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During the period of this Statement of Intent, the administration of all Ministry resources in its two Votes will be in accordance with best public sector management practice. In addition to regular reporting under standard six-monthly reporting and evaluations, internal audit capabilities will be reinforced to ensure strict adherence to policies and procedures.
Since it is important for government agencies to be able to demonstrate that their expenditure of public funds adds value, the Ministry has examined its cost-effectiveness using a number of other measures. These are quite separate from its ongoing efforts to ensure that all expenditures are valid and competitively priced. The Ministry’s Statement of Intent for 2007-2010 provided two examples of alternative approaches to cost-effectiveness. One showed the effectiveness of the Ministry’s cost structure alongside other foreign services. This has been independently confirmed by comparative material contained in a recent report by the Lowy Institute for International Policy entitled Australia’s Diplomatic Deficit: Reinvesting in our instruments of international policy. The other example illustrated the unit costs for delivering consular services to New Zealand citizens. [Delete, and the relative return on investment received from the cost of conducting trade negotiations.] Last year’s Statement of Intent for 2008-2011 gave an example of the return on the costs of investing in international trade negotiations, which we summarise below. All three examples remain valid illustrations of the Ministry’s cost-effectiveness.
The Ministry leads the whole-of-government effort to negotiate FTAs and generally deploys the largest resource. The Ministry’s costs to negotiate the FTA with China were of the order of $760,000 for travel, accommodation and other direct costs in 2007/08, the final year of the negotiations when there was less travel than in the previous two years. This suggests a broadly indicative investment of about $1 million a year in direct negotiating costs. A Joint Study Report in 2004 estimated that this FTA could boost New Zealand’s real GDP by US$1.9 billion and potentially increase New Zealand’s exports to China by US$180 million - $280 million a year over 20 years. While quantification of benefits can only be indicative and depends on the rate at which commercial opportunities are taken up by New Zealand business, the potential export gains from the FTA represent a significant return on the Ministry’s three-year investment in negotiations.
Cost-effectiveness and value for money are also very important concerns for NZAID. Value for money is a key consideration in Activity selection, procurement processes, review and evaluation. However, measuring cost-effectiveness is a complex task.
The indicators below have been carefully chosen to reflect a broad range of aspects of value for money. While some are clearly related to efficiency (eg findings from evaluations relating to value for money) others have more indirect links but are necessary to give a fully rounded picture of cost-effectiveness. The proxies of overall agency cost-effectiveness are included because they reflect international consensus on what makes efficient and effective aid that delivers value for money. For example, the United Kingdom’s Department for International Development estimates conservatively that programme-based approaches “will result in benefits of at least 20 percent compared to the channelling of equivalent funds through project support”. Increased use of programme-based approaches is one of the commitments of the Paris Declaration on Aid Effectiveness, and hence our compliance with this Declaration is taken as one proxy for overall value for money for bilateral programmes. Effective implementation of management priorities and Government policy (including, for example, compliance with sectoral policies) is seen as an important part of the "value" in "value for money".
| Indicators and measures | Current status (more detail will be available in the Ministry’s 2008/09 Annual Report) | ||
|---|---|---|---|
| Effective implementation of management priorities and Government policy | |||
| Economic development ODA | 2007/08 | Target | |
| Increasing amount and proportion of ODA spent on economic development | Expenses | $51.9m |
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| As a percentage of sector-allocable ODA | 28% |
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| Pacific allocation | 2008/09 | Target | |
| Increasing percentages of bilateral ODA, bilateral and regional ODA, and all ODA go to the Pacific | Of bilateral ODA | 80% |
|
| Of all bilateral + regional ODA | 77% |
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| Of all ODA | 53% |
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| Evidence of increasing consistency between ODA and foreign policy objectives in programme strategies and Activities | Formal reporting will begin in 2009/10. | ||
| 2007/08 | Target | ||
Declining number of Activities, allowing focus on a smaller number of larger and more comprehensive initiatives Increasing median annual expenses of Activities Increasing percentage (by count and by expenses) that are delivered using “high order aid modalities” |
Number of Activities | 882 |
 |
| Median annual expenses | $119,535 |
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| Activities in high order modalities | 14% |
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| Expenses in high order modalities | 54% |
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| Evidence of compliance with sectoral and thematic policies (education, health, human rights, etc) | Reporting will begin in the Ministry’s 2008/09 Annual Report | ||
| Proxies of overall agency cost-effectiveness | |||
| Progress towards the 2010 targets for aid effectiveness including 66 percent of bilateral aid to use programme approach; increased use of partner financial management and procurement systems; 50 percent of technical cooperation to be coordinated with other donors; higher proportion of ODA to be recorded on partners’ budgets; and qualitative assessment of progress towards the aid effectiveness principles. | A review in 2007 of NZAID implementation of the Paris Declaration on Aid Effectiveness found that there was good overall performance and a good alignment between NZAID leadership and culture with the Declaration | ||
| NZAID performance against Good Humanitarian Donorship benchmarks[8] | In 2008 New Zealand was rated by the inter-governmental Good Humanitarian Donorship group positively compared with other donors for committing a high proportion of humanitarian funds under flexible terms; un-earmarked; and not requiring donor-specific reporting. New Zealand was rated less positively than other donors for timeliness of commitment and the proportion of humanitarian funds going to internationally identified priorities | ||
| NZAID performance assessed by external peer or other review | OECD peer review in 2005 found that the re-orientation of NZ development cooperation since 2002 was “impressive” The 2008 Commitment to Development Index by Washington-based think tank, the Center for Global Development, rated New Zealand low relative to other donors on aid, because of a low ODA to GNI ratio; and for its many small projects. However, New Zealand was rated 7th out of 22 donors for its overall Commitment to Development, with high scores on trade, security and environment policies | ||
| Findings on programme and Activity cost-effectiveness | |||
| Summary findings from reviews and evaluations relating to value for money | Example: the mid-term review of the Commonwealth Local Government Forum Pacific project found it represented good value for money | ||
[8] The Good Humanitarian Donorship targets are on the GHD website
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