1. Crown copyright: State Services Commission, March 2008 1 Information for New Members of Crown Entity Boards Information for New Members of Crown Entity Boards

2. 2 Crown copyright: State Services Commission, March 2008 Outline of content 1What are Crown entities and where do they fit in the State services environment? 2How do Ministers influence Crown entities? 3Accountability and scrutiny of Crown entities 4Developing effective relationships 5Governing a Crown entity 6Expectations of board members 7Applying public sector values 8Additional resources

3. 3 Crown copyright: State Services Commission, March 2008 1What are Crown entities and where do they fit into the State services environment…?

4. 4 Crown copyright: State Services Commission, March 2008 Elements of New Zealand’s System of Government

5. 5 Crown copyright: State Services Commission, March 2008 Components of New Zealand’s System of Government include… Cabinet Established by convention, with no constitutional basis. Powers are held by individual Ministers in their own right. Established by convention, with no constitutional basis. Powers are held by individual Ministers in their own right. An important forum for Ministers to work together to determine Government policy and processes An important forum for Ministers to work together to determine Government policy and processes Has a strongly enforced convention of collective responsibility Has a strongly enforced convention of collective responsibility Supported by Cabinet Committees, eg APH Supported by Cabinet Committees, eg APHCaucus Each party in Parliament has a caucus comprising all its MPs Each party in Parliament has a caucus comprising all its MPs Can be very influential, eg when the governing party has to depend on the vote of every MP within its sphere of influence Can be very influential, eg when the governing party has to depend on the vote of every MP within its sphere of influence Government caucus often consulted on board appointments Government caucus often consulted on board appointments

6. 6 Crown copyright: State Services Commission, March 2008

7. 7 ‘Crown entities’ are a key part of the Public Sector They constitute a wide variety of public organisations delivering many public services They are often the 'face of government‘ delivering: Almost all public health, education, transport and housing services Almost all public health, education, transport and housing services Key regulatory functions Key regulatory functions Crown entities are collectively responsible for: more than 50% of the Crown’s operating expenditure more than 50% of the Crown’s operating expenditure The management of approximately 2/3 of the Crown's physical assets The management of approximately 2/3 of the Crown's physical assets over half the workforce employed in the State services over half the workforce employed in the State services

8. 8 Crown copyright: State Services Commission, March 2008 Crown entities are separate from the Crown - legal entities in their own right Because of their functions and the nature of their work they are designed to operate at 'arms length’ from Ministers because, for example: Decisions on individual cases should not be influenced by Ministers Decisions on individual cases should not be influenced by Ministers Ministers should be distanced from operations Ministers should be distanced from operations Entities require access to a broad range of skills Entities require access to a broad range of skills However, Ministers are still answerable to Parliament for the entities’ performance On one hand they are ‘stand-alone’ but, on the other…

9. 9 Crown copyright: State Services Commission, March 2008 The legislative framework for Crown entities consists of… The Crown Entities Act 2004 provides a consistent framework for the establishment, governance and operation of Crown entities; provides a consistent framework for the establishment, governance and operation of Crown entities; clarifies accountability relationships between Crown entities, boards, responsible Ministers and Parliament; and clarifies accountability relationships between Crown entities, boards, responsible Ministers and Parliament; and clarifies powers and duties of board members. clarifies powers and duties of board members. The entity’s own statute Each Crown entity is established under and shaped by its own statute which can negate or modify any provisions of the Crown Entities Act. And other legislation including: State Sector Act 1988. Public Finance Act 1989 Companies Act 1993. Official Information Act 1982 Ombudsmen Act 1975. Public Audit Act 2001. Various Acts relating to employment and human rights

10. 10 Crown copyright: State Services Commission, March 2008 There are 3 basic categories of statutory Crown entities … Crown Agents Autonomous Crown Entities (ACEs) Independent Crown Entities (ICEs) The differences between the categories include the nature of the work they do, the provisions for board member appointments, and ministerial powers ot direction. There are also other types of Crown entity (Crown entity companies, Crown entity subsidiaries, School Boards of Trustees, and Tertiary Education Institutions)

11. 11 Crown copyright: State Services Commission, March 2008 Differences between statutory entities

12. 12 Crown copyright: State Services Commission, March 2008 Each Crown entity has a ‘responsible Minister’ who … Oversees and manages the Crown's interests in and relationships with the entities that are within their portfolio Represents the public interest in the entity (and, in private sector terms, is the de facto ‘shareholder’) Ensures an effective board is in place to govern the entity Influences the entity’s strategic direction Monitors and reviews Crown entity performance and results Manages risks on behalf of the Crown Carries out any statutory responsibilities Note: The Ministers of Finance and State Services also have important roles to play in the Crown entity sector.

13. 13 Crown copyright: State Services Commission, March 2008 Ministers expect boards to… be aware of demands on Ministers both Parliament, taxpayers and other interested parties accept that the Crown has interests wider than those of ordinary shareholders in private companies understand (and embrace) wider Government policy issues as part of their decision- making provide assurance of effective organisational performance (delivery of results) and conformance with statutory functions, powers, duties, etc be aware of and keep Ministers informed about the potential implications of organisation-specific issues on the Crown ensure their Crown entity behaves prudently and sensitively and in keeping with public sector values

14. 14 Crown copyright: State Services Commission, March 2008 ‘No surprises’ Boards have authority but Ministers are ultimately answerable for the actions of their Crown entities to Parliament and the public. Ministers expect to be informed as fully and as early as possible of any entity issues that may impinge on the Government’s responsibilities or be potentially contentious Proactivity and timeliness in applying the ethos of 'no surprises' is essential to the integrity of the relationship and to mutual trust and confidence. A 'no surprises' way of working is not intended to interfere with entities' statutorily independent functions nor with boards' operational responsibilities. Note: Crown entities should apply the same principles to their relationships with monitoring departments

15. 15 Crown copyright: State Services Commission, March 2008 Ministers are supported by monitoring departments However a Crown entity is funded, a monitoring department provides the Minister with information, analysis and advice on its effectiveness and efficiency A monitoring department is expected to focus on major opportunities and risks Monitoring departments support Ministers in the process of identifying skill needs and appointing board members A department’s authority to undertake its monitoring role derives from its position as the Minister’s agent