Chapter 20

Creating a new public body

This is a single section from Chapter 20. Read the full chapter here.

Part 3

What form should a new public body take?

Legislation should ensure appropriate accountability arrangements best suited to the relevant functions.

It is usually more efficient and effective 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. If a new organisational form is created, legislation still needs to replicate the essential features of the existing forms. Many forms also have existing bodies of case law surrounding their operations that may need to be considered when creating any new form.

Sometimes it may be appropriate to adopt an existing proven regime, such as the Crown Entities Act 2004, 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 Schedule 2 of the Public Service Act 2020.

Departments are the preferred form if 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. If there is a constitutional requirement for ministerial oversight or direct responsibility, or if the subject matter is important to the Government, carries high public and political expectations, and has significant accompanying risk, a public service department is the preferred form. This may involve granting an existing department a new power or creating a new department.

Departmental agency—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 or 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 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 and are governed by the Crown Entities Act 2004. They are usually the appropriate form 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 if 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 if 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 if 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 as to 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 if the functions are both commercial and non-commercial in nature but not as clearly defined as may be needed for a State-owned Enterprise.
• School board of trustees—This form is appropriate if a new State school or State-integrated school is created.
• Tertiary Education Institution—This form is appropriate if a new university, polytechnic, wānanga, or institute of technology is created.

Schedules 1 and 2 of the Crown Entitles Act 2004 contain examples of CAs, ACEs, ICEs, and CECs.

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 according 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 if 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 if 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 organisational form is used for roles that act as a check on the Executive’s use of power and resources. However, in performing that function, 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.[1]

Public Finance Act 1989 body (Schedule 4 and 4A)—If, 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 4A of the Public Finance Act 1989.

Interdepartmental Executive Board – A board consisting of public service chief executives from a range of portfolio areas responsible for dealing with complex issues that have impacts and policy levers that sit across a wide range of portfolio areas.

Interdepartmental Venture – A distinct organisation within the public service akin to a department. Rather than being headed by a chief executive, an interdepartmental venture has a board of chief executives. These chief executives are made up of the existing chief executives of departments relevant to the functions of the venture.

Statutory Board – Statutory board means a body corporate established by or under written law to perform or discharge any public function under the supervisory charge of a Ministry or organ of state.

Te Kawa Mataaho maintains an up-to-date list of all the organisations in the State Sector, categorised by their organisational form.[2] It has also produced guidance on how to identify the organisational form that is most appropriate to the particular functions concerned.[3]

[1] The Offices of Parliament are the Office of the Auditor-General, the Office of the Ombudsmen, and the Office of the Parliamentary Commissioner for the Environment. See New Zealand Parliament Offices of Parliament.

[2] New Zealand's central government organisations | Te Kawa Mataaho Public Service Commission.

[3] Machinery of Government - Organisational Forms | Te Kawa Mataaho Public Service Commission.

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