Appendix 2: Crown Research Institutes' operating environment

Each Crown Research Institute (CRI) is based around a productive sector of the economy or a group of natural resources. CRIs are expected to determine their own research priorities, while taking account of government research priorities or sector interests. They have common characteristics but also operate in different science and market areas, serve different customer groups, and have become commercialised to varying degrees. CRIs are not expected to maximise profits, but are expected to generate income from their research, science, and technology activities.

Funding

CRIs operate in a contestable funding environment. They compete for funding by tendering for research contracts from private companies, local bodies, or other state-owned agencies, or bid for contracts from the Foundation for Research, Science and Technology (FRST). Government funding consists primarily of contestable contracts from FRST, although there are some negotiated stable funding arrangements.

The main sources of income are:

• government research contracts;
• fee for service contracts; and
• sales and royalties.

CRIs also get funding from the CRI Capability Fund (administered by the Ministry of Research, Science and Technology) to retain and develop research capability. In the 2007/08 financial year, FRST contracts and capability funding made up 46% of CRIs’ total revenue.

Legislation

The main statutes for CRIs include:

• the Crown Research Institutes Act 1992;
• the Companies Act 1993; and
• the Crown Entities Act 2004.

The Crown Research Institutes Act 1992 sets out operating principles for CRIs. A CRI should:

• carry out research for the benefit of New Zealand;
• pursue excellence in all its activities;
• comply with all applicable ethical standards;
• promote the application of the results of research and technological developments;
• be a good employer; and
• exhibit a sense of social responsibility.

The Crown Entities Act 2004 also requires CRIs to act as good employers. This means that CRIs must have policies for the fair treatment of employees, provide for diversity, and enhance individuals’ development.

Monitoring and governance arrangements

CRIs are Crown entity companies. They have shareholding Ministers who are responsible for overseeing and managing the Crown’s interests in the CRIs. Shareholding Ministers appoint CRI directors and set out their expectations for CRIs in an annual operating framework.

The Crown Company Monitoring Advisory Unit monitors the Government’s investment in CRIs, and provides performance and governance advice to shareholding Ministers.

The shareholding Ministers for CRIs are the responsible Minister and the Minister of Finance.