Part 3: Organisational health and capability
Capability report
Our operating model
The Auditor-General's staff are organised into two business units – the Office of the Auditor-General (OAG) and Audit New Zealand.
The OAG carries out strategic planning, sets policy and standards, appoints auditors and oversees their performance, carries out performance audits, provides reports and advice to Parliament, and carries out inquiries and other special studies.
Audit New Zealand is the operating arm, and carries out annual audits allocated by the Auditor-General. It also provides other assurance services to public entities within the Auditor-General's mandate and in keeping with the Auditor-General's auditing standard on the independence of auditors.
The Auditor-General also engages private sector accounting firms to carry out audits of some public entities. Figure 29 shows the Auditor-General's operating model.
Figure 29
Our operating model
Size and scale of our operations
The Auditor-General has a statutory duty to conduct annual audits of the financial reports and other audits required by various statutes of about 4000 public entities, of which about 3000 are schools and other very small entities. The Auditor-General is also able to perform other services reasonable and appropriate for an auditor to perform, and to audit other quasi-public entities.
We employ about 350 staff in eight locations, and engage about 60 private sector accounting firms to carry out annual audits of public entities.
Summary results for 2008/09
Our Annual Plan 2008/09 set out the measures we intended to use to assess our current capability, specifically:
- staff numbers and the distribution of staff by function, gender, and ethnicity;
- staff tenure and turnover, including numbers of internal promotions to senior roles; and
- investment in staff training and development.
Our specific intentions and results against these measures for 2008/09 were to maintain and improve:
- our audit staff numbers;
- the engagement and satisfaction of our staff; and
- all of the key capability statistics from the previous year.
Specific areas of focus were:
- continued strengthening of the management and leadership capability of our senior people;
- maintaining and extending the national professional development programme;
- improving Individual Development Plans for all staff;
- ongoing investment in targeted areas of generic training (for example, te reo, presentation skills, media liaison, and plain English writing);
- resourcing and aligning the mix of staff in Audit New Zealand to better align with our future resourcing model;
- improving and expanding our high potential and talent management programmes to recognise, reward, and develop our high performers;
- maximising the quality of our national internship programme; and
- further aligning our human resources policies and procedures to support the recruitment, retention, and development of the best people.
Based on this information, we drew our own conclusions about the adequacy, quality, and effectiveness of our current capability. Overall, we have made good progress during 2008/09 in:
- continuing to develop the leadership skills and capability of our staff;
- improving our systems and processes;
- improving recruitment and retention to attract and retain good people; and
- maintaining acceptable levels of organisational health.
Resources
Throughout 2008/09, our overall staff turnover has remained around 20%. However, there has been a noticeable drop in the turnover of Audit New Zealand staff, ending the year at around 17%. We attribute this drop to two factors: the worldwide recession and improved culture. The recession has undoubtedly led to lower worldwide demand for accounting staff, which has reduced the number of our newly qualified auditors leaving to travel overseas. We believe that our leadership development programme has also contributed to a reduction in attrition, because more senior staff have chosen to stay and staff engagement and satisfaction have improved.
We use a resource planning model to forecast audit staff requirements in future years. This model has shown us that, even though attrition is reducing, we need to maintain a certain level of recruitment for graduates but reduce the recruitment of qualified employees. It also shows that we need to continue to supplement our internal staff with secondees from other chartered accounting firms to help us through our peak workload periods.
Our recruitment initiatives and processes were again successful in 2008/09. Thirty-one graduates joined the Office during the year, including 19 who had worked with us as interns in the previous year. We continued to recruit a small number of qualified auditors from the United Kingdom and South Africa. We also attracted a number of highly experienced professionals from both the public and private sectors in New Zealand. We believe that, for the first time in a number of years, we have sufficient staff.
Figure 30 provides a summary of staff numbers, their functional distribution, and staff turnover for the year.
Figure 30
Staff numbers, functions, and turnover
| As at 30 June | 2009 | 2008 | 2007 |
|---|---|---|---|
| Staff numbers (full-time equivalents) | |||
| Office of the Auditor-General | 61 |
57 |
71 |
| Audit New Zealand | 249 |
216 |
217 |
| Corporate Services* | 44 |
38 |
N/A |
| Total | 354 |
311 |
288 |
| Functional distribution | |||
| Audit/assurance | 65% |
74% |
72% |
| Technical and advisory | 10% |
9% |
4% |
| Corporate support | 22% |
13% |
20% |
| Senior management | 3% |
4% |
4% |
| Turnover | |||
| Office of the Auditor-General | 19% |
19% |
19% |
| Audit New Zealand | 17% |
21% |
18% |
| Corporate Services* | 24% |
21% |
n/a |
* Corporate Services function is shared between the OAG and Audit New Zealand. From 2008, the staff numbers for Corporate Services are shown separately. In previous years, these staff numbers were distributed between the two business units.
Equal employment opportunities
The principles of equal opportunity are embedded in the Office's policies and procedures. Our recruitment programme in particular aims to attract and appoint the best people, who have the appropriate skills, values, and attributes to meet the Office's needs, objectives, and strategic direction, in a manner that provides equal employment opportunity to Māori, women, ethnic or minority groups, and people with disabilities.
The Office benefits from a diverse workforce, and we are committed to recognising and valuing different skills, talents, experiences, and perspectives among our employees. A diverse workforce will help the Office relate to our clients and bring a variety of perspectives to bear on our work.
As shown in Figure 31, the diversity of our staff remains high.
Figure 31
Staff diversity
| As at 30 June | 2009 | 2008 | 2007 |
|---|---|---|---|
| Gender distribution – all staff | |||
| Women | 52% | 52% | 54% |
| Men | 48% | 48% | 46% |
| Gender distribution – executive management | |||
| Women | 42% | 42% | 45% |
| Men | 58% | 58% | 55% |
| Ethnicity distribution | |||
| NZ European | 48% | 42% | 48% |
| NZ Māori | 2% | 4% | 3% |
| Pacific Islander | 3% | 3% | 2% |
| Asian | 12% | 12% | 9% |
| Other European | 7% | 12% | 8% |
| Other ethnic groups | 4% | 2% | 3% |
| Undeclared | 24% | 25% | 27% |
Training and development
We aim to continue to improve the overall skill, leadership capability, and experience level of staff. This is of particular importance for audit staff, but applies to the whole organisation. Statistics on staff experience and training are shown in Figure 32.
Figure 32
Staff experience and training
| 2008/09 | 2007/08 | 2006/07 | |
|---|---|---|---|
| Experience – average years in job (at 30 June) | |||
| Office of the Auditor-General | 7.6 | 7.2 | 5.8 |
| Audit New Zealand | 4.2 | 4.3 | 4.3 |
| Corporate Services* | 2.9 | 5.4 | n/a |
| Training and development – average expenditure for each employee | |||
| Office of the Auditor-General (incl. Corporate Services) | $1,658 | $1,884 | $2,572 |
| Audit New Zealand | $2,371 | $4,509 | $3,165 |
| Pass rate of staff undertaking NZICA accreditation | |||
| 94% | 100% | 100% | |
* Corporate Services function is shared between the OAG and Audit New Zealand. From 2008, the staff numbers for Corporate Services are shown separately. In previous years, these staff numbers were distributed between the two business units.
We have continued to develop our high potential and talent management programmes, to improve staff retention and to broaden the skills of our current and future leaders. In 2008/09, two new programmes were launched: an aspiring managers' programme and an aspiring directors' programme. These programmes target audit staff who have shown the capability and desire to take on more senior roles, focusing on self-development and leadership skills.
Expenditure on training and development has decreased for Audit New Zealand, in particular. The peak figure in 2007/08 reflects the investment we made in establishing leadership development programmes in that year.
Many staff members throughout the organisation have also received generic training, which includes plain English writing, presentation, and media liaison skills.
Professional development continues to have a very high priority. In 2008/09, Audit New Zealand refreshed its national professional development programme for all audit staff. The programme delivered 30 modules/courses to 513 course participants. These were highly rated by audit staff, with an average rating of 7.9 out of 10. The programme aims to improve the base professional competencies of audit staff. This includes equipping them to work within Audit New Zealand's national professional practice framework, audit methodology, and quality control systems, and the Auditor-General's auditing standards.
Organisational health and staff satisfaction
Each year we survey our staff to understand trends in various aspects of our staff satisfaction. For a second year, we used the Gallup Q12® employee engagement survey to survey our staff.
We are particularly interested in the overall satisfaction and engagement of our staff, whether the organisation meets the basic needs of our people, the degree to which our people contribute as individuals and as teams, and the opportunity for growth in the organisation.
We are pleased to note that our results have improved in almost all areas since the previous year (see Figure 33). While it is difficult to quantify the effect of particular initiatives, we believe that the ongoing leadership development programme in Audit New Zealand has played a significant part.
We consider it desirable and beneficial to continue improving our employees' engagement and satisfaction across the board, and will be working on this throughout 2009/10.
Figure 33
Staff survey results
| As surveyed in May | 2009 | 2008 |
|---|---|---|
| Staff survey results (1 = low, 5 = high) | ||
| Overall engagement | 3.8 | 3.7 |
| Overall satisfaction | 3.7 | 3.5 |
| Basic needs met | 4.0 | 4.0 |
| Individual contribution | 3.7 | 3.5 |
| Teamwork | 3.7 | 3.5 |
| Growth | 4.2 | 4.0 |
Another indicator of organisational health is the average number of sick days taken by an employee. As shown in Figure 34, the figures for 2008/09 are consistent with previous years.
Figure 34
Sick leave
| Sick leave taken – average for each employee | |||
|---|---|---|---|
| 12 months to 30 June | 2009 | 2008 | 2007 |
| Office of the Auditor-General | 4.8 | 5.2 | 5.3 |
| Audit New Zealand | 5.1 | 5.5 | 4.8 |
| Shared Corporate Services | 4.8 | 4.3 | n/a |
Information systems
The Office, especially Audit New Zealand, is highly dependent on information technology to complete its work. Audit staff working in the field need to have remote access and communications tools to ensure an effective, efficient, and customer-focused service. The OAG needs systems to manage the approximately 4000 audits we are responsible for.
During 2008/09, the Office invested in the replacement of its core financial system and an integrated time and cost management system. The new system replaces several separate systems that were no longer able to meet the information, management, and security needs of the Office. The replacement system contains increased functionality, including process workflow management and significantly improved operational and management reporting functions.
Also in 2008/09, a project was started to put in place a single document and records management system.
Financial performance indicators
Details of our performance against measures established in the Annual Plan 2008/09 are summarised in Figure 35.
Figure 35
Financial performance indicators for the year ended 30 June 2009
| Measure | 2008/09 Actual $000 |
2008/09 Supp. Estimates $000 |
2008/09 Annual Plan $000 |
2007/08 Actual $000 |
2006/07 Actual $000 |
|---|---|---|---|---|---|
| Operating results | |||||
| Income: other than Crown | 60,506 | 62,607 | 61,332 | 58,525 | 58,503 |
| Output expenditure | 69,934 | 72,520 | 71,228 | 67,861 | 67,553 |
| Surplus before capital charge | 750 | 165 | 120 | 549 | 552 |
| Surplus | 486 | - | - | 285 | 285 |
| Working capital management | |||||
| Current assets less current liabilities | 1,687 | 1,736 | 2,272 | 2,324 | 1,844 |
| Current ratio | 118% | 122% | 129% | 130% | 123% |
| Average receivables and work in progress | 42 days | 41 days | 45 days | 42 days | 35 days |
| Resource use | |||||
| Total plant, equipment, and intangible assets at year-end | 2,351 | 2,440 | 2,019 | 1,847 | 2,389 |
| Additions as % of total | 64% | 67% | 76% | 42% | 51% |
| Taxpayers' funds | |||||
| Level at year-end | 3,521 | 3,521 | 3,521 | 3,521 | 3,521 |
| Net cash flows | |||||
| Surplus on operating activities | 2,233 | 813 | 1,589 | 452 | 1,867 |
| Surplus/(Deficit) on investing activities | (1,428) | (1,531) | (1,410) | (652) | (1,015) |
| Surplus/(Deficit) on financing activities | (285) | (285) | - | (469) | - |
| Net increase/(decrease) in cash held | 520 | (1,003) | 179 | (669) | 852 |