VII. Accounting For Results

In exchange for giving managers broad discretion in using public resources, the New Zealand reforms, as do those in a few other countries, seek to impose new accountability requirements. This trade-off is often applied unevenly, for it is much easier for the central agencies to surrender ex ante control than to enforce strict accountability. In some countries, therefore, the introduction of new accountability rules has lagged behind the removal of input controls. "Letting managers manage" has held greater sway than has "making managers manage" by holding them accountable for what they do, spend, and accomplish.

This has not been the case in New Zealand, where making managers responsible for their performance has been a guiding principle in the effort to improve the efficiency and quality of public services. New Zealand gives managers enormous freedom to act, but it closely monitors their financial and substantive results. Accountability has not been an afterthought; it was designed into the new system at the outset, and as gaps in accountability have been identified, additional requirements have been imposed. In fact, the most distinctive features of New Zealand management reform - the performance and purchase agreements, appropriation by output classes, the split between funds voted to Ministers and money provided to departments, and accounting and budgeting on an accrual basis - have been due to efforts to ensure full accountability for results. In other countries, the concern is that not enough attention is paid to accountability; in New Zealand, some complain, the costs of maintaining the accountability regime are too high.

Accountability revolves around the ex ante specification of both financial conditions and outputs and the ex post reporting of results. Ministers and managers must agree in advance on financial performance and the outputs to be produced, the money to be spent on the agreed outputs, and the quality and timeliness of the work to be performed. This advance specification of performance enables Ministers and managers to compare the volume, cost, and quality of the outputs actually produced to planned levels. This is the essence of managerial accountability - doing what was contracted at the agreed price and explaining any variance between planned and actual performance.

The New Zealand version of accountability currently has more to do with purchase than with ownership, more with producing outputs than with the overall capacity of the department, more with whether managers are meeting specified targets than with whether public programmes are effective. Policy outcomes are outside the managerial accountability framework; they are considered matters of Ministerial responsibility and political judgment.

This model of accountability is patterned on the relationship of buyers and sellers in commercial transactions. Matters that are external to this relationship fall outside the accountability system. This problem is not unique to New Zealand, but it is aggravated by the purchaser-supplier split and the sharp focus on outputs. In other countries, certain actions and outcomes fall between the cracks of the accountability system because managers are unsure of what they are responsible for; in New Zealand, they sometimes fall between the cracks because managers know precisely what they are responsible for.

This chapter discusses five related accountability issues: (1) the output relationship of Ministers and managers; (2) the advance specification of outputs in the Estimates, departmental forecast reports, (DFR's) and purchase agreements; (3) reporting and assessing results in annual reports and other documents; (4) the adequacy of internal management controls; and (5) the cumulative burden of complying with the various accountability requirements. The financial aspects of accountability - delivering the outputs at the agreed cost, maintaining the financial health of the department, and achieving financial targets - appear to be functioning quite well and are not discussed in this chapter. This study has not reviewed the work of Parliament or the Audit Office, though both have important roles in the accountability system. Brief consideration is given, however, to Parliament's demands for financial data and other performance information.

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