Part 1: Introduction

Crown Research Institutes: Results of the 2011/12 audits.

In this Part, we provide an overview of the Crown research institutes (CRIs) and discuss the more significant changes to the CRIs' operating environment, including changes to the structural, governance, and reporting regimes.

Crown research institutes

The eight CRIs were established under the Crown Research Institutes Act 1992 (the CRI Act) to carry out research for the benefit of New Zealand. The CRIs also provide a range of scientific and advisory services.

CRIs operate as separate Crown-owned companies, each with a particular and distinct "public good" science/research purpose.

The eight CRIs are:

  • AgResearch Limited (AgResearch);
  • Institute of Environmental Science and Research Limited (ESR);
  • Institute of Geological and Nuclear Sciences Limited (GNS);
  • Industrial Research Limited (IRL);1
  • Landcare Research (New Zealand) Limited (Landcare Research);
  • National Institute of Water and Atmospheric Research Limited (NIWA);
  • New Zealand Institute for Plant and Food Research Limited (Plant and Food Research); and
  • New Zealand Forest Research Institute Limited (Scion).

The eight CRIs are described more fully in Appendix 1.

For the year ended 30 June 2012, the eight CRIs reported combined total revenue of about $703 million and total assets of $733 million. CRIs' aggregate equity was just under $527 million. Together, they employed just under 4000 full-time equivalent staff.

Changes in the operating environment of Crown research institutes

CRIs are required to promote and facilitate the application of the results of research and technological developments, and maintain their financial viability. In achieving these objectives, CRIs – like many other companies – are affected by the current economic situation and by the resultant expectation of efficiencies within the public sector generally.

The report of the Crown Research Institute Taskforce in February 20102 initiated considerable change for CRIs and for science research funding and policy agencies. The objective has been to increase the realisation of the benefits to New Zealand from science-based innovation, reduce complexity in the funding and monitoring system, and shift responsibility and accountability for investment decisions.

For CRIs, these changes included:

  • a cultural change to more open access and being more focused on the CRI's stakeholders, with stakeholder surveys conducted by the monitoring department, now the Ministry of Business, Innovation and Employment (MBIE), with CRI input;
  • a statement of core purpose (SCP) for each CRI, setting out the enduring purpose and focus for the CRI;
  • the requirement for each CRI to prepare its statement of corporate intent (SCI) in close consultation with its sector groups, businesses, and other end users;
  • shifting significant funding from funding agencies to CRI Boards, so that the CRI Board received core funding (direct Crown funding), with the amount and percentage varying for each CRI, and took on an investment (and accountability) role for strategy and resource allocation;
  • a new suite of key performance indicators that give weight to both the financial viability requirement of the CRI and the requirement to deliver research that benefits New Zealand; and
  • balance sheet reviews by the monitoring department.

For policy and funding agencies, changes included:

  • The Ministry of Research, Science and Technology and the Foundation for Research, Science and Technology were disestablished, and a single entity was created in 2011: the Ministry of Science and Innovation (MSI). MSI became part of MBIE from 1 July 2012, initially as MBIE (Science and Innovation) and then as MBIE – Science, Skills and Innovation Group.3
  • Primary responsibility for monitoring CRIs was moved from the Treasury's Crown Ownership Monitoring Unit (COMU) to MSI, then MBIE. COMU retained a role in monitoring CRI financial performance.4
  • More of the funding allocation decisions were shifted from funding agencies to CRI Boards, because the Boards are closer to both the science and the end users' requirements.

There have also been initiatives to support business investment in research and development, and a review of the research requirements and support for the high-value manufacturing and services sectors. This included the 2011 report Powering Innovation: Improving access to and uptake of R&D in the high value manufacturing and services sector (the Powering innovation report).5 The role and capability of IRL was reviewed, leading to a Cabinet decision to disestablish IRL as a CRI and incorporate its operations into an "advanced technology institute" called Callaghan Innovation.

IRL's new status

IRL ceased to be a CRI on 1 February 2013 and became a fully-owned subsidiary of Callaghan Innovation. IRL continues to carry out its previous functions and responsibilities with much the same staffing, until further decisions are made about the structure and operations of Callaghan Innovation. It has been renamed Callaghan Innovation Research Limited.

Callaghan Innovation

The Callaghan Innovation Act 2012 set up Callaghan Innovation in response to a major recommendation of the Powering Innovation report, which looked at how to boost the growth of firms in the high-value manufacturing and services sectors. Callaghan Innovation began operating on 1 February 2013.

Callaghan Innovation's focus will be broader in scope than the work of the former IRL. It takes over a range of business development functions that currently sit within other agencies, including the administration of some business research and development grants. It brings together the operations of the former IRL, MBIE's business investments team, and the Auckland FoodBowl.6

Callaghan Innovation's main objective is to support science and technology-based innovation and its commercialisation by businesses, primarily in the manufacturing and services sectors, to improve their growth and competitiveness. Callaghan Innovation provides a link between its own facilities, expertise, and resources and those of other Crown agencies and research organisations, such as CRIs, universities, and polytechnics. It has close links with New Zealand Trade and Enterprise, with which it is co-located in Auckland, Wellington, and Christchurch.

An establishment board was responsible for the preliminary planning. The new Board continues the implementation work and is preparing the new entity's business plan and accountability documents.

Reporting reforms – the statement of core purpose

In November 2010, the Government released an SCP7 for each CRI that set out:

  • each CRI's roles and responsibilities, and how these will benefit New Zealand;
  • the operating principles that describe the way a CRI must conduct itself;
  • the outcomes for each CRI (the SCP outcomes); and
  • which areas a CRI will lead to achieve the SCP outcomes and which areas a CRI will contribute to (led by another CRI to achieve its SCP outcomes).

In our previous report on the results of our CRI audits,8 we drew attention to the new performance framework for CRIs, including SCPs, and new reporting requirements. In the 2011/12 audits, we looked at CRIs' reports of performance against their SCPs.

In Part 4, we comment on CRIs' reporting against the SCP outcomes, as reflected in the SCI, and on their use of the core funding.

Our future focus

Our intention in the next year or two is to widen the focus of this report to include public entities in the wider science and innovation sector.

We will continue our interest in the quality of CRIs' reporting against their SCPs and report again on the results of our analyses of financial performance of CRIs.

We will also report on CRI and State-owned enterprise decision-making at Board level about future strategies, tactics, and operations based on the right information, in the right form, at the right time.

1: IRL ceased to be a CRI on 1 February 2013, when it became a subsidiary of the non-CRI Crown entity, Callaghan Innovation. We have retained it in the group we reviewed because it was still a CRI for 2011/12.

2: Crown Research Institute Taskforce (2010), How to enhance the value of New Zealand's investment in Crown Research Institutes. The report is available on MBIE's science and innovation website (

3: MSI began operating on 1 February 2011, after the integration of the functions of the former Ministry of Research, Science and Technology and Foundation for Research, Science and Technology. MSI was disestablished on 30 June 2012, when its operations were merged with those of the Department of Labour, the Department of Building and Housing, and the Ministry of Economic Development to form the Ministry of Business, Innovation and Employment on 1 July 2012. MSI's operations became MBIE (Science and Innovation) for the early stages of the merger. The change to the final structure of MBIE took effect on 19 November 2012, and MBIE (Science and Innovation) became part of the MBIE – Science, Skills and Innovation Group.

4: Until 31 January 2011, COMU was the primary monitoring department for CRIs. From 1 February 2011 until 30 June 2012, MSI was the primary monitoring department for all CRIs, with COMU having a secondary role in monitoring CRIs' financial performance. On 1 July 2012, MSI operations were transferred to MBIE, where the monitoring of CRIs continued to be carried out by the original monitoring group. Monitoring CRIs is now one of the functions of MBIE – Science, Skills and Innovation Group.

5: Ministry of Science and Innovation (2011), Powering Innovation: Improving access to and uptake of R&D in the high value manufacturing and services sector. See

6: The FoodBowl is a purpose-built facility located near Auckland International Airport and operated by New Zealand Food Innovation Auckland Limited. It was set up to support innovative food and beverage companies, providing them with export-certified processing facilities.

7: SCPs for each CRI are available online:

8: Part 7: Results of Crown research institute audits, Central government: Results of the 2010/11 audits (Volume 1), December 2011.

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