Part 2: Roles and responsibilities

How government departments monitor Crown entities.

2.1
In this Part, we describe the roles and responsibilities of monitoring departments and discuss:

Key messages

2.2
In most cases, information about the roles and responsibilities of monitoring departments was not clear. We recommend that the departments have a clear and documented understanding of their roles and responsibilities.

2.3
Formal agreements between Ministers and Crown entities set out their roles and responsibilities, and included information about the broad role of the monitoring departments. However, representatives from four Crown entities told us that a lack of clarity about the monitoring department’s role created difficulties for them.

2.4
DIA was good at providing the Minister with information about his statutory responsibilities within written briefings about Crown entity matters. This is an area that MED and MCH could improve on.

2.5
The departments and representatives from four Crown entities told us that they placed a high value on having an effective relationship between the monitoring department and the Crown entity.

About roles and responsibilities

2.6
Monitoring departments and the board of a Crown entity (with the support of the entity’s management and staff) each are accountable to the responsible Minister. In carrying out their responsibilities, they must also interact with each other. A diagram of these relationships is set out in Figure 1.

Figure 1
The relationship between the responsible Minister, the Crown entity, and the monitoring department

Figure 1: The relationship between the responsible Minister, the Crown entity, and the monitoring department.

2.7
It is important that each of the three parties has a clear understanding of their roles and responsibilities, and how this relates to the roles and responsibilities of those they interact with. This helps to avoid confusion about, or duplication of, roles.

2.8
Because monitoring departments and Crown entities need to work together, the nature of the relationships between the two parties is also important.

Information and agreements about roles and responsibilities

Roles and responsibilities of monitoring departments should be clearer.

2.9
Roles and responsibilities of the departments and Crown entities were recorded in:

  • information that departments held about their roles and responsibilities; and
  • output agreements and memoranda of understanding between responsible Ministers and Crown entities.

Information departments held about their roles and responsibilities

2.10
In most cases, the departments did not hold all the information we expected about their roles and responsibilities for the monitoring of Crown entities.

2.11
We reviewed information that the departments held about their roles and responsibilities within:

  • public documents, such as their SOI and the Estimates of Appropriations;
  • any output agreement between the responsible Ministers and the departments; and
  • other documents.

2.12
The departments’ SOIs set out high-level information about their role in monitoring Crown entities. The high-level nature of this information was in keeping with these types of documents. However, this information often could have been clearer – for example, one department identified within its SOI only some of the Crown entities it was responsible for monitoring.

2.13
MED’s 2008/09 output agreement and performance information supporting the Estimates of Appropriations provided a good description about the broad types of monitoring activities that MED intended to carry out for each Crown entity.

2.14
Departments and Ministers need to determine the level of detail included in these documents each year. In this case, the information in the Estimates of Appropriations was particularly useful because it was the main way in which MED identified the broad types of monitoring activities that it intended to carry out for the selected Crown entities for the 2008/09 financial year.

2.15
MED had internal monitoring plans for two Crown entities we looked at. The monitoring plans set out clear, up-to-date information about MED’s role and responsibilities. They also distinguished between particular tasks for the time frame each plan covered and the usual monitoring tasks that MED intended to carry out each year. We discuss further aspects of these plans in paragraphs 4.12-4.14. The plans were particularly useful because they provided staff with clear information about the scope of their responsibilities.

2.16
MCH and DIA did not have clear information about their roles and responsibilities for monitoring Crown entities in 2008/09.1 The information they had did not always cover the scope of work that their staff actually carried out, was sometimes vague, and was seldom comprehensive. In our view, this was not sufficient to give staff a clear picture of their responsibilities.

2.17
DIA told us that it frequently used guidance from central agencies for Ministers and monitoring departments on roles and responsibilities when it carried out its monitoring work. This guidance is useful to assist departments’ staff to decide how to approach monitoring activities. However, there are many areas where departments need to carry out their own work (or clarify with Ministers) to define the scope of their monitoring role and the responsibilities that staff are expected to carry out.

2.18
A clear, up-to-date record of the monitoring responsibilities, together with clear information about the monitoring department’s role, would assist staff to:

  • understand the scope of the monitoring work they are expected to carry out;
  • plan for monitoring work;
  • approach monitoring tasks with a view to fulfilling their monitoring role; and
  • check that they have carried out the monitoring tasks they needed to do.

2.19
Departments should check that this information is consistent with that agreed with the responsible Minister in any output agreement, or summarised within public documents.

Recommendation 1
We recommend that the departments have a clear and documented understanding of the monitoring role they have for each Crown entity and the responsibilities they have in fulfilling this role.

Output agreements and memoranda of understanding between responsible Ministers and Crown entities

2.20
Nine of the ten Crown entities we looked at had an output agreement or a memorandum of understanding with the responsible Minister. The agreements or memoranda included clear information about the roles and responsibilities of each entity and the responsible Minister. Most of the agreements or memoranda noted the broad role of the monitoring department.

2.21
The departments were involved in preparing the agreements or memoranda, either by preparing them directly or by providing advice to the responsible Minister about them.

2.22
Setting out information about roles and responsibilities within agreements or memoranda is a practical approach. It is in keeping with the statutory purpose of an output agreement for a Crown entity, which is to:

... assist a Minister and a Crown entity to clarify, align, and manage their respective expectations and responsibilities in relation to the funding and production of certain outputs, including the particular standards, terms, and conditions under which the Crown entity will deliver and be paid for the specified outputs.2

2.23
We were pleased that the departments were involved in preparing the output agreements and memoranda. It provided them with an opportunity to check that the information about the roles of the Crown entity, responsible Minister, and monitoring department was clear.

Do representatives from Crown entities think that roles and responsibilities are clear?

2.24
Representatives from Crown entities we spoke with had different views about whether roles and responsibilities of the departments and Crown entities were clear. Representatives from three entities thought that they were. Representatives from four entities told us that a lack of clarity about the monitoring department’s role created difficulties for them.

2.25
For example, a representative from one Crown entity said that lack of clarity in the monitoring arrangements meant that board members were unsure about whether they were there to make decisions or to follow the monitoring department’s lead.

2.26
A representative from another Crown entity told us that they had several different relationships with the monitoring department. For example, the department purchased services from the entity as well as having responsibility for monitoring it. The representative told us that the department could adversely affect the entity’s performance through some of these relationships, but that the department did not take account of this in carrying out its monitoring work.

2.27
These comments show that the departments need to carry out further work so that Crown entities are clear about the monitoring department’s role.

Information provided to the responsible Minister about their responsibilities

MCH and MED could provide more information on an ongoing basis to each Minister about the Minister’s responsibilities. DIA did this work well.

2.28
The departments briefed responsible Ministers after the 2005 and 2008 general elections on the Crown entities that the Ministers were responsible for. The written briefings set out useful information about the role and functions of the Crown entities, the roles and responsibilities of the Minister, and issues for the Minister to be aware of.

2.29
DIA provided the responsible Minister with ongoing information about his responsibilities by setting out this information at the beginning of briefing documents that they prepared for him on various matters (for example, on SOIs, board appointments for Crown entities, and budget processes). The information that DIA prepared was clear and useful, and usually identified whether the requirement was a legislative one.

2.30
MED provided some ongoing information to Ministers about their responsibilities for the selected Crown entities within briefing documents. MCH seldom provided information to responsible Ministers about their legislative responsibilities within written briefings on matters where they could have. This was partly because, at the time of the audit, they considered some Ministers to be well established in their roles and familiar with their responsibilities.

2.31
Ministers have various statutory obligations in respect of Crown entities that they are responsible for. For example, the responsible Minister must present the entity’s SOI to the House of Representatives within a specific time frame. Monitoring departments play a major role in ensuring that Ministers are aware of what they need to do to meet these obligations.

Importance of relationships between monitoring departments and Crown entities

Good relationships between monitoring departments and Crown entities are important.

2.32
A professional, open relationship between Crown entities and monitoring departments assists departments in collecting the information they need for their monitoring work. It also allows them to have free and frank discussions about issues and risks when necessary. This sort of relationship is also important from a Crown entity’s perspective, so that they can be confident in discussing issues with the department.

2.33
The departments told us that an important part of their monitoring work was having a good relationship with the Crown entities they monitor. This relationship allowed them to have regular contact, open discussions, and good sharing of information with the entities. The departments also told us that having a good relationship was particularly important for managing risks.

2.34
It was clear that MED had carefully considered how it would have an open and productive relationship with one Crown entity it monitored. MED had documented when and how it needed to be formally involved with the entity. In our view, this information was useful for staff to have a clear understanding of how they were expected to liaise with the entity. It was also useful because it meant staff knew who to refer issues to within the department and Crown entity if they needed to be escalated.

Crown entities’ views on relationships

2.35
Representatives from four Crown entities told us that having an open and constructive relationship with the monitoring department was important for them.

2.36
Representatives from three Crown entities told us that the monitoring department left them to carry out their business when things were going well and got involved only when they needed to. They told us that this approach worked well for them.

1: Information that MCH had to guide its monitoring work for the 2007/08 financial year had provided a good description of the broad types of activities that it intended to carry out in that year.

2: Section 170(2) of the Crown Entities Act 2004.

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