Part 5: Monitoring and review
5.1
In this Part, we discuss:
- why monitoring and review are important for effective governance;
- the main findings from our work; and
- how well each entity performed against our expectations.
Why is monitoring and review important for effective governance?
5.2
The monitoring and review role of boards involves the processes and actions the board takes to track an organisation's financial and operational performance, including how the chief executive's performance is managed. We also looked at whether boards understand and manage accountabilities to stakeholders well.
5.3
Effective governance depends on boards receiving regular reports that provide a clear and objective view of an organisation's performance. Critically, boards need to be provided with enough detail to support performance management and decision-making while avoiding unnecessary details about operational matters.
5.4
We expect boards to be responsible for appointing a chief executive and regularly reviewing the chief executive's performance against an agreed set of criteria.
5.5
We also expect organisations to have prepared a comprehensive stakeholder engagement plan that details the board's role in stakeholder engagement and management. The plan should show that the board considers the needs of stakeholders as part of its governance discussions and decisions, as well as gaining a view from stakeholders on how they see the organisation is performing.
Main findings about monitoring and review
5.6
The entities have set appropriate key performance measures and boards are regularly provided with reports that provide a sound basis to monitor and review performance. We saw evidence through board minutes that boards and subcommittees have invested a significant amount of time and effort in understanding and agreeing accountability documents.
5.7
We found evidence of the boards regularly reviewing organisational performance and questioning results to understand the main drivers of organisational performance.
5.8
We also saw evidence that boards are asking for more detail to allow them to understand issues and whether the actions in response are having the desired effect. For example, the reporting provided to the board of Te Papa on the financial performance of the organisation against targets and budgets became noticeably more detailed when Te Papa was focusing on resolving its financial issues.
5.9
Boards were sometimes receiving reports that were too detailed which did not aid decision-making. It was not always clear whether the value of providing a high level of detail had been weighed against the additional time required to discuss it at board meetings. The chairperson often plays a pivotal role in working with management to ensure that information presented to the board is relevant.
5.10
Boards in the sector would benefit from reviewing their current monitoring and review arrangements, and agreeing with management the relevant set of financial and operational performance measures and associated reporting requirements. Boards and management should regularly revisit the amount and type of information given to boards to ensure its continued relevance.
5.11
Achieving the appropriate balance between receiving relevant information and receiving too much information is an ongoing tension for boards in the public and private sectors. This has also been recognised as an issue for organisations in other jurisdictions, including the Arts Council of England.
5.12
Mostly, the entities we looked at knew who their major stakeholders are, knew how to engage with them, and considered stakeholder's views when making decisions. However, most of the entities had not used that information to prepare formal stakeholder engagement plans.
5.13
Boards would benefit from formalising their engagement with stakeholders. This should include board members formally updating other members on any notable stakeholder interactions, as well as stakeholder-related issues. This knowledge is valuable in helping board members to carry out environmental scans, identify risks, and explore opportunities.
5.14
Formalising stakeholder engagement also recognises the increasing importance of stakeholders in providing revenue to organisations beyond the funding from central or local government. A formal approach to stakeholder management might help organisations develop effective relationships with stakeholders that can help to secure additional funding sources and revenue.
The entities' performance
5.15
Figure 4 sets out the criteria we have used to assess each entity's performance for the monitoring and review aspect of governance.
Figure 4
Framework for assessing a board's performance – monitoring and review
| Assessment rating | Criteria |
|---|---|
| Leading | The board is aware of how other organisations are measuring their performance and uses this information to seek out examples of best practice to improve monitoring and review. The board is aware of how wider stakeholder groups can work together to drive strategic outcomes for the culture, arts and heritage sector, and uses this knowledge to lead effective stakeholder engagement that drives performance improvement throughout the sector. |
| Comprehensive | The board has comprehensive structures and processes to monitor performance, and performance measures accurately reflect the strategic plan, including reviews of annual plans and ensuring that the plans are carried out. The board gets regular reports that provide a clear and objective view of operational performance, enabling the board to focus on matters of strategy, and avoid focusing on unnecessary details of operational matters. There is a comprehensive stakeholder engagement plan that is well understood by the entire organisation. Stakeholders are well known, and board behaviour is aligned to the plan. |
| Progressing | The board has well developed structures and processes to monitor performance, and performance measures align to the strategic plan. The board gets comprehensive reports that provide oversight of performance and address critical performance measures and issues for objectives and strategies. There is a solid understanding of the organisation's accountability to stakeholders, and the board has appropriate measures in place to meet these accountabilities. |
| Developing | The board has structures and processes in place to monitor performance, and measures are partially aligned to the strategic plan. Reports to the board provide oversight of performance and highlight critical performance measures and issues. There is a stakeholder engagement plan in place, and there is increasing understanding of the organisation's accountability to stakeholders. |
| Ad hoc and limited | The board has partially developed structures and processes to monitor financial and non-financial performance. However, there is no clear alignment between performance measures and strategic plan. Board reports do not always focus on key performance issues and tend to be too focused on operational matters. The stakeholder engagement plan is not widely understood or reviewed. |
Auckland Art Gallery
5.16
We assessed Auckland Art Gallery's performance as "Comprehensive".
5.17
The board has structures and processes for monitoring financial and operational performance. Given that the board governs five different entities, it is particularly important that it gets the right level of information about each entity's performance, without any unnecessary detail. Auckland Art Gallery's management team and the board have worked closely together to ensure that performance information meets the board's needs and achieves this balance. The board members we spoke to were satisfied with the performance information that they received. The quality of information in the board reports was regularly reviewed by the board to ensure that it continued to meet the board's needs.
5.18
The board demonstrated awareness of its major stakeholders and their interests. As the shareholder of Auckland Art Gallery, Auckland Council is viewed as the major stakeholder, and there are clear roles and responsibilities for interacting with it.
5.19
The Regional Facilities Auckland team includes a Director of External Relations, as well as a part-time employee who is responsible for liaising with local boards. All Regional Facilities Auckland entities use a stakeholder management system. Auckland Art Gallery uses this for events such as exhibition openings. We were not made aware of a formal stakeholder management plan.
Creative New Zealand
5.20
We assessed Creative New Zealand's performance as "Comprehensive".
5.21
The Arts Council has structures and processes for monitoring financial and operational performance. Board reporting packs showed that the board had discussed a draft statement of performance expectations in May 2014 and understood how this differed from previous performance documents because of changes to the Crown Entities Act.
5.22
Information provided to the board is detailed enough for board members to understand the main variances between actual and planned performance and what caused any variances.
5.23
The board reporting packs are extensive and provide substantial detail about Creative New Zealand's activities. Reporting packs include information required for decision-making as well as information to be noted. Some of the reports to the board included very detailed information that risks diverting attention from the strategic issues the board should be focusing on.
5.24
The chief executive and chairman are aware of their respective roles and responsibilities in interacting with stakeholders – in particular, the need to have transparent methods of allocating funding that stakeholders could understand. Creative New Zealand demonstrates awareness of the different types of stakeholders it has and actively seeks input from these stakeholders. For example, Creative New Zealand recently reviewed the literature sector and sought input from stakeholders through focus groups and questionnaires. We are not aware of a formal stakeholder management plan.
Govett-Brewster Art Gallery
5.25
We assessed Govett-Brewster Art Gallery's performance as "Progressing".
5.26
We saw evidence that New Plymouth District Council has invested a significant amount of time and effort into understanding and agreeing its public accountability documents. The Council gets information that allows it to monitor the financial and operational performance of Govett-Brewster Art Gallery. Meeting minutes show that the Monitoring Committee uses this information to understand of the major drivers of organisational performance.
5.27
New Plymouth District Council demonstrates awareness of its main stakeholders and how to engage with them, and considers their views when making decisions. Govett-Brewster Art Gallery has a complex set of stakeholders, and the Gallery Director is able to distinguish between the main stakeholder and governance groups.
5.28
In the past, some of Govett-Brewster Art Gallery's stakeholders had become more involved in governance activities than we expect from stakeholders who are not responsible for governing the Gallery. Formalising how the Gallery wishes to engage with these stakeholders and mapping the stakeholder groups would help stakeholders and governors to have a shared understanding of their roles.
5.29
We saw no evidence of a specific stakeholder engagement plan. However, we understand that the community is able to contribute to certain decisions about Govett-Brewster Art Gallery. For example, a survey was carried out to understand the public's willingness to pay to use the Gallery's facilities after a request from New Plymouth District Council that the Gallery consider charging an entry fee to its facilities.
Te Māngai Pāho
5.30
We assessed Te Māngai Pāho's performance as "Progressing".
5.31
The board is provided with detailed financial and operational reporting from the chief executive. This includes the progress each of the board subcommittees has made during the reporting period, the status of all conditional funding proposals, and progress made against legislative requirements.
5.32
The level of detail within board reporting packs is significantly more than we would expect to see. The degree of detail in the reporting creates the risk that board meetings are more focused on operational than governance matters. Interviewees recognised that more outcomes-based reporting might help direct the board towards a more strategic focus in meetings.
5.33
The board and management have identified a range of stakeholder engagement needs and opportunities. Stakeholder engagement occurs on a regular and planned basis – for example, at iwi radio station annual general meetings. The chairman told us that stakeholders were primarily managed through individual relationships. Te Māngai Pāho does not have a formal stakeholder management framework or management plan.
Te Papa
5.34
We assessed Te Papa's performance as "Progressing".
5.35
During 2013 and 2014, the Te Papa board required a significant change in the amount and nature of performance information provided to it, including financial performance. The board thought that previous financial reports were not satisfactory, because they did not provide appropriate information about Te Papa's financial performance. At the time of our audit, the board was confident that the new reports (along with a range of other changes to financial reporting processes and policies) met its requirements.
5.36
The new reports are more detailed than we expect to see, but we understand the circumstances that have led to the board wanting this level of detail. A challenge for the board in the future will be how to reduce the level of operational detail required while maintaining enough assurance about Te Papa's financial (and operational) performance.
5.37
We saw evidence in the board reporting papers that the board was considering stakeholder perspectives in its decision-making and other activities.
5.38
We are not aware of a formal stakeholder engagement plan or stakeholder management framework.
Wellington Museums Trust
5.39
We assessed Wellington Museums Trust's performance as "Comprehensive".
5.40
Performance reporting in board reports is aligned to the indicators of financial and operational performance in the Wellington Museums Trust's Statement of Intent. Board members we interviewed were satisfied with the quality of reports.
5.41
There was evidence that the board had proactively asked for more financial information – such as seeking further information on changes to the budget for the refurbishment of the Museum of Wellington City and Sea building.
5.42
The board's leadership in annual planning and reporting is visible in board report packs and minutes. Board members are provided with opportunities to review and discuss the contents of their accountability documents and annual report before they were asked to approve them.
5.43
There are formally defined principles for the relationship between Wellington Museums Trust and its primary stakeholder, Wellington City Council, against which there is quarterly reporting.
5.44
Wellington Museums Trust does not have a stakeholder management plan. Although trustees commented on their various interactions with stakeholders through a range of planned and formal meetings (such as with Wellington City Council) and informal means (such as exhibition openings), there are currently no formal stakeholder management plans in place. Wellington Museums Trust is reviewing its client relationship management system.