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Creating a new public body
This is a single section from Chapter 17. Read the full chapter here.
What form should the new public body take?
A new body should be in the form that provides appropriate accountability arrangements and is best suited to performing the relevant functions.
It will be more efficient, and result in a more effective organisation, to rely on one of the existing organisational forms discussed below. Good reasons must exist for creating a new organisational form from the ground up rather than relying on an existing form.
The organisational forms below have comprehensive governance rules already in place that can be found in legislation. Where a new organisational form is created, legislation will still need to replicate these essential features of the existing forms. Many forms also have existing bodies of case law surrounding their operations that may need to be factored into any new form.
Sometimes it may be appropriate to adopt an existing proven regime such as the Crown Entities Act, but to exclude the application of any particular provisions that are not appropriate (see, for example, the provisions of the Heritage New Zealand Pouhere Taonga Act 2014).
Choosing a particular organisational form purely for reasons of administrative convenience or presentation may result in the body not possessing all the qualities (such as independence or governance arrangements) it requires to operate properly or to fulfil its functions.
Public service departments: Public service departments are also known simply as departments or ministries. Some, such as the Crown Law Office and the Treasury, are named differently. Departments are directly accountable to a Minister and are part of government. All public service departments are listed in the first Schedule to the State Sector Act 1988.
- Departments should be the preferred form where the body is required to exercise functions inherent to government (foreign policy, immigration, and citizenship), substantive coercive powers (tax collection, prisons), provide policy advice to the Government, or perform multiple functions. Where there is a constitutional requirement for ministerial oversight or direct responsibility, or where the subject matter is of importance to the Government, carries high public and political expectations, and has significant accompanying risk, a public service department should be the preferred form. This may involve granting an existing department a new power or creating a new department.
Departmental agency: A departmental agency is a new organisational form in the New Zealand context, provided for by amendments in 2013 to the State Sector Act 1988. Legally, a departmental agency is part of the host department, but it is headed by its own chief executive who acts under deemed delegation as the employer of those employees who carry out the departmental agency’s activities.
- Departmental agencies are designed to carry out a clearly defined set of services, operational or regulatory activities under autonomous management, but within the policy and resource settings of a host public service department. The choice of a departmental agency can offer a preferable alternative to establishing a wholly separate department or Crown entity, and offers the benefits of maintaining system coherence and avoiding the fragmentation and costs of separate agencies.
Crown entities: Crown entities perform much of the operational business of government. They are governed by the Crown Entities Act 2004. Crown entities will usually be appropriate when there is a compelling need to have the function performed at arm’s length from Ministers or under the authority of a governance board. Crown entities can take a variety of forms, each of which vary slightly from each other in respect of their legal form, function, source of funding and their relationship with Ministers.
- Crown agent (“CA”): This form is appropriate when the body is required to give effect to government policy. A CA has a large degree of ministerial oversight.
- Autonomous Crown entity (“ACE”): This form is appropriate when the body is required to have regard to government policy as one of a number of relevant factors. An ACE can still have a large degree of ministerial oversight.
- Independent Crown entity (“ICE”): This form is appropriate where it is important that the body has greater independence from Ministers to preserve public confidence in the body. The Minister is prevented from directing the body how to perform its functions, although the Minister can exert indirect influence through budget monitoring and the Statement of Intent process.
- Crown entity company (“CEC”): This form is appropriate where the functions are both commercial and non-commercial in nature although not as clearly defined as may be needed for a State Owned Enterprise.
- School board of trustees: This form is appropriate where a new State school or State-integrated school is created.
- Tertiary Education Institution: This form is appropriate where a new university, polytechnic, wānanga or institute of technology is created.
Examples of CAs, ACEs, ICEs and CECs are in Schedules 1 and 2 of the Crown Entitles Act 2004.
State Owned Enterprise (“SOE”): An SOE is designed to be run as a commercial enterprise and be independent of government influence over the SOE’s day-to-day operations. The Government is the sole shareholder and is therefore able to ensure that the business is run having regard to the values and interests of the community in which it operates. SOEs are governed by the State-Owned Enterprises Act 1986.
- An SOE may be the appropriate form when there is an identifiable commercial objective and the body can operate as an efficient and profitable business.
Mixed ownership model company: A mixed ownership model company can be created when the Government sells minority shares (up to 49%) in an SOE. The Government retains control as the majority shareholder and the company ceases to be an SOE. It is also possible to create new companies with the Crown as majority or minority shareholder from the outset.
Officer of Parliament: An officer of Parliament is accountable to the House, not to Ministers. This form is used for roles that act as a check on the executive’s use of power and resources. For that purpose, an officer of Parliament must only discharge functions that the House of Representatives, if it so wished, might carry out. Offices of Parliament are rarely created; at present only three exist.
Public Finance Act 1989 body (Schedule 4 and 4A): Where, due to its particular distinctive features, a body does not comply with all of the requirements of the Crown Entities Act 2004, that body may be listed in Schedule 4 or Schedule 4A of the Public Finance Act 1989.
The State Services Commission maintains an up-to-date list of all the organisations in the State Sector, categorised by their organisational form. It has also produced guidance on how to identify the organisational form that is most appropriate to the particular functions concerned.