Corporate Publications Statements of Intent Annual Reports

Resource material › Corporate Publications › Statement of Intent 2011-14Tauāki Whakamaunga AtuCapability to deliver

Operating environment

The operating environment for the Department is inextricably linked to, and strongly influenced by, the broader economic and fiscal environment, which has been adversely affected by the global economic downturn and domestic recession.

The key messages from the Government continue to highlight a tight economic and fiscal environment, exacerbated by the financial pressures created by the Christchurch earthquakes.

The primary implication for the Department is that it will continue to operate within a fiscally constrained environment, with static baselines creating significant risks and cost pressures over the medium term. Any capital investment proposals will need to align with the Government’s aim of using improvements in national infrastructure to drive productivity growth within the public sector and the wider economy.

The other influences that affect the Department’s capability to deliver the required services and support include:

the outcomes of the Treasury-led Better Administrative and Support Services programme, and the potential impact on the back-office functions of the Department
the cross-functional nature of the Department’s operations means that processes and systems must be sufficiently flexible to meet individual business unit requirements, while still conforming to overall corporate requirements.

Managing in a changeable operating environment

To manage in this environment, the Department must be both risk-aware and risk-astute. Managers must understand where their strategic, operational and service delivery uncertainties lie, and how these can create risk to the achievement of the Department’s objectives.

The Department is confident that it has the capability and capacity to manage and respond to the continually changing environment. It has in place systems, structures and processes that enable the Department to identify and mitigate risks in the operating environment. The Executive Leadership Team determines the nature and level of strategic risk by actively defining and assessing the short- and medium-term context of the various sectors, stakeholders and customers of the Department. The Department considers opportunities afforded by the forward environmental scanning and identifies key initiatives and strategic priorities as the first expression of its response to the external operating environment.

The Executive Leadership Team is collectively responsible for identifying the key capability and capacity requirements to support the strategic direction and priorities, and assessing the level of uncertainty of performance or productivity. Each branch is required to identify any area of performance or delivery risk to its operations and services and put in place appropriate mitigations and contingency plans.

The Executive Leadership Team also supports the identification and recognition of risk by way of the Department’s four governance committees, which provide further focus on key categories of risk management. The practice and policies to support risk management in the Department are strengthened by way of the Risk and Assurance governance committee, tasked specifically to provide oversight and guidance at an organisation-wide level.

Approach to building capability

In 2010, the Minister of Internal Affairs challenged the Department to become the preferred home for selected government functions that require high-quality service delivery to people, communities and government. In the past 12 months, the Department’s strategic priority has been to build its capability so it can meet that challenge.

The scale of change to date is significant, involving major growth in the number of people and responsibilities. This will continue with the consolidation of the changes associated with the integration and the strengthening of the Department’s capability for future change. The Department’s approach to building capability has been and will continue to be largely influenced by the 1 February 2011 integration.

To respond to the integration, Internal Affairs seeks to be an organisation that is sustainable, fit for purpose and adaptable for managing change. It will focus on building its capability to:

deliver services to people and work with communities, hapū and iwi
deliver services to government
be a good employer.

The Department has put in place a new structure, leadership team and governance arrangements. The executive leadership team has collective accountability for the strategic direction of the Department, supported by the governance committees and management board, which also have a whole-of-Department perspective. The integration has created a new organisation that has potential synergies from the new combinations of functions within it. However, the Department has to build a collective culture that allows it to realise those synergies. This is an important area of focus for the leadership team, and is essential in order for the Department to be able to meet the Government’s expectations.

Improving services to people and working with communities, hapū, and iwi

Providing customer-focused services

A central process to improving service delivery, both internally and externally, is a series of ‘Systems Thinking’ interventions, which the Department undertakes in order to improve the efficiency and effectiveness of its functions, systems and processes. The Department has adopted the Systems Thinking approach to ensure continuous improvement of its services. Systems Thinking is a highly participative method designed to support managers and staff through improvement efforts, while challenging thinking and assumptions that may hinder improvement. This will include developing measures that better reflect what matters to the customer, what the current state is and what needs to be done to improve performance. The interventions the Department has introduced in Citizenship, Births, Death and Marriages, and Human Resources have already resulted in significant and measured efficiency gains. Internal Affairs is developing an in-house capability which will see the Systems Thinking approach implemented incrementally and continually across all of the Department’s functions.

The Department will also continue to:

support the National Library’s New Generation programme, which is focused on developing new services and building a stronger customer focus, and leverage this work across the organisation where appropriate
develop and formalise the community advisory practice and training frameworks in its Community Operations areas.

Ensuring fair prices for the Department’s products

The Department provides a number of services to individuals and groups for which it charges fees. It has in place an overall pricing framework encompassing best practice public sector guidelines, a set of overarching pricing principles and specific pricing strategies for individual products and services provided in both contestable and non-contestable environments and markets.

Where services are provided on a cost recovery (fee-for-service) basis in non-contestable markets, the Department operates memorandum accounts⁴ to assist in managing costs and revenue, particularly where fees charged are set under regulations. Other fees are charged for services that are not regulated through specific statute.

The Department depends on revenue from fees for over one-third of its income, and baselines can fluctuate as demand for products and services changes. The most significant area of fee generation is for passport production. Volumes in this area are predicted to rise, and then plateau, over the next five years, reflecting the commencement in March 2010 of the renewal cycle for the five-year passports.

A regular review of fees is essential to ensure cost recovery, while fee reviews are undertaken on a regular basis to ensure the validity of application of the principles of equity and financial prudence in the setting of fees.

Apart from passports, there continue to be current and outyear risks associated with projected adverse performance in citizenship, birth, death and relationship certifications and non-casino gambling. Accordingly, during the 2011/12 financial year fee reviews will be completed for these products, and the recommendations from these fee reviews may affect forecast third-party revenue from 2011/12.

Enabling effectiveness for Māori

The Department is committed to the articles and the principles of the Treaty of Waitangi and will continue to build its internal capability to work with whānau, hapū and iwi Māori. The Department is currently reviewing its overall Effectiveness for Māori plan (EfM) to ensure that its capability to work effectively with Māori is aligned with its strategic direction.

This EfM plan is designed to strengthen its capability to improve outcomes for whānau, hapū, iwi and Māori. For example, the Department’s implementation of the following will help build, amongst other things, capability to deliver high quality operational services to Māori:

the Te Whakamotuhaketanga Hapū strategy in Community Operations
the Te Kaupapa Mahi Tahi and Bicultural Implementation Plan of the National Library
the Responsiveness to Māori Programme of Archives New Zealand.

The Department is also undertaking a review of its Māori advisory groups. As a result of the integration, the Department has three Māori advisory groups which exist to provide high level advice and support to the Chief Executive and advice to local branches. These groups provide advice on matters relating to its overall ability to meet Treaty of Waitangi obligations and work with mana whenua (Te Atamira Taiwhenua), as well as its specific work relating to National Library (Te Komiti Māori) and Archives New Zealand (Te Pae Whakawairua) responsibilities. The future arrangements need careful consideration, and will be worked through to identify an approach that best enables the Department to successfully respond to the needs of Māori staff, implement Treaty settlements, and to honour its broader obligations under the Treaty.

Delivering services to government

In addition to ensuring it has the capability to deliver services to people and communities, the Department will also continue to build its capability to support other public sector organisations through ICT strategy and procurement.

Central to its support of other public sector organisations is the Department’s ability to use its expertise in delivering government technology services to ensure it has the internal technical and service delivery capability it needs to give the maximum benefit to its public sector clients. The Department’s approach to ICT involves a standard ‘client-service provider’ model to deliver services to internal and external clients and it is achieving measurable improvements as a result.

The Department also seeks to show particular leadership in procurement through strengthening awareness of the need for collective responsibility and prudent management of taxpayer funds. It will improve procurement competency among staff in areas such as value for money. Following on from the success of the Centre of Expertise for ICT Equipment, part of the all-of-government procurement programme, the Department will continue to take a strategic approach to procurement. It will do this by ensuring value for money, improving ease of doing business, building capability, encouraging sustainability, being a leader in partnering and collaboration, and maintaining effective control.

The Department will review its shared services model in order to make sure that the way it operates and the relationships the branch has with the rest of the Department deliver the intended benefits from its formation, such as a consistent approach to delivery and flexibility in response to changing needs.

Being a good employer

The Department continues to focus on being a good employer. It also aspires to be an ‘employer of choice’, offering a range of opportunities for people to grow their careers. It is well-positioned to make a contribution to the wider State sector through building leaders and will continue with its current focus on talent management and leadership development.

As part of being a good employer, the Department continues to promote diversity and equal employment opportunities (EEO) and support the Equality and Diversity: New Zealand Equal Opportunities Policy. Internal Affairs recognises the value of a diverse workforce and supports a number of EEO groups within the Department.

The Department will also build on the integration of the former Department, National Library, Archives New Zealand and the functions of the Office of the Government Chief Information Officer and the Office for the Community and Voluntary Sector by:

working to achieve a common set of core terms and conditions and single people systems to unify the diverse groups within the Department. This will involve implementing a new employment relations strategy, which includes new remuneration and performance management systems.
reviewing existing key frameworks such as the Lominger Leadership Competencies to ensure they align with the Department’s current direction and focus.

Financial management and capital intentions

The Department meets its obligations to deliver effective financial management and stewardship, within the parameters of the provisions of the Public Finance Act 1989, and the State Sector Act 1988.

Financial management within the Department is based on two foundation principles, financial accountability and strategic financial management. These foundation principles provide a framework for financial management within the Department and encompass a number of financial strategies.

The Department maintains a promulgated suite of financial policies and procedures that are designed to ensure consistency in the application of best practice financial management, and also support and reinforce the strategic goals and priorities of our Ministers and the Government. In addition the Department has been progressively strengthening its financial management capability, in line with the purpose of the Government’s expectations, processes and rules for public service departments and Crown entities.

These processes and rules are designed to improve the focus on, and quality of, capital asset management and to produce worthwhile value for money gains over time. In the short-term, the Department will accord priority to consolidating financial practices and infrastructure to ensure financial management supports it to fulfil its strategic direction.

Fiscal environment

Cabinet directed the delivery of baseline savings of $0.833 million in 2010/11 and $2.000 million in 2011/12 and out-years, in respect of the enlarged Department. These savings are now reflected in the Department’s baseline, and have been apportioned across all activities of the Department, both Crown-funded and third-party funded.

Apart from the foregoing baseline reductions, the Department continues to actively seek ways to work more productively, and areas of potential gain will be explored on an ongoing basis.

As well as the influencing factors described earlier, the Department is subject to a number of specific environmental and other influences that have a direct impact on its financial operations and capability.

The increasing complexity of the business and financial reporting requirements has compelled a focus on systems enhancements, together with additional, robust compliance and reporting frameworks, to ensure we deliver consistent, accurate and meaningful information in a timely manner.

The continuing growth in the scope and complexity of the Department’s business activities requires the delivery of customised solutions that are effective and financially sustainable, particularly where workloads and requirements for financial management have increased.

An increasing emphasis on accountability, efficiency and transparency is generating changes in organisational financial requirements.

The ongoing enhancement of our performance management framework and associated performance measures are enabling an increased emphasis on continuous improvement, value-for-money service delivery and a focus on productivity improvement.

The Department’s financial and information management processes, systems and tools have to support changing requirements, driven by the continuing growth and complexity of the business. Many tools, and the way they are used, will need to be updated to adequately support the financial and information needs of the new, enlarged Department and its stakeholders. To be successful in the future, the Department will invest in improving some systems, tools and processes, and introducing some new ones. In this regard, a particular focus for the Department over the next two years is the introduction of a new generation Financial Management Information System.

Capital and asset management

The Department is progressively enhancing its own capital planning and investment framework, to ensure appropriate compliance and alignment with the Treasury-led Capital Asset Management framework. In this regard and in order to realise the greatest benefits from its capital investments, these improvements will seek to ensure the alignment and integration of strategic, business and operational planning across the Department.

The overall objective for the Department is to ensure effective capital asset planning, investment, delivery and management, supported by processes and procedures that provide assurance that required standards are being met, the required capability has been built and the required and credible information is readily available.

Overall the Department is aiming to maintain a capital base that will meet the Government’s objectives of economic growth and improved State sector performance. In light of the fiscal constraint on capital injections from the Crown, a key challenge for the Department is ensuring the sustainability of the Department’s funding flows from depreciation as a means of fully funding future capital investment, that is, self-funding capital investments through balance sheet management.

Key financial information

Appropriations

	2010/11 $million	2011/12 $million	2012/13 $million	2013/14 $million	2014/15 $million
Departmental:
Output Expenses	296.484	360.447	362.361	362.789	362.765
Other Expenses	3.100	–	–	–	–
Capital⁵	44.209	72.891	40.012	40.648	39.968
Total Departmental	343.793	433.338	402.373	403.437	402.733
Non-departmental:
Output Expenses	7.149	9.142	9.142	9.142	9.142
Other Expenses	78.537	54.555	50.690	47.203	47.203
Benefits and Other Unrequited Expenses	58.900	60.000	60.000	60.000	60.000
Capital	75.623	2.524	1.888	1.883	1.976
Total Non-departmental	220.209	126.221	121.720	118.228	118.321
Total Baselines	564.002	559.559	524.093	521.665	521.054

The following summarises the changes in departmental baselines:

Output expenses – the outyear increases are primarily due to the full-year impact of the integration of the National Library of New Zealand and Archives New Zealand into the Department of Internal Affairs (from 1 February 2011), and volume increases in demand-driven activities, in particular passports
Capital – from 2011/12 the out-year reductions reflect the completion of the National Library New Generation Implementation Programme and the Passport System Redevelopment Programme.

The following summarises the changes in non-departmental baselines:

Output expenses – the out-year increases are attributable to the full-year impact of the integration of the National Library of New Zealand and Archives New Zealand into the Department of Internal Affairs from 1 February 2011
Other expenses – the outyear decreases reflect the impact of funding provided in 2010/11 for response and recovery activities as a result of the Christchurch Earthquake, and the end of the time-limited funding for the racing promotion and sponsorship scheme
Benefits and Other Unrequited Expenses – the out-year increases reflect the projected costs of the Rates Rebate Scheme
Capital – the 2010/11 appropriation primarily included a loan to the Auckland Transition Agency.

Forecast Capital Expenditure

Category	2010/11 $million	2011/12 $million	2012/13 $million	2013/14 $million	2014/15 $million
Intangibles	36.202	32.718	26.008	28.454	29.976
Property, Plant and Equipment	8.007	40.173	14.004	12.194	9.992
Total	44.209	72.891	40.012	40.648	39.968

The ‘Intangibles’ category largely comprises software, much of which is proprietary to the Department. This includes passport and other identity-related systems.

The ‘Property, Plant and Equipment’ category includes expenditure on computer hardware associated with infrastructural asset projects, building developments, office fit-outs and associated furnishings, and cyclical replacement of the VIP Transport vehicle fleet.

The Department’s forecast capital expenditure over the planning horizon reflects anticipated capital injections from the Crown for identified initiatives, the sustainability of the Department’s funding flows from depreciation as a means of funding priority future capital investments, and the importance of retaining an adequate level of unallocated residual funding that can be made available for emerging priorities, emergencies, or other capital contingencies.

During 2011/12, the Department will substantially complete a number of major projects including the National Library New Generation Implementation Programme and the Passports System Redevelopment Programme, and introduce a replacement grants management system.

Footnotes

[4] Memorandum accounts are notional accounts to record the accumulated actual surpluses and deficits of particular activities with the objective of breaking even over the medium to long term.

[5] 2010/11 includes the full 12 months capital expenditure programme for the integrated Department.

The Department of Internal Affairs

Te Tari Taiwhenua

Building a safe, prosperous and respected nation