Chapter E5 Monitoring, auditing and reporting

E5.19 Audit of activities delivered by approved organisations

Introduction

This section sets out the NZTA’s procedures for monitoring and audit of activities delivered by approved organisations.

Legislative mandate

The NZTA’s functions include:

• managing funding of the land transport system, including (but not limited to) auditing the:
  • performance of approved organisations in relation to activities approved by the NZTA
  • operation of the land transport disbursement accounts of approved organisations
• assisting, advising and cooperating with approved organisations.

NZTA audit programme

These statutory requirements are addressed through the NZTA’s annual audit programme comprising:

• procedural audits and theme audits
• passenger transport audits
• technical reviews
• theme audits
• road infrastructure safety assessments (RISAs)
• post-approval reviews of activity assessment
• post-implementation reviews (PIRs).

The NZTA audits most approved organisations every three years. Those receiving a higher level of funding are on a two-yearly cycle. State highway activity is audited every year because it receives a significant proportion of NLTF funding.

In May each year, all approved organisations are sent a copy of a general circular showing the audit programme for the coming year. The general circular is also published at www.nzta.govt.nz/resources/general-circulars/.

Each approved organisation included in the programme is contacted well in advance of the audit, suitable dates negotiated, and any required information requested.

Approved organisations must make all necessary records available to auditors on request, including internal audit management reports.

Risk factors to be considered

In selecting the approved organisations to be audited, three risk factors are considered:

• known issues/risks
• levels of funding
• length of time since the previous audit.

The audit process

An entry meeting is held to explain the audit programme and to establish relevant contacts with key staff. At the conclusion of the audit, an exit discussion is held with key staff. Any issues are raised at this time to ensure there are ‘no surprises’ in the final report.

Before the audit report is finalised, the NZTA sends it to the approved organisation for comment. The NZTA considers the comments and may change the report as a result. The comments are appended to the report in full. The NZTA then issues the final report after adoption by the Chief Executive under delegation from the Board.

The NZTA regional liaison staff will follow up recommendations, and any recoveries for over-claimed expenditure (arising from a Procedural Audit) are invoiced to the approved organisation.

Procedural audits

Procedural audits focus on ensuring approved organisations comply with the requirements in this manual, procurement manuals and various general circulars that have been issued to approved organisations. The procedural audits include:

• reviewing documentation/ledgers supporting final claims submitted to the NZTA
• reviewing and validating a sample of transactions included in the general ledger
• checking a sample of contracts to ensure they have been let in accordance with procurement strategies and approved procurement procedures
• looking at management of contracts subsequent to them being let, including both financial and non-financial aspects
• validating annual achievement reports submitted to the NZTA.

On average, 30 procedural audits are carried out each year, including about four passenger transport audits.

Passenger transport audits

Passenger transport audits (of contracts let for public passenger transport activities) are similar to standard procedural audits, with additional areas of interest including:

• public transport specific procurement procedures
• administration and management of Total Mobility schemes
• administration and management of public transport activities
• status and content of the RLTS and the regional public transport plan.

Technical audit programme

The purpose of the technical audit programme is to review and audit activities, that are either wholly or partly funded from the NLTF, against the relevant NLTP agreements in terms of:

• value for money, which includes:
  • effectiveness (the extent to which required objectives or targets are met)
  • efficiency (how well inputs are used to produce outputs)
  • economy (minimising the cost of inputs or resources used for an activity)
• quality (compliance with set standards or guidelines)
• the technical and management systems employed to deliver the activities.

Audit types

The technical audit programme comprises the following audit types:

• technical reviews
• theme audits
• road infrastructure safety assessments (RISAs)
• post-approval reviews of activity assessment
• post-implementation reviews (PIRs).

Each of these technical audit types is described in greater detail in the following sections.

Technical reviews

Technical reviews are carried out on a one-to-one basis with an approved organisation by the technical auditor who will generally be accompanied by:

• the local NZTA regional contact for that organisation
• an independent local authority engineer.

One purpose of the technical review process is to foster good working relationships and to exchange knowledge. Having an engineer from a similarsized organisation provides a good opportunity for this collegial exchange.

Information utilised during the technical review includes, but is not limited to:

• approved organisation publications (such as the long-term council community plan – LTCCP, annual plan, Activity/Asset Management Plan etc, generally sourced directly from the local authority website to ensure it is the most current version)
• pavement condition trends
• maintenance programme achievement and expenditure data
• road crash data
• observations made during a drive over of a sample of the road network
• road infrastructure safety assessments (RISAs)
• consultation with the NZTA regional staff for their insight.

Theme audits

Up to four theme audits are carried out each year. Theme audits address a specific topic across a range of approved organisations (ie a one-to-many relationship), generally concentrating on management issues affecting land transport network performance.

The results feed into operational policy development for both the NZTA and other parties, such as the Ministry of Transport, Local Government NZ, RCA Forum, etc.

Reports on theme audits can be found on the SmartMovez website.

Road infrastructure safety assessments

A road infrastructure safety assessment (RISA) is a technical review that assesses a sample of an approved organisation’s road network to identify possible areas for safety improvement. This assessment method is still being trialled.

A RISA:

• is based on international research that relates infrastructure features to crash rates
• assesses the extent of these features on the road network
• makes recommendations for high-level strategic actions to improve road safety on a network-wide basis
• is used as an input to technical reviews.

Post-approval review of activity assessments

The NZTA will audit a sample of submitted project assessments throughout the year to assess approved organisations’ competence and performance. Should the review reveal any issues of significance, funding may be reduced, refused or withheld as detailed in section A2.4.

Post-implementation reviews

Post-implementation reviews audit a sample of completed large construction projects (split 50:50 between state highway and local authority projects) against the initial project objectives, costs and economic justification. It is a constructive process looking to identify areas for improvement in both the NZTA procedures and those of approved organisations.