Transcript Induction Programme Structure

Information for New
Members of Crown Entity
Boards
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Outline of content
1 What are Crown entities and where do they fit in the State
services environment?
2 How do Ministers influence Crown entities?
3 Accountability and scrutiny of Crown entities
4 Developing effective relationships
5 Governing a Crown entity
6 Expectations of board members
7 Applying public sector values
8 Additional resources
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1 What are Crown entities and
where do they fit into the State
services environment…?
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Elements of New Zealand’s System of
Government
Constitutional
Monarchy
(represented by
Gov-General)
Legislative Branch
Parliament
Executive Branch
Government
Judicial Branch
Courts, Tribunals
Makes
law
Develops and
administers law
Interprets and
applies law
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New Zealand’s System of Government includes…
•
Executive Council
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•
Cabinet
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•
The highest formal instrument of government, constituted by the Sovereign’s Letters Patent
The institution through which the government collectively and formally advises the
Governor-General
Comprises all Ministers of the Crown who derive their power to advise the Sovereign and
Governor-General from membership of the Executive Council
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 – the ‘workhorse’ of government
Has a strongly enforced convention of collective responsibility
Supported by Cabinet Committees, eg the Appointments and Honours Committee (APH)
Caucus
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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
Government caucus often consulted on board appointments
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Crown entities are a key part of the State
sector
• They constitute a wide variety of public organisations
delivering many public services
• They are often the 'face of government‘ delivering:
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Almost all public health, education, transport and housing services
Key regulatory functions
• Crown entities are collectively responsible for:
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More than a third of total government expenditure
The management of approximately 2/3 of the Crown's physical assets
Over half the workforce employed in the State services
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On one hand they are ‘stand-alone’ but, on
the other…
• 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 appropriate 'arms length’
from Ministers because, for example:
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Decisions on individual cases should not be influenced by Ministers
Ministers should be distanced from operations
Entities require access to a broad range of skills
• However, Ministers are still answerable to Parliament for
entities’ performance
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The legislative framework for Crown entities
consists of…
The Crown Entities Act 2004
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provides a consistent framework for the establishment, governance and
operation of Crown entities
clarifies accountability relationships between Crown entities, boards,
responsible Ministers and Parliament
clarifies powers and duties of board members
The entity’s own Act
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can supplement, negate or modify any provisions of the Crown Entities Act
Other legislation, eg:
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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
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There are 3 types of statutory Crown
entities …
• Crown Agents
• Autonomous Crown Entities (ACEs)
• Independent Crown Entities (ICEs)
The differences between the types include the degree of
separation from the Minister, reflected in provisions for
board member appointments and removals, and ministerial
powers of direction.
In addition to statutory entities, there are four other
categories of Crown entity: Crown entity companies, Crown
entity subsidiaries, School Boards of Trustees, and Tertiary
Education Institutions.
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Differences between statutory entities
Crown Agent
Power for Minister
to appoint Board
Members?
Yes
Power to remove
Board Members?
Yes, at Ministers’
discretion
Power to direct on
Government
Policy?
Whole of
Government
Direction?
Must ‘give effect to’
policy if directed by
Minister
Must ‘give effect to’
if directed by
Ministers of State
Services and
Finance
Autonomous Crown Independent Crown
Entity
Entity
Yes
No, Gov-Gen
appoints on
recommendation of
Minister
Yes, by Minister for No, by Gov-Gen, for
justifiable reason in just cause , on
Minister’s opinion
Minister’s advice.
Attorney General
consulted
Must ‘have regard
No, unless
to ’policy if directed specifically provided
by Minister
for in another Act
Must ‘give effect to’ Must ‘give effect to’
if directed by
if directed by
Ministers of State
Ministers of State
Services and
Services and
Finance
Finance
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Each Crown entity has a ‘responsible
Minister’ who …
• Oversees and manages the Crown's interests in and relationships
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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
Carries out any statutory responsibilities
Note: The Ministers of Finance and State Services also have important
roles to play in the Crown entity sector, including issuing directions to
support a whole of government approach.
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Ministers expect boards to…
• be aware of demands on Ministers from Parliament, taxpayers and
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•
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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
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‘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 ‘no surprises’ principles to their
relationships with monitoring departments.
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Ministers are supported by monitoring
departments
• Monitoring departments have a statutory role to assist the
responsible Minister to carry out his or her role in relation to
each monitored entity (no matter how they are funded)
• This includes supporting Ministers in the process of
identifying skill needs and appointing board members, and
providing the Minister with information, analysis and advice
on the entity’s effectiveness and efficiency
• The monitoring department is expected to focus on major
opportunities and risks
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2 Ministers influence Crown
entities in various ways…
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… through making board appointments
• Mostly made by Ministers; ICE board members are appointed
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by the Governor-General
Ministers’ recommendations for appointment almost always
go to the Cabinet Appointments and Honours Committee
(APH) and often to the government caucus
Appointments are for a fixed term
Appointees may be offered a second or subsequent term of
office but there is no guarantee of this
Ministers and the Governor-General have powers of removal.
No compensation or other benefit for loss of office
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… by participating in an on-going dialogue
with entities, eg..
• Meetings
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Ministers typically hold regular meetings with the board chair (or with
senior management as authorised by the board) to discuss strategic
issues. Monitoring department representatives will often be present
Ministers may also have periodic meetings with the full board
• Briefings
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Boards are expected to advise their Minister in advance of any major
initiatives or developments
See also ‘no surprises’
• Regular reporting
Entities provide regular reports on performance to their Ministers
• Informal engagement between boards and responsible Ministers
contributes to more formal processes within the strategic planning and
performance cycle (see over)
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Strategic Planning
/ Performance
Cycle
Direction Setting
What do we intend to
achieve over the next 4
years and why?
Identify/confirm
strategy.
Check indicators. Identify
major areas for change.
Planning
Review
What impact have our
interventions had and what
improvements can we make?
Assess effectiveness and
efficiency of interventions,
consider
unintended
consequences.
Continuous
Improvement
What is the best way to
achieve this and have we got
the required capability?
Identify options and choose
the ‘best’ intervention set.
Identify required capabilities.
Are we implementing and
delivering as planned, and
managing our capability
and risks effectively?
Deliver
interventions,
monitor and refine.
Implementation
and delivery
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… by participating in formal strategic
direction setting processes, for which there
are various channels…
(1) Letter of Expectations
A letter of expectations may be used to set out a Responsible
Minister’s expectations for:
• The Crown entity’s strategic direction
• Its governance and performance
• Specific priorities for the planning period
• Monitoring and information
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(2) Statement of Intent (SOI)
• The SOI is the centrepiece of the accountability relationship
between a Crown entity board and its Minister (to be provided at
least every 3 years as from 1 July 2014). It must cover at least four
financial years
• Through strategic discussions, in consultation with the
Minister, a board outlines its strategic thinking and future
intentions and frames its actions. A decision can then be
taken as to whether a new SOI is required
• Should reflect Government’s objectives for both the sector
and for individual Crown entities, and wider Government
policy initiatives and themes
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… through various other processes and
agreements, such as …
• Statement of Performance Expectations (from 1 July 2014)

Details the outputs to be supplied and what they are to achieve, identifies
expected revenue and proposed expenses, and explains how performance
will be assessed. It is produced annually and tabled in the House
• Memorandum of Understanding (MOU)
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May be used to document the Government’s performance expectations of
a Crown entity and enable the Minister and the entity to record their
understanding of the basis for monitoring, and accountability of the
entity. The MOU supplements the SOI
• Annual Report
An assessment of performance against strategic intentions in the SOI
 An assessment of the performance outlined in the SPE
 Tabled in the House annually

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… by monitoring Crown entity performance
• Ministers ‘oversee and manage’ Crown entities (and are
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•
answerable to Parliament for their entities’ performance)
They obtain advice from monitoring departments about the
entities' effectiveness and efficiency, and how any risks will
be managed
Ministers can require Crown entities to supply a wide range
of information
They rely on good reporting from the entity and are assisted
by monitoring departments as their agents
Ministers are able to formally review a Crown entity’s
operations and performance at any time
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Ministers have powers to direct some
Crown entities
• Ministers may direct a Crown Agent or ACE (ie, in
relation to a government policy that relates to the
entity’s functions and objectives)
• The Ministers of Finance and State Services may issue
directions to apply a Whole of Government approach
to Crown entities (eg, relating to ICT)
• Ministers must consult with affected entities before
issuing directions
• All directions must be in writing. They are tabled in
Parliament and notified in the Gazette
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3 As part of the State services,
Crown entities must collaborate
with other entities where
practicable, demonstrate high
standards of accountability, and
expect to experience considerable
public scrutiny…
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Delivering better public services
• Working together with other agencies, as part of the whole
State Services system
• Key initiatives to deliver better public services include:
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Focus on Results – driving collaboration for service improvement
Stewardship – building excellent public institutions
System leadership roles – including the role of the State Services
Commissioner as ‘Head of the State Services’, and functional leadership
roles for Property, Procurement, and ICT
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Accountability to Parliament…
• Despite their ‘arm’s length’ relationship, Crown entities
operate within a political setting
• Ministers responsible for Crown entities are answerable to
Parliament
• A Crown entity can support its Minister by, for example:
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appropriate and transparent reporting (often by supplying information
via the monitoring department)
open and constructive engagement with Select Committees
Following a ‘no surprises’ approach
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…scrutiny by Select Committees…
• Crown entities may appear before Select Committees:
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As witnesses (e.g. in relation to Estimates, financial review or
enquiries)
As advisors (e.g. on a bill)
• See guidelines at www.ssc.govt.nz/officials-and-selectcommittees
• Information and answers must be full and honest
• Parliamentary privilege applies. There must be no pressure
on officials, or action taken against them, for giving evidence.
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Select committees - continued
• Entities should be represented at an appropriate level: usually
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the chair in respect of Crown entities
Entities should take a "no surprises" approach with their
Minister e.g. giving advance notification of a submission
‘Protections’ are available to officials but, given a Crown
entity's accountability to its board and Minister, loss of
confidence could result from flouting the conventions
Responsibility for explaining and justifying government policy
ultimately rests with Ministers
Board members can appear in a personal capacity
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… contributing to answers to Parliamentary
Questions, OI Act requests, Ministerial
correspondence, etc…
• Ministers have to respond to various forms of request for
•
•
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information concerning Crown entities in their portfolios
Crown entities need to provide information to enable
Ministers’ offices or departments to prepare appropriate and
accurate responses
The timelines for responses can be very short
Documents created by Crown entities (even internal e-mails)
are subject to disclosure under the Official Information Act
All of this place strong disciplines on departments and entities
re record-keeping, productive relationships, responsive
processes, etc
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…and also, through the audit process
• The Office of the Auditor-General gives Parliament, Crown
entities and the public independent assurance that Crown
entities are:
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carrying out their activities effectively, efficiently and appropriately
using public funds wisely
reporting their performance accurately
• OAG audits information of almost 3000 Crown entities(*) on
what has been spent and achieved, does some more in-depth
performance audits and inquiries, and provides advice to
Parliament when it financially reviews Crown entities
(*) incl almost 2500 School Boards of Trustees
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4 The development and
management of effective
relationships is crucial for Crown
entity success…
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For Crown entity boards the key players
include…
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•
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Responsible Ministers and their offices
Monitoring departments
Crown entity chief executives and senior managers
Other Crown entities in or affecting the sector
Central agencies
The OAG
Select committees
Each entity will have other stakeholders that are specific to their
business and with whom effective relationships need to be
developed and managed.
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The central agencies are:
Department of the Prime Minister and Cabinet (DPMC)
• Advises the Prime Minister
• Coordinates policy advice
State Services Commission (SSC)
• advises the Minister of State Services
• advises on establishment, disestablishment and mergers of agencies
• provides guidance to Crown entities and monitoring departments on:
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appointment terms & conditions of chief executives and subsequent
reviews of conditions
integrity issues and standards of behavior and conduct
board member fees (Crown agents and ACEs)
The Treasury
• advises the Minister of Finance
• has oversight of budget planning, Crown entity financial obligations and
reporting
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5 Governing a Crown entity is
both similar to and different from
governing any other substantive
organisation…
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A Crown entity board…
• Sets the entity’s strategic direction and annual
•
•
•
•
•
•
performance expectations, in consultation with the
Minister
Exercises the entity’s powers and functions itself or
through delegation, empowering the CEO and others
to implement the board’s policies
Appoints and oversees performance of the CEO
Ensures the entity’s functions are performed
efficiently and effectively
Manages risk and ensures compliance
Provides assurance of financial responsibility
Maintains appropriate relationships with key
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stakeholders
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High standards of governance
effectiveness require active performance
management…
• Crown entity boards need to demonstrate the highest possible
standards of corporate governance, and to know how their entity
is performing
• Boards have a high degree of control over their own processes
and structures
• Boards have collective responsibility and need to speak with ‘one
voice’, once a decision is taken
• Boards should undertake regular assessments of their own
effectiveness, which may include assessments of individual
members as well as the board as a whole
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A Crown entity is guided in some aspects
of its employment relationships
• A Crown entity board appoints the entity Chief Executive, and
oversees his/her performance
• There are some important differences from company board
practices, eg Crown entity boards must consult with SSC on
the terms & conditions of employment of the Chief Executive:
 prior to appointment; and
 when conditions of employment, including remuneration, are
reviewed (statutory entities only)
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Crown entities must act as ‘good employers’
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Fees for Board Members
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•
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Board fees for Crown Agents and ACEs are set in
accordance with a framework approved by Cabinet (the
‘Cabinet Fees Framework’) and administered by the State
Services Commission ([email protected])
Fees are set at different levels according to the role, and
responsibilities and complexities of the board duties
Exceptions are possible – but require a sound rationale and
must go through a Ministerial and/or Cabinet approval
process – depending on the level of increase proposed
The Remuneration Authority has a fee-setting role for ICEs
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6 A lot is expected of board
members collectively, and
individually…
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Collectively, boards of statutory entities
are expected to…
• Act consistently with the entity’s objectives, functions, the
current SOI and, from 1 July 2014, the Statement of
Performance Expectations
• Ensure that the entity performs its functions efficiently and
effectively, in a manner consistent with the spirit of service to
the public, and in collaboration with other public entities
(where practicable)
• Ensure the entity operates in a financially responsible
manner, by prudently managing its assets and liabilities and
endeavouring to ensure long-term financial viability
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Individually, board members are expected
to…
• Comply with the Crown Entities Act, their entity’s enabling Act
•
•
•
•
and other relevant legislation
Act with honesty and integrity
Act in good faith and not at the expense of the entity’s
interests
Act with reasonable care, diligence and skill (as a ‘reasonable
person’ would in the same circumstances)
Avoid disclosing information obtained in their capacity as a
member, unless in specified circumstances
Note: Both the board and its individual members can be
sanctioned for a breach of duties
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In terms of performance assurance…
• Boards have the primary responsibility for monitoring and
reporting on a Crown entity’s performance – they must know
what is happening in their agency
• Ministers have both a need and a right to know - boards
should provide information on which valid judgments can be
made about an entity’s performance
• Boards are expected to work constructively with Ministers
and monitoring departments to identify the performance
measures and standards that will support accurate and
appropriate judgments about the Crown entity's performance
and progress
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Liabilities and indemnities
• The Crown Entities Act gives individual members and other
personnel immunity from civil liability when they have acted in
good faith in performance or intended performance of the
entity’s functions
• There is no immunity from criminal liability
• A board may indemnify and insure its members and other
statutory entity personnel
• An office holder or employee will not be covered for any act or
omission made in bad faith and/or not conducted in the
performance or intended performance of the entity’s functions
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7 Preserving the integrity of
public sector values means …
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…you will have actively considered conflicts
of interests before accepting appointment
• Before appointment, a prospective board member must
disclose to the Minister the nature and extent of all interests
that they have, or are likely to have, in matters relating to the
entity
• The responsible Minister is required to confirm, in the
submission to APH, that this disclosure has been made
• The nature of the interests to be disclosed are specified in
legislation (see next slide)
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… after appointment, you should also
disclose interests …
Interests must be disclosed if you:
• may derive a financial benefit (including remuneration as an employee)
• are the spouse, de facto partner, child or parent of a person who may
derive a financial benefit
• have a financial interest in a person to whom the matter relates
• are a partner, director, officer, board member, or trustee of a person
who may have a financial interest in a person to whom the matter relates
• may be ‘interested’ because of a provision in the entity’s Act
• are otherwise directly or indirectly interested in the matter (‘interests’
are not only financial)
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…and then manage proactively any
conflicts of interest you may have
A board member of a statutory entity, who has an interest (as
defined in legislation):
• Must not vote or take part in any discussion or decision of the board
relating to the matter or otherwise participate in any activity of the entity
that relates to the matter
• Must not sign any document relating to the matter
• Must be disregarded for the purpose of forming a quorum for any part of
a meeting of the board relating to the matter
Exceptions to these requirements may be made by the
chairperson if he/she is satisfied it is in the public interest
The pragmatic test – “how will it look on the front page of
tomorrow’s paper?”
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…and having standards of conduct for
board members and for employees …
• New board members must be familiar with their board’s
policy manual or charter; in particular, its standards of
integrity and conduct setting out explicit expectations in
relation to potential probity issues
• Boards should satisfy themselves that their entity’s own code
of conduct and practices reflect the principles of the
Standards of Integrity & Conduct for the State Services and
related expectations (eg, on offers of gifts & hospitality), and
should endorse their adoption for all entity employees
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During an election year …
• Official Information Act requests should be handled in a timely
•
•
•
•
and appropriate manner
State servants intending to stand for Parliament must inform
their employer, and stand down from their positions by
Nomination Day in the case of staff covered by the Electoral Act
Senior staff should exercise particular care in discussing their
intentions
Agency premises and other resources should not be used for
electioneering
See SSC guidance: www.ssc.govt.nz/election-guidance
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8
Additional Resources
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State Services Commission
• General guidance and Information for Crown Entities:
www.ssc.govt.nz/crown-entities
• This includes links to specific reports and guidance as they are made
available, eg:
 Preparing the Statement of Intent
 Preparing the Annual Report
 Board Appointment and Induction Guidelines
 Enduring Letter of Expectations to the Boards of Statutory Crown
Entities
 Directions Supporting a Whole of Government Approach
 Preparation of Governance Manuals
 Officials and Select Committees - Guidelines
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The Treasury
• Guidance on developing strategy and annual performance expectations:
Performance Expectations – "What's Intended to Be Achieved" www.treasury.govt.nz/publications/guidance/planning/performance
expectations-achieved
 CEA: Statement of Performance Expectations (SPE)
http://www.treasury.govt.nz/publications/guidance/planning/ceaspe
• Other information on SOI content and timetables is available
here: www.treasury.govt.nz/publications/guidance/strategy

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Office of the Auditor-General
• See www.oag.govt.nz for documents that may be of interest, eg:



Managing Conflicts of Interest: Guidelines for Public Entities
Controlling Sensitive Expenditure: Guidelines For Public Entities
Severance Payments: a Guide for the Public Sector
Other sources
• www.govt.nz
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