Source: https://oag.parliament.nz/2005/taxis/part1.htm
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Part 1: Introduction Effectiveness of controls over the taxi industry. https://oag.parliament.nz/2005/taxis/part1.htm https://oag.parliament.nz/@@site-logo/logo.png
Our 1997 report
Why we undertook this audit
Issues arising during our audit
In this Part, we explain why and how we undertook this audit, its scope, and our expectations at the start of the audit. We also discuss issues that arose during our audit; in particular, a difference of view about the role of the Land Transport Safety Authority (the Authority).
In 1997, we reported to the then Transport and Environment Committee on our audit of the application of the “fit and proper person” assessment by the Authority under the Transport Services Licensing Act 1989.
The assessment is made by compliance staff within the Authority’s regional offices, in relation to the suitability of a person seeking to work in the passenger service industry.1
At the time, we reviewed files at 4 of the Authority’s 7 regional offices, interviewed stakeholders,2 and presented our findings to the Transport and Environment Committee and the Authority.
Except for the Wellington regional office, there were few cases where the issue or renewal of a passenger endorsement3 was questionable. The Authority agreed with parts of our report, but strongly disagreed with our references to particular decisions made by the regional offices.
Our 1997 report also found that:
some regions were not carrying out enough enforcement work, with many taxi drivers flouting the law in the knowledge there would be little enforcement action; and
there was a lack of information sharing between the Police and the Authority. We recommended the 2 organisations reach an agreement so the Police would automatically tell the Authority every time a passenger service driver was charged with a serious offence.
In this audit, we were interested in examining whether the Authority had acted on our 1997 findings. We were also aware of public and Parliamentary concerns about the quality and safety of taxi services. Media articles were citing concern within the taxi industry, and noting the belief of the Taxi Federation (a body representing about 40% of the industry4) that the industry was not functioning well because it had grown without a similar increase in the Authority’s compliance staff.
We were also aware that Parliament was considering the Land Transport Amendment Bill. The Bill included some measures to address passenger service users’ concerns about the taxi industry, including placing more responsibility on taxi organisations for the actions of drivers. It was therefore timely to assess whether the Authority was effectively administering taxi licensing, monitoring, and enforcing compliance, in accordance with statute.
Considering all this, we decided to extend the scope of this audit. We looked at the Authority’s licensing, monitoring, and enforcing compliance of the wider taxi industry – including taxi organisations, passenger service licence holders, drivers, and course providers. Taking a wider view of the Authority’s licensing, monitoring, and enforcing role let us assess the effectiveness of the Authority’s controls over the taxi industry.
Our audit objectives were to:
examine whether the Authority was applying effective controls when granting or renewing the licences of taxi drivers;
examine whether the Authority was effectively monitoring taxi drivers after it approved them;
provide the Authority with an assessment of whether it was effective in regulating the taxi industry; and
recommend improvements, where appropriate.
Our audit did not include the legislative requirements for vehicles used in a taxi service.
We did not look at the adequacy of individual Authority decisions – that is up to the discretion of the Director of the Authority and delegated Authority staff. Instead, we focused on the procedures behind the decisions, and the consistency in procedure between the Authority’s regional offices. This let us assess whether there was any risk that unfit or improper people could enter, and remain in, the taxi industry.
Our report refers to the Authority, in relation to our findings, because this was the name of the organisation at the time of our audit. Our recommendations are directed at Land Transport New Zealand – the entity created when the Authority and Transfund were merged – which has been responsible for land transport since 1 December 2004.
In relation to controls over those entering the taxi industry, we expected the Authority to have policies and procedures in place for its staff and agents, and course providers. We expected that regional offices would consistently apply the policies and procedures.
In relation to monitoring those who had entered the taxi industry, we expected the Authority to have effective measures for regularly monitoring whether those in the taxi industry were complying with their obligations and responsibilities. If non-compliance was found, we expected the Authority to take appropriate enforcement action to ensure compliance, or to suspend or revoke a person’s licence or endorsement.
Early in the audit, we gave the Authority a copy of the expectations we had prepared for this audit, for its review. The Authority provided comments at that point.
As we conducted our audit, it became clear that the Authority’s view of its role was different to ours (see paragraphs 1.35-1.52). We consider that our expectations were accurate, and consistent with both the legislation relevant to the Authority, and its accountability documents. We also consider that our expectations are consistent with Land Transport New Zealand’s legislative objective (described in Part 7), so we have audited and reported on that basis.
We set out our expectations in more detail, including expectations that follow up findings from our 1997 report, at the start of other Parts of this report.
Our audit focused on the effectiveness of the Authority’s controls over the taxi industry in relation to licensing, monitoring, and enforcing compliance. In assessing the effectiveness of the controls, we reviewed the Authority’s policies and procedures for:
approving taxi organisations and granting passenger service licences;
granting passenger endorsements, Area Knowledge Certificates, and identification cards for taxi drivers; and
approving course providers for certificates required to operate in the taxi industry.
the Authority’s monitoring of legislative provisions relating to taxi organisations, passenger service licence holders, taxi drivers, and course providers;
the Authority’s internal audit programme, which monitors policy and procedure implementation;
collaboration between the Police and the Authority about any offences committed by people in the taxi industry, which might require a review of the person’s fit and proper person status, and therefore their suitability to work in the industry; and
consistency between selected Authority regional offices in applying the policies and procedures.
We met with managers and staff at the Authority’s National Office in Wellington. We became familiar with the organisation, and, specifically, its policies and procedures for giving effect to the legislation that sets out the licensing requirements for the taxi industry.
Our fieldwork covered 4 of the Authority’s 7 regional offices. We selected regional offices in Auckland, Wellington, and Christchurch, because they have the largest taxi fleets. We selected Palmerston North because:
the Transport Registry Centre is there (it has responsibility for, among other things, monitoring the performance of the Authority’s agents); and
it is a centre with a smaller population, and provided a good contrast with the larger taxi driver populations of the other regions.
We reviewed files held at the selected regional offices, including passenger endorsement application and renewal files, complaints registers, and audits of taxi organisations and course providers. We assessed whether the Authority had complied with legislative requirements for licensing taxi drivers, and examined consistency between the 4 regional offices.
We invited the selected regional offices to organise audit work during our visits. We watched Authority staff conducting audits of taxi organisations, and audits of approved providers of passenger endorsement courses.
We also met with staff from 2 parts of the Police that have the most interaction with the Authority:
the Licensing and Vetting section; and
the Commercial Vehicle Investigation Unit (CVIU).
When the Authority assessed a person’s fitness and propriety to be granted an endorsement or licence, it requested information from the Licensing and Vetting section about a person’s criminal or traffic conviction history. We met with the Manager of the Licensing and Vetting section to get information on the procedure followed by the Authority and the Police in exchanging information on a person’s conviction history.
The Police are contracted, under the New Zealand Road Safety Programme, to conduct on-road taxi enforcement. The CVIU carries out most Police enforcement of the taxi industry. The CVIU is also the only group in the Police that records taxi-specific information about on-road enforcement. For these reasons, we met with the then National Manager of the CVIU at its Head Office in Wellington. This gave us an understanding of the CVIU, its responsibilities and those of the Authority in monitoring and enforcing compliance of the taxi industry, and its interaction with the Authority.
We also met with CVIU staff based in Auckland, Ohakea, Wellington, and Rangiora. With the exception of Wellington, we accompanied the CVIU during on-road inspections of taxis. We saw, first hand, the level of compliance with the legislation that governed the taxi industry.
In each region, we met with course providers to understand the Authority’s approval and monitoring procedures. These meetings also gave us the providers’ perspective of the Authority’s performance.
We met with staff from the New Zealand Immigration Service, to understand the checks it carried out (at the Authority’s request) for applicants born outside New Zealand. We discussed, with Auckland City Council and Auckland International Airport staff, their interaction with the taxi industry, and their impressions of the Authority’s performance.
We met with the Taxi Federation, taxi organisations, and taxi drivers in each fieldwork location. We reviewed the complaints registers of some taxi organisations. These stakeholders presented their views of the Authority’s performance, and suggested areas for improvement.
Towards the end of our audit, we met with advisors to the Land Transport Amendment Bill, at the request of the Transport and Industrial Relations Committee of the House of Representatives. We discussed aspects of the Bill that might usefully be amended to address matters that arose during the audit, but only to the extent that the findings disclosed to the advisors did not prejudice natural justice in relation to our discussions with the Authority.
During our audit, the land transport sector underwent significant change. The Land Transport Safety Authority and Transfund were merged to create Land Transport New Zealand, and the Land Transport Amendment Bill was introduced to Parliament. We discuss these and other changes, and make a recommendation about dealing with the changes in Part 7.
A fundamental issue that arose during our audit was a difference between the Authority’s view of its role and our view. While the Authority has now been dissolved, the issue of role and responsibilities will still apply to the new entity, Land Transport New Zealand. We discuss these views here to provide context for the remainder of our report.
The Authority’s view of its role
The Authority was established as a Crown entity under the Land Transport Act 1993, to undertake activities that promoted safety in land transport at a reasonable cost.5 Its legislative functions included:
establishing safety standards for entry into, and operation in, the land transport system;
monitoring adherence to safety standards within the land transport system;
ensuring regular reviews of the land transport system to promote the improvement and development of its safety;
maintaining and preserving records and documents about activities within the land transport system, and in particular to maintain the Land Transport Register; and
promoting safety in the land transport system by providing safety information and advice, and fostering safety information education programmes.
In its 1998 Transport Services Operator Licensing Review Discussion Document, the Authority identified that, as well as “road safety risks” (that is, crashes), taxis have particular personal safety risks (incidents between drivers and passengers), and economic risks (economic fraud or disadvantage).
However, the Authority’s position is that it had a legislative mandate of “safety”, which, given resource allocations, was focused on reducing or minimising death or injury. When the Authority commented on our draft report, it wrote that “taxi operations do not pose a high risk to personal safety when compared with other sectors of the transport industry for which the [Authority] is also primarily responsible.” Using this approach, the taxi industry is not given as high a priority as other parts of the transport sector, such as goods service vehicles.
This view means that aspects of the taxi industry, such as area knowledge and economic risks (for example, overcharging), are not given a high priority. At least one Authority regional office is not auditing the providers of area knowledge courses. The Authority considers this justified, because area knowledge providers present little or no risk, and are the subject of few complaints (any complaints received are investigated), and it is therefore not a good use of resources to focus on them.
The Authority also stated–
The most effective use of [its] limited resources is to concentrate on the Authority’s ‘gatekeeper’ role of limiting entry into the passenger service industry, monitoring and auditing organisations that have control over drivers and ‘exiting’ from the industry those found to be unfit and/or improper.
However, we were also advised that the Authority is–
… not responsible for the ongoing management of the industry and the ‘players’ within it. That government oversight ceased with de-regulation many years ago.
The Authority’s position is that individual drivers and taxi organisations are responsible for their own compliance with transport-related legislation. This approach to monitoring will become entrenched with the Authority’s move towards a “willing compliance” philosophy. “Willing compliance” relies on the taxi industry complying with legislative requirements, with the Authority monitoring that compliance (a similar approach is used by other agencies, such as the Civil Aviation Authority).
The Authority states that under the “willing compliance” philosophy, if non-compliance is found, the Authority will take appropriate enforcement action to bring the person or organisation back into compliance. However, the Authority also believes that–
The NZ Police (including the Commercial Vehicle Investigation Unit (CVIU)) are the appropriate agency to undertake enforcement activities relating to individuals’ compliance with obligations.
Our view of the Authority’s role
The legislation that applies to the taxi industry places many obligations on taxi organisations, passenger service licence holders, and taxi drivers. They need to meet, and continue to meet, many qualitative requirements. In 1989, the restrictions on entry to the taxi industry changed from quantitative to qualitative when the checks on economic grounds were removed, but the industry remains highly regulated (see Part 2). The legislative changes increased the importance of monitoring to ensure an “even playing field”, where all industry participants meet the standards required by the legislation.
On top of its “gatekeeper” role, Parliament has given the Authority responsibility for monitoring and enforcing the taxi industry’s compliance with transport-related legislation. While some controls over the taxi industry were removed in 1989, this only means that central government no longer controls the number of taxis in the industry. It does not absolve the Authority of responsibility for oversight of the industry (with support from other agencies), and ensuring that the taxi industry works effectively through robust entry controls and monitoring, and appropriate enforcement.
The legislated obligations of the taxi industry are described in Part 2. They include, for example, that taxi organisations must keep:
a register of drivers and passenger service licence holders;
details of their drivers’ Area Knowledge Certificate(s) (see paragraph 2.34); and
a complaints register.
Taxi organisations are also responsible for controlling their drivers. Responsibility for complying with legislation primarily rests with the taxi industry.
However, effective industry regulation requires ongoing, objective assessment of whether the industry is complying with its obligations. The legislation noted in Part 2 of this report sets out both the industry’s obligations and the Authority’s mandate, and makes it clear that monitoring industry compliance, and ensuring that the industry works effectively, is the Authority’s role.
It is not for us to say how competing claims for resources within the Authority should be addressed. However, we consider that the present level of compliance monitoring of the taxi industry is inadequate to ensure that the industry engages with the “willing compliance” philosophy. In our view, the Authority needs to do more to maintain oversight of the taxi industry, to fulfil its legislative mandate.
The Authority is responsible for ensuring that there are robust controls over entry to the industry, and enough compliance monitoring to ensure that the industry meets the expectations of Parliament, as reflected in legislation. Fulfilling this role may not directly affect the road toll, but is an aspect of the ongoing safety role.
We consider that preserving oversight of the industry is central to the Authority’s role in monitoring. It requires the effective collection of data, and analysis to turn that data into information. While the Authority records a significant amount of information in a variety of places, it lacks a risk assessment tool to bring the information together to form a complete picture of non-compliant operators, who can then be targeted through audits.
A philosophy involving working with industry in “partnership” requires industry participation and engagement, which is an issue for some taxi organisations. We are concerned that the Authority’s “willing compliance” philosophy will work only if there are enough incentives for the industry to bring about an attitude of compliance. Unless there is sufficient monitoring, of a type and extent that is visible to the industry, those incentives are lacking. “Willing compliance”, in other words, cannot work without robust entry controls, monitoring, risk assessment, and appropriate enforcement – including prosecution – to encourage compliance.
Given the extent of non-compliance in the industry, we consider the Authority will struggle to reach an acceptable level of monitoring of compliance, as long as it has:
the number of competing priorities; and
no overall risk assessment tool.
Other agencies have a role within the legislative framework that relates to the taxi industry. While the Authority has primary responsibility for licensing and administering entry controls in its “gatekeeper” role, other agencies are involved alongside the Authority in ongoing monitoring and enforcing of the taxi industry’s compliance with legislative obligations. For example, the Inland Revenue Department is responsible for ensuring compliance with tax obligations, and the New Zealand Immigration Service is responsible for work eligibility and immigration status issues.
However, in our view, the Authority is responsible for the Government’s strategy in relation to the taxi industry, and for fostering the relationships necessary to achieve that strategy. Each agency with involvement in the industry is then expected to play its part.
Above the operational level is the development of legislation in the form of Acts, Rules, and Regulations. At that level, the Director of the Authority works with the Ministry of Transport, the Minister of Transport, and other parties. This report makes several recommendations relating to Rule amendments. We direct the recommendations at Land Transport New Zealand, recognising that it must work with other agencies to give effect to the recommendations.
1: A “passenger service” means carrying passengers on any road, in a motor vehicle, for hire or reward.
2: These stakeholders included relevant staff from the Authority and the Police, and the Chief Executives from 2 transport industry groups (the New Zealand Road Transport Association, and the New Zealand Bus and Coach Association).
3: A passenger endorsement shows the driver licence holder knows his or her obligations and responsibilities as the driver of passengers, and has had his or her fitness and propriety assessed. (See paragraphs 2.29-2.31).
4: According to the Taxi Federation’s Executive Director, the Federation represented 3300 of the 8089 vehicles that were registered as taxis in September 2004.
5: The Land Transport Act 1998 defines a cost as ‘reasonable’ if “the value of the cost to the nation is exceeded by the value of the resulting benefit to the nation.”