Public sector

Effective governance in the New Zealand Public Sector is a critical enabler to the success of many public services, functions and Crown investments. This includes directors of State-owned enterprises (SOEs) and other Crown owned companies, elected and appointed board members of Crown entities such as district health boards, and members of local authorities.

In this section:

  • Central government - general governance guidance, conflicts of interest, remuneration, improving governance in the Public Sector – lessons from the Auditor-General
  • Local government - conflicts of interest, governance development

Central government

SSC’s Guide to New Zealand’s Central government agencies lists entities in the wider state sector by type of entity, including SOEs and the different types of Crown entities.

Key websites:

  • State Services Commission (SSC) has information for directors working or interested in the public sector, including governance resources for Crown entities
  • The Treasury has information for boards of Crown companies and other commercial entities. Following a review of its commercial operations, the Treasury disestablished the Crown Ownership Monitoring Unit (COMU), whose functions were taken over by the Treasury’s Governance & Performance team

  • Office of the Auditor-General (OAG) has good practice guidance and other reports relating to management and governance of public sector entities.

Key legislation setting out the establishment, governance and operation of entities and boards in the state sector includes:

  • Crown Entities Act 2004
  • Crown Research Institutes Act 1992
  • State Owned Enterprises Act 1996
  • State Sector Act 1998
  • Public Finance Act 1989

Treasury’s Owner’s Expectations Manual outlines shareholding Ministers' expectations for State-owned enterprises (SOEs). Many of these principles and expectations can be applied to other Crown-owned entities and companies, where appropriate.

The State Services Commission has updated its website on Crown entities, with a focus on the roles of Ministers, monitoring departments, boards and staff of Crown entities. It presents the new It Takes Three: Operating Expectations Framework for Statutory Crown Entities.

The Auditor-General’s report on the 2012/13 audits of State-owned enterprises (SOEs) covers 18 companies including Solid Energy, KiwiRail, Meridian, NZ Post, Air New Zealand and Might River Power. With combined revenue of $16.37 billion and total assets of $52.5 billion these companies represent around 20% of the Government’s balance sheet (2013 figures). The report includes financial analysis of the individual companies and of the portfolio as a whole. Although individual performance varied significantly, poor performance of Solid Energy and KiwiRail resulted in low overall performance for the portfolio, including an overall 1.7% return on assets and 4.4% return on equity. The Auditor-General also highlights large variances between forecast and actual performance of many companies and suggest questioning management’s ability to predict and manage performance.

General governance guidance
2014 Resource for Preparation of Governance Manuals - Guidance for Statutory Crown Entities. This guide describes the Crown entity environment (including relevant legislation, board functions and powers and key relationships), board conduct, boards in action and board administration.

Tertiary Education Institutes: Amendments made in 2009 to the Education Act 1989 were targeted at improving the governance of Institutes of Technology and Polytechnics (ITPs). Subsequently, an evaluation framework was developed in order to assess the impacts of the changes and track progress over time. An overview of the evaluation of changes to ITP governance can be found on the Tertiary Education Commission’s (TEC) website.

The TEC produced a Governance Guide for Council Members of Tertiary Education Institutions, in March 2014.

Guidance and resources for School Boards of Trustees can be found on the websites of the Ministry of Education and the New Zealand School Trustees Association.

Conflicts of interest
The Auditor-General’s 2007 guidance, Managing conflicts of interest: Guidance for public entities, discusses a range of organisations, situations, and personnel, and considers ethical expectations as well as legal rules.

Management of conflicts of interest in the three Auckland District Health Boards (2007) looks at how conflicts of interest were dealt with in the three Auckland District Health Boards.

Remuneration and allowances for board and committee members in the public sector are in the main covered by one of the following three mechanisms:

  • The Remuneration Authority sets the remuneration of board members of independent statutory bodies, and other key office holders such as judges, Members of Parliament, and local government representatives
  • The Treasury's Commercial Operations group provides advice to Shareholding Ministers and Responsible Ministers on appointments to the boards of entities such as State-owned enterprises, the Crown financial institutions, other Crown entity companies and statutory entities. Information regarding the appointments process, induction and professional development can be found here.
  • If not covered by the Remuneration Authority, Treasury, or another fee setting authority, then the Cabinet Fees Framework covers boards and committees in which the Crown has an interest. The Framework is administered by the SSC.

The Auditor-General’s Inquiry into Expenses Incurred by Dr Ross Armstrong as Chairperson of Three Public Entities (2003) provides some lessons for directors who hold multiple appointments in the public sector and the need to document the business purposes for expenditure incurred.

Improving governance in the Public Sector – lessons from the Auditor-General
The Inquiry into aspects of ACC’s Board-level governance (2012) looked at whether the ACC Board had policies and procedures for managing interactions between board members and individual claimants (namely Bronwyn Pullar), who they might know.

The Auditor-General’s Additional work on Solid Energy New Zealand Limited (2014) highlighted governance and management lessons that can be learned by Solid Energy and other entities. This work included reviewing board minutes and papers (from 1 July 2008 to 30 June 2013) and other information released by Treasury on its website, and interviews with key people, including the former Chairman and CEO of Solid Energy.

Maintaining a future focus in governing Crown-owned companies (2014) focuses on the ability of Crown-owned companies’ governance systems to support “future thinking” and to realise and adjust strategies accordingly.