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2  Explaining Key Concepts (continued)

Responsible Ministers

Prior to the Public Finance Amendment Act 2004, a single Minister was responsible for a Vote. Following the amendments more than one Minister may be responsible for an appropriation or appropriations within a Vote. As a result, it is no longer appropriate to use the term 'Vote Minister'; instead, the term 'Minister responsible for an appropriation' is used.

Ministers may be responsible for purchase and/or ownership interests. A Minister responsible for an appropriation has sought an appropriation from Parliament to purchase outputs, or to incur other expenses (eg, benefit expenses) or capital expenditure, and is accountable for the proper use of those resources. The Minister seeks Parliament's authority to allow the use of resources and reports back on their use.

A Minister responsible for an ownership interest and the performance of a department or Crown entity is known as a 'Minister responsible for an agency'[8]. These Ministers agree specific ownership priorities with the Chief Executive of a department or board of a Crown entity.A Minister responsible for an agency represents the owner of the resources invested in Crown-owned agencies on behalf of the Government and the people of New Zealand. They are concerned with ownership performance and ensure that capital expenditure is necessary and appropriate and that the return derived from capital invested is optimised.

A Minister responsible for an agency focuses on the agency's governance, policy-setting and purchase roles, is not involved in its day-to-day management, and is accountable to Parliament for their agency's overall performance.

Votes

When Parliament considers legislation relating to appropriations, the appropriations are grouped within 'Votes'. Generally, a Vote groups similar or related appropriations together. When the Appropriation Act is passed, Parliament is said to 'vote' resources to Ministers. All the appropriations in a Vote are administered by one department.

There is typically one Vote for each ministerial portfolio but sometimes a portfolio relates to more than one department (eg, the Attorney-General portfolio relates to the Crown Law Office and the Parliamentary Counsel Office). In other cases, a portfolio may not have its own Vote (eg, Ethnic Affairs) with the relevant Minister responsible for an appropriation within a wider Vote. Further, there are departments administering multiple Votes providing outputs to more than one minister (eg, the Ministry of Justice).

The Crown and Departments

The Crown and its departments are legally indistinguishable, as a department is part of the Crown. Despite this, departments are treated as distinct entities for management purposes.

Distinguishing between the Crown and departments enables departmental chief executives to be held accountable for things over which they have direct responsibility and reasonable control. Chief executives have both stewardship and delivery responsibilities, ie, they build the capability and effectiveness of the department as well as deliver goods and services.

In New Zealand, chief executives are accountable for producing outputs because departments are provided resources to produce outputs and control their production. As chief executives cannot control outcomes, the primary responsibility for outcomes still sits with the Crown. However chief executives are responsible for knowing what their outcomes are, knowing how well their outputs improve those outcomes, and taking sensible steps to improve both their output mix and outcomes.[9]

Similarly, a department's Chief Executive is accountable for managing a contract for non-departmental outputs[10], ensuring the contract's terms are clear and verifiable, and monitoring performance against them. They are not responsible for the delivery of the services being contracted for.

The distinction between departments and the Crown also recognises that primary financial accountability and responsibility for certain types of income and expenses, such as taxes and benefit payments, remains with Ministers. After Ministers or Parliament set policy, a department's responsibility may be limited to managing collection or payment, monitoring the effectiveness of that policy, and advising on areas of possible change.

While the Ministry of Social Development pays unemployment benefits, its Chief Executive has limited control of the total amount of that expense. Parliament has set the amount of, and decides who will be entitled to receive, benefits. Unemployment benefit payments are therefore recorded as an expense of the Crown rather than an expense of the Ministry. This separation of departmental and Crown activities results in different appropriations, bank accounts, and financial reporting for Crown, departmental and non-departmental expenses.

The Crown and Other State Sector Organisations

Crown entities and SOEs are separate from the Crown and are established with varying levels of independence from ministerial direction. Their chief executives are usually accountable to boards.

Crown entities are run at arm's length from the Crown but are funded by the Crown to deliver core services. Ministers appoint boards and engage with the boards on strategic direction, purchase interests and performance issues. Crown entities have greater independence from policy direction than departments but the boards' responsibilities for stewardship, delivery of Crown-funded services and financial responsibility are in many ways analogous to the responsibilities of a department's Chief Executive.

The principal role of SOEs is to operate as a successful business. Interactions with Ministers thus focus on ownership issues.

Notes

  • [8]The Public Finance Act uses 'Responsible Minister' in respect of a department; the Crown Entities Act uses 'Responsible Minister' in respect of a Crown entity.
  • [9]Similar expectations apply eg, to the boards of Crown entities.
  • [10]Non-departmental outputs are outputs (goods and services) purchased from a provider other than the department administering the Vote. The provider may be a government agency, a non-governmental organisation or a private sector organisation.
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