Part 6: Advice on statements of intent
6.1
The Act directs responsible Ministers to participate in the process of setting the entity’s strategic directions and targets. One of the main ways that a Minister can do this is by providing advice to the Crown entity as it prepares its SOI.
6.2
In this Part, we describe SOIs and discuss:
- planning for SOIs;
- advice that monitoring departments provided while Crown entities prepared their SOIs; and
- year-on-year improvements within each Crown entity’s SOI.
Key messages
6.3
The departments carried out many of the basic activities we expected – for example, preparing letters of expectations and written briefings for the Minister on each Crown entity’s SOI. However, each department could improve the timeliness and/or the quality of this work.
6.4
This Part contains one recommendation. It relates to our overall view that the departments could improve the effectiveness, efficiency, and timeliness of the preparation of each Crown entity’s SOI by greater consideration of:
- how the SOI is prepared; and
- the information and assurance that the Minister needs about the SOI.
6.5
We were concerned that the departments seldom provided advice to the Minister about whether a Crown entity’s SOI would provide a base for assessing the entity’s performance.
About statements of intent
6.6
Each Crown entity must prepare an SOI each year. Section 138 of the Act sets out the purpose of an SOI:
The purpose of a statement of intent is to promote the public accountability of a Crown entity by—
- enabling the Crown to participate in the process of setting the Crown entity’s medium-term intentions and undertakings:
- setting out for the House of Representatives those intentions and undertakings:
- providing a base against which the Crown entity’s actual performance can later be assessed.
6.7
The Act sets out the required content of the SOI and the roles and responsibilities of the Crown entity and the responsible Minister for preparing the SOI and presenting it to the House of Representatives. To meet these requirements, particular activities must be carried out in a specific sequence.
6.8
Departments are encouraged to carry out further non-legislative work to support Ministers in providing direction to the Crown entity on its SOI, by preparing a letter of expectations for the entity.
6.9
Figure 3 summarises the legislative and non-legislative steps for preparing a Crown entity’s SOI. We prepared this diagram to help us assess the work that the departments did to support the responsible Minister in carrying out their legislative functions and responsibilities in relation to the entity’s SOI.
6.10
In 2007, the Government introduced a requirement that Crown entities prepare their SOI in time for presentation to the House of Representatives the day after Budget day, unless there were reasons why it was not practical to do so. Crown entities were encouraged to meet this requirement in 2008 and were expected to meet this requirement from 2009 onwards.
Planning for statements of intent
Departments can do more work to help Crown entities prepare their SOI in a timely and efficient way.
6.11
Figure 3 shows that there is a sequence of steps that must be followed to prepare a Crown entity’s SOI. Some of the steps are optional. Some of the steps involve the entity’s board representatives, the monitoring department, or the responsible Minister.
6.12
We expected that monitoring departments would work with each Crown entity to prepare the entity’s SOI in a timely and efficient way, and to ensure that the entity had a clear understanding of the process involved in preparing the SOI early on in the financial year.
6.13
MCH had made a good start in doing this by including a schedule of dates and responsibilities about preparing SOIs within each Crown entity’s output agreement or memorandum of understanding for 2008/09. MED was less advanced, but included some information about the requirements for preparing SOIs within each entity’s output agreement or memorandum of understanding for 2008/09 – one entity had a schedule of dates and responsibilities, and two entities had a date for when the draft SOI needed to be provided to the Minister.
Figure 3
Steps for preparing a Crown entity’s statement of intent, including some legislative requirements under the Crown Entities Act 2004
6.14
At the start of the 2008/09 financial year, DIA drafted a process for preparing one Crown entity’s 2009-2012 SOI so that it would meet the new non-legislative requirement to present the SOI to the House of Representatives on the day following Budget day (see paragraph 6.10). This information referred to legislative requirements and set out where there was room for task deadlines to be flexible. DIA shared this information with the entity in December 2008.
6.15
The detail of this information was in keeping with our expectations. It was a good example of a department carrying out early careful planning to help the entity prepare its SOI in a timely and efficient way. However, in our view, their work would have been enhanced by sharing the information with the entity earlier.
6.16
In 2008, one of the departments encountered some difficulties when two entities it monitored were late preparing their draft SOIs for the Ministers. The department had a short time frame to review each draft SOI and provide comment on it to the Minister.
6.17
In one case, the Minister was reluctant to request the Crown entity to make any changes to the SOI because the legislative time frame for completing the SOI and presenting it to the House of Representatives was tight. In the other case, information on file suggests that the draft SOI was not prepared within the statutory time frame.
6.18
Both of these situations are undesirable. Although the Crown entities have played a part in this, it highlights the importance of monitoring departments working with Crown entities to help them prepare their SOI in a timely and efficient way. Crown entities need to have a clear understanding of the process involved in preparing the SOI. We encourage the departments to continue to improve their work in this area.
Advice that monitoring departments provided while Crown entities prepared their statements of intent
Departments can improve the timeliness and content of some of the advice they provide to Crown entities while they prepare their SOI.
6.19
The following sub-headings correspond to Figure 3. We do not comment on the work that each Crown entity did to finalise their SOI or that the responsible Minister did in presenting the SOI to the House of Representatives.
6.20
The departments provided the responsible Ministers and Crown entities with advice during the preparation of their SOI. This work could be more effective if the departments improved the timeliness and content of some of the advice they provide.
Letter of expectations
6.21
In the 2007/08 financial year, MED and DIA prepared a letter of expectations for each responsible Minister to send to the relevant Crown entities, setting out the Minister’s priorities, to help the entity prepare its SOI for 2008-11. MCH prepared a similar letter for one of the four entities we selected.
6.22
The departments provided the letters to the Minister between December 2007 and March 2008.
6.23
It is not a legislative requirement to prepare a letter of expectations. However, this is a clear and practical way for Ministers to provide direction to a Crown entity about its strategic direction (or to summarise any previous discussions about the entity’s direction), particularly in the context of preparing an SOI.
6.24
In some cases, the letter of expectations would be more effective if the departments prepared it earlier in the financial year. It is likely that Crown entities will have made significant progress in preparing their SOI by early March in order to meet statutory time frames and the requirement we refer to in paragraph 6.10. If an entity receives the letter of expectations after it has spent time preparing its SOI, there is the risk that the entity may need to revisit the strategic planning that the SOI is based on. This is an area that monitoring departments need to take account of when planning for an entity’s SOI.
Preparing and approving the draft statement of intent
6.25
We did not review the work that Crown entities carried out to prepare their draft SOI.
6.26
In many cases, the monitoring department and the Crown entity communicated about the SOI as it was drafted. This approach allowed the department to advise the Crown entity early about areas where it could improve the SOI.
6.27
Representatives from four Crown entities each commented positively about the interaction they had with the monitoring department about their SOI.
Comments and advice on the draft statement of intent
6.28
The departments prepared a written briefing for the responsible Minister on the 2008-11 SOIs for nine of the 10 Crown entities. These briefings did not always include the information we expected.
Does information in the SOI provide a base for measuring a Crown entity’s performance?
6.29
In most cases, written briefings did not include advice to the responsible Minister about whether information within the draft SOI provided a satisfactory base for monitoring the Crown entity’s performance. Briefings should include this information because one of the legislative reasons why an entity must prepare an SOI is to provide a base against which the entity’s performance can be assessed.
6.30
The clearest example we saw of a written briefing providing advice to the Minister whether the SOI provided a satisfactory base for monitoring the Crown entity’s performance was a briefing for a 2007-10 SOI. The briefing stated:
The [monitoring department] considers that [the entity] has developed an SOI that provides a reasonable basis for funding and monitoring of performance.
Does the SOI meet the requirements of the Crown Entities Act 2004?
6.31
Five of the nine written briefings advised the responsible Minister clearly about whether the SOI included information required by the Act. MCH did not provide advice to responsible Ministers about this.
6.32
The Act sets out the minimum basic requirements that SOIs must meet. Departments responsible for advising the Minister on a Crown entity’s draft SOI should clearly state whether the requirements have been met, and whether any action needs to be taken.
Comments for the Crown entity
6.33
In most cases, the monitoring department prepared a letter for the Minister to send to the Crown entity, noting that they received the SOI and setting out any comments on the draft SOI. This is good practice because it provides a clear record for the entity and the Minister of any comments the entity had to take account of under section 146(2)(c) of the Act.
| Recommendation 5 |
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We recommend that the departments identify, and act on, work they can do to improve the effectiveness, efficiency, and timeliness of the preparation of each Crown entity’s statement of intent. This work should consider:
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Year-on-year improvement of each Crown entity’s statement of intent
Departments could provide clearer advice on the overall quality of each Crown entity’s SOI.
6.34
We reviewed the advice that the departments provided to the responsible Minister and each Crown entity on the entity’s SOI for at least two of the last three financial years. We did this to see whether the departments had identified and communicated how entities could improve the quality of their SOIs.
6.35
In many cases, written briefings and advice set out areas where the entity could carry out further work to prepare a better quality SOI in the following year. This is good practice because it provides a record for the department and the entity to refer to when they start planning for the next SOI.
6.36
However, briefings to Ministers that we reviewed seldom provided clear advice on what the department’s views were on the overall quality of each Crown entity’s SOI. This made it difficult for us to determine whether an entity would need to carry out a significant amount of work to improve its SOI.
6.37
It is important for departments to form a view about the overall quality of the SOI and communicate it to the Minister and the Crown entity. This could help the Minister in setting performance expectations for the entity to improve its SOI. It could also help the department in identifying early on if there are any activities it needs to carry out to help the entity meet these performance expectations.
6.38
The chairperson of one Crown entity told us that it was difficult to continue to improve the SOI because the non-legislative requirements for preparing the SOI change each year.