Minister of Conservation, Willow-Jean Prime. Photo / Michael Cunningham
The Department of Conservation (DoC) is spending close to half a million dollars on consultants in an effort, paradoxically, to tackle a considerable and looming budget shortfall.
In May DoC hired PwC to analyse its costs and forecast funding needs. The estimated cost of the consultancy work is $360,000. It also hired Nimbl Consulting in April to review its asset management practices and to identify improvements. The estimated cost for that work is $103,500.
At the same time, the department’s operating shortfall in the upcoming fiscal year is in the tens of millions of dollars, and, without a change in course, is expected to worsen thereafter, the Herald understands.
Mike Tully, Deputy Director-General Organisation Support at DoC, declined to confirm the size of the budget shortfall. He said the department identified the need to take a deeper look at its cost drivers, and “after discussions with the Minister of Conservation and the Treasury it was agreed this work would be undertaken”.
He said the consulting work also follows “work with the Treasury” as part of Budget 2022, when “challenges around DoC’s financial sustainability were identified - including some long-running issues and pressures exacerbated by Covid-19 - and the Government made a three-year investment to help address these.”
In planning for fiscal 2023/24, which begins next month, the department is struggling to cover basic operating costs, a recent email sent by Tully to managers shows.
“To be transparent, the initial view shows that we do not have sufficient funding to cover our basic running costs. There is now urgent work under way to seek clarity on our position,” he wrote to managers and directors at the department in late May.
He said the senior leadership would “be working with their teams to overlay how fixed operating cost commitments fit within available funding before budget envelopes are confirmed”.
Fixed costs are typically expenses like staff salaries and lease and vehicle fleet costs. If these eat up too great a portion of the operating budget they will diminish the cash available for field and maintenance work, including the budget to buy materials and to fly staff into the backcountry.
The email was leaked to the Substack news and opinion blog of Auckland-based lawyer “Thomas Cranmer”, a reform-tilted pseudonym.
The consultancy hires, especially PwC, suggest that either the department’s relatively new senior leadership team lacks confidence in DoC staff to complete a useful internal review of costs, or that the lack of confidence in the department originated higher up the food chain amongst ministers.
Tully told the Herald that the decision to commission PwC was made by DoC’s leadership. “It will help us be clear about what’s needed to maintain our significant asset base, and which investments will make the most difference,” he said.
The resulting advice will be provided to the Minister of Conservation, Willow-Jean Prime, in August. A restructure involving at least some cost-cutting is widely expected thereafter.
In the meantime, DoC is making sure that any staff vacancies filled are “tightly focused on our core work and priorities” but there is no hiring freeze, Tully said.
Minister Prime said: “The decision to bring in consultants is for the director general of DoC, but given the size and scale of the department and the significant work under way, I am advised that this will support the development of rigorous in-depth advice regarding choices for the medium and longer term.”
She said the work is important to ensure DoC can “manage its large and ageing asset base, now and for the future…”
Last month, Newsroom reported on official department documents that put the book value of the deferred renewal of DoC’s visitor assets, mainly tracks, at $300m; the maintenance of assets was a reported 70,000 hours behind. The documents dated to early 2022.
Former Conservation Minister and Green Party conservation spokesperson Eugenie Sage said, “a major part of the [funding] issue appears to be overly complex, bloated business planning systems which have a thick layer of middle management, cost a lot and make decision-making too complicated.”
Sage said a round of middle management job cuts at the department is warranted.
She also suggested that the consultancy spending is wasteful and unlikely to prove more useful than an internal baseline cost review: “the department would have been better to have asked its operational staff: what are the issues here with shortfalls and asset management, and to have done its own internal review.”
DoC’s purview includes a third of the country’s land and water, the backbone of the tourism industry including thousands of assets such as visitor centres, huts, trails, roads and bridges, and responsibility for threatened biodiversity.
Several sources close to DoC told the Herald that, without new money, the department is unlikely to be able to both preserve staff numbers and have sufficient operating funding per person (for overheads like IT costs, vehicles and helicopter hours) to make efficient use of its people and maintain productivity.
They said that DoC faces a range of budgeting problems, but one contributing factor has entailed the use of time-limited funding for considerable permanent hiring, something the Herald understands happened following Budget 2017 and 2018 from funding largely tied to DoC’s role in tourism. They said supposedly ring-fenced Jobs for Nature programme money has also masked the problem. That Covid-era initiative began in 2020 and funding tapers heavily in the upcoming fiscal year.
While the delivery of Jobs for Nature projects has largely been undertaken by third-party contractors, the sources said that some of the funding has helped cover the cost of departmental staff who’ve been “managing and supporting” the work. As that one-time funding drops away, the cost of the permanent staff both remains, and because of rising wages and inflation, increases.
Annual Review figures show 2465 permanent and fixed-term fulltime-equivalent staff in 2020/21, a sizable increase from 2124 in 2017/18 (the figures appear not to include seasonal staff).
Over the four-year period the proportion of “frontline” staff, such as rangers, has slipped to 52 per cent of that total, from 60 per cent.
DoC’s total budget sits at a record high. Appropriations for the upcoming year top $880m, however, thereafter budget projections fall heavily to $712m and $701m in subsequent years. It’s worth noting that DoC’s baseline funding - its core funding available to run the business, which excludes time-limited funding, capital expenditure and the non-departmental money that DoC spends on behalf of the Crown - is hundreds of millions of dollars less than the headline figures.
The Auditor General’s (AG) last audit found DoC’s management control environment required “major improvements … at the earliest opportunity”.
Central in the auditor’s poor review were DoC’s weak internal or systems controls, including procurement practices and systems that were “currently not fit for purpose and need to evolve to match DoC’s increasing complexity and funding”.
The AG noted that the department began work on a significant five-year corporate services work programme of improvement and “uplift” in 2019/20. This remains ongoing, and improvement in procurement processes were anticipated over the last 11 months.
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