How changes to annual reviews are making for stronger scrutiny

Parliament recently wrapped up its annual reviews for 2022/23. Russell Bates tells us how recent changes are helping make the scrutiny process better.

ParliamentOnce a year, leaders of central government agencies come before a select committee to brief it on how things are going and what they are achieving.

Select committees scrutinise chief executives by asking about their agencies’ performance and spending. Committees then report to Parliament on what they have heard, and any concerns they have. Formally, these are called “annual reviews”.

The Office of the Auditor-General supports Parliament in this task. For each reviewed agency, we write a briefing about our key audit findings, our other observations, and what we think committees should be concerned about. Before committees speak to the agencies, we meet with the committees to take them through the matters we think they need to examine.

In 2023, the then Parliament decided that its scrutiny function could be improved. Through the Review of Standing Orders, annual reviews and Estimates now have more structure, more time, and more focus.

Between January and March, we briefed committees about 77 agencies. These included 14 in-depth reviews, which were a minimum of three hours. Shortly, we will support committees with their scrutiny of appropriations through the Estimates process.

Below are our observations from the first of the annual reviews under the new Standing Orders.

The benefit of structure

Thorough planning and well-designed agendas gave the annual review hearings greater structure.

Committees decided in advance what issues mattered most to them. Our Office supported committees by giving advice on their structured agendas. These agendas were then shared with agencies ahead of the hearings.

Because of the detailed agendas, agencies could come prepared with the right people and information to answer questions. We heard “we will come back to you” a lot less from agencies.

Above all, agendas helped guide discussions and enabled a greater focus on the issues that matter. They were essential for guiding committees and agencies through some long days.

Having more time added to the quality of scrutiny

It is important that committees have enough time to examine an agency. Last year’s annual reviews took about 70 hours. This year, committees dedicated about 120 hours to annual reviews.

Individual hearings, which used to last one or two hours, were often extended to three to six hours. The hearing for one agency totalled 10 hours across multiple days.

Having more time made discussions more meaningful and in-depth. An official’s opening three-minute elevator pitch of achievements to committees will often not stand up to more comprehensive scrutiny when put in the context of overall agency performance.

Committees had time to follow-up – asking for more specific information if an agency’s initial answer was not detailed enough. One committee called an agency back for an additional hearing to seek further detail.

Even with more time, committees were sometimes hard pressed to fit sessions into their busy schedule. This may improve soon; starting in June 2024, there will be two dedicated scrutiny weeks per year for the Estimates and annual review hearings. The House will not be sitting in these weeks, and Parliament expects members – along with ministers and public sector leaders – to make these hearings their priority.

There was a stronger focus on key matters

The Standing Orders changes also empowered committees to focus more strongly on the future and strategic issues. This produced insights on legislative settings, policy matters, and the role of regulators – in essence, what works and what might need changing.

They enabled a more thorough conversation about performance, strategic issues, challenges, and – always a good thing – audit-related matters. The process allowed committees to really focus on the challenges, what agencies need to do, and how long it will take. There is now a good baseline of agencies’ plans and commitments that committees can use to track progress.

The detailed discussions gave committees insight into complex policy problems and the roles different agencies play. In the future, we hope to see even more discussion about how agencies work together effectively. Where this goes beyond the subject matter of one particular committee, it may require joint hearings of committees, agencies, or both.

Understanding performance

A practical example of how these changes improved scrutiny can be found in the way committees examined how agencies report on performance.

It should be easy to understand what agencies are looking to achieve, how they are going about it, how well it is all going, and what it is costing. Currently, it is not.

We briefed committees on the problems we see in many agencies with how they report on their performance. We can often see that agencies are busy. But we cannot tell what this adds up to – that is, have they made meaningful progress towards their outcomes? We could not piece together the elements of their performance reporting into a coherent and compelling performance story.

Many committees had focused, in-depth discussions on performance reporting. Longer hearings allowed more time for detailed questioning about performance measures in annual reports and the reasons why measures were not achieved. Committees asked for better performance information and were questioning agencies about whether they were clearly communicating with the public about the value of their programmes.

However, despite committees providing agendas that signalled their interest in performance, agencies were often unable to provide detailed information about the benefits from spending, including what happened with additional funding from previous budgets. They often defaulted to quoting the dollar amount spent rather than what was achieved.

For the next round of in-depth hearings, we will be looking for more specific responses from agencies about the difference they are making.

What comes next

These hearings were the first for select committees in their Parliamentary term. We will be using what we learned during the annual reviews to better brief committees so we can help strengthen public sector scrutiny during the Estimates hearings.

Since the reviews, we have also been advising committees with the development of their three-year scrutiny plans. These plans will be tabled before Budget Day and will guide their scrutiny activities for the rest of the parliamentary term.

We intend to provide further observations on the new scrutiny arrangements after the Estimates hearings.