE staff involved with grant administration and business process improvement; and
• examined a small sample of individual grants from three grant programmes.

Which grant programmes did we audit?

1.12
The three grant programmes we selected were the Growth Services Fund (GSF), the Strategic Investment Fund (SIF), and Enterprise Development Grants for Market Development (EDG-MD).

1.13
Our 2004 audit also examined the GSF and SIF programmes. We re-selected them for two reasons:

• Both programmes involve significant amounts of public funding. GSF was appropriated $9.4 million and SIF $5.2 million for 2007/08.
• Our 2004 report found several areas where the administration of both of these programmes could be improved.⁴

1.14
We selected the EDG-MD programme because it is now the largest grant programme by value administered by NZTE. The 2007 Budget substantially increased funding for this programme, from $36.3 million for 2006/07 to $51.4 million for 2007/08, with funding at the new level planned for the next three years.

1.15
Figure 1 summarises the main characteristics and aims of the three grant programmes we examined.

Figure 1
Descriptions of the three grant programmes we examined

Our audit sample

1.16
We sampled individual grants from those approved under the three selected grant programmes in the 2005/06 and 2006/07 financial years. We mainly chose grants where half or more of the approved funding had been paid to recipients, so we could assess the administration of grants from application to completion. Figure 2 summarises our audit sample as a percentage of the number and value of grants in each grant programme that were approved in the two-year period we sampled.

Figure 2
Summary of grants we audited

1: New Zealand Trade and Enterprise: Administration of grant programmes, ISBN 0-478-18124-9.

2: New Zealand Trade and Enterprise (2007), Statement of Intent 2007-2010, Wellington.

3: New Zealand Trade and Enterprise(2007), Statement of Intent 2007-2010, page 52. In addition to the funding for grants and awards, NZTE was appropriated nearly $4.7 million in 2007/08 for grant administration and management.

4: Of the other three grant programmes examined in 2004, two of them - Enterprise Network Grants and the Major Events Fund - have been disestablished. We excluded the third - Enterprise Development Grants for Capacity Building - because it was found to be well administered overall.