Managing Quality and Cost-effectiveness
Like other government departments, the Treasury takes a “Managing for Outcomes” approach to planning and performance; focusing our efforts on the key outcomes and the contributing results that support the Government's objectives and using our skills and capability planning to ensure we contribute effectively. As other agencies contribute to the same outcomes, much of our work involves a degree of collaboration.
The Treasury continues to focus on the cost-effectiveness of its outcomes and the outcomes across the wider State sector and these can be difficult to measure.
Insomeresults,theTreasuryismorereadilyabletodistinguish the impact of its effort, as for example the impact of the NZDMO work. The objective of the NZDMO is to maximise the net returns on its portfolio management activities within appropriate levels of risk. In these areas, the Treasury has developed measures that highlight the impact of our effort over time. In the case of the NZDMO, we assess our impact through the following three measures:
- the annual profit generated (value added) for the Crown
- market risk (interest-rate and foreign-exchange-rate risk), and in particular, the average monthly value at risk, and
- input costs per transaction.
In these and similar areas we provide specific measures and targets relating to the annual profit generated through lending, the management of market risk, the value of new exposure for medium to long-term credit insurance, bonds and working capital for the forthcoming year. These measures are published in the Vote Finance Estimate of Appropriations.
In contrast to the more tangible outputs discussed above, a significant amount of the Treasury's work involves supporting the Government through policy advice, including second-opinion advice on the work programmes of other government agencies. The contribution made by policy advice is more difficult to measure. Advice does not always result in a clear and/or measurable change, and where it does, the gains of such advice are often realised incrementally over a period of years from a cumulative series of interventions. These characteristics make the analysis of cost-effectiveness inherently difficult.
The focus of our approach is to ensure our work is good value for money and to demonstrate the impact of our work through progress made towards desired changes in our outcomes. We have identified key impact measures for each of the three outcomes areas in the Operating Intentions of this SOI.
In addition to measuring progress toward our desired outcomes or the results contributing to them, we use a framework for measuring the quality of policy advice, Treasury Quality Standards for Policy Advice. Consistent with the focus on cost effectiveness, a central tenet of the Treasury framework is that quality policy advice should be “fit for purpose”.
The quality standard provides a way of testing agreed dimensions of the quality of our advice: whether it is analytically rigorous and set in a wider strategic context, the timing reflects the necessary imperatives, it is customer focused and persuasive and our internal control processes for quality have been effective. The measures apply independently of whether the Government accepts the advice we provide. The standard is published on pages 35 and 36 of this SOI.
In tandem with the introduction and implementation of the standards in 2008/09, at the time of writing we are commissioning an external review of several areas against this standard. The review will support our continuous improvement approach and provide a clear understanding of the quality of our advice, where we excel and where we can improve. It will also establish a benchmark against which to compare future performance.
In addition to external reviews, stakeholder feedback provides an important measurement of the quality of our policy advice, our management within our delegated authority constraints and our performance against our annual performance objectives. We will continue to seek formal feedback from the Minister three times a year regarding the quality and timeliness of our performance.
