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Crown Entities

Crown entities are bodies established by law in which the Government has a controlling interest through ownership mechanisms. Crown entities form part of the Government reporting entity but are not part of the ‘core' Crown.

Crown entities dominate delivery in several areas of service delivery (eg, education, fire services, health, social housing, and public good research). Others administer and disburse billion dollar funds (eg, superannuation, accident compensation and earthquake contingency funds). Some small Crown entities play roles in the economy and society that are disproportionate to their size and cost. These include the autonomous and independent agencies that regulate commerce, guard public rights and freedoms, and protect the welfare of vulnerable groups.

While Crown entities provide core services on behalf of the Government, they are run at arm's length from the Government. Crown entities are typically established where a greater or lesser degree of independence is required (eg, to protect regulatory and quasi-judicial functions) or desired (eg, where Crown agents are performing delivery functions). The Crown Entities Act constrains how Ministers can direct a Crown entity.

Crown entities fall into five statutory categories[37].

  1. Statutory entities, which fall into one of three types:
  2. Crown agents (eg, the District Health Boards)
    Autonomous Crown Entities (ACE, eg, the Standards Council)
    Independent Crown Entities (ICE, eg, the Law Commission).

  3. Crown entity companies (trading entities such as the Crown Research Institutes and Television New Zealand).
  4. Crown entity subsidiaries, which are companies incorporated under the Companies Act and owned by Crown entities.
  5. School Boards of Trustees, constituted under the Education Act 1989.
  6. Tertiary Education Institutions again formed under the Education Act.

Many of the accountability and funding arrangements for Crown entities reflect arrangements already discussed with regard to departments.

Crown Entity Reporting Requirements

Crown entities in which the Crown has a purchase, as well as an ownership interest, in addition to financial statements, are required to prepare a Statement of Intent specifying the impacts, outcomes, or objectives that the entity seeks to achieve or contribute to, including a Statement of Forecast Service Performance.

The responsible Minister of a Crown entity is required to present the SOI to Parliament.

Ministers may also require a Crown entity to have an output agreement for any or all outputs funded by the Crown. Output agreements[38] last at least one year. They lay out price, quantity and delivery standards for outputs, and terms and conditions for delivery and payment.

Crown entities must prepare annual financial statements in accordance with GAAP. They forward a complete set of financial statements to the C&AG within 90 days of the end of each financial year. The actual outputs produced are set out in the statement of service performance in the annual report.

There are, however, important differences. Most Crown entities have a board structure to provide governance, appoint chief executives and set direction. Ministers appoint and reappoint board members but boards govern Crown entities.

Ministers participate in the process of setting and monitoring strategic direction and targets, review operations, and can request information pursuant to section 27 of the Crown Entities Act. Ministers can give policy direction to some Crown entities[39] but directions are published and tabled in Parliament. Thus, Ministers' main influences over Crown entities are in appointing competent boards, setting expectations,commenting on strategic direction, purchase and funding decisions (outputs, etc), and effective monitoring.

Parliament appropriates money to Ministers to purchase services from, or invest capital in, Crown entities. Because they are not legally part of the Crown, Crown entities do not need an appropriation to incur expenses or capital expenditure.

Crown entities can incur expenses in excess of their budget but, because they are not legally part of the Crown, bear any losses incurred. Thus, a District Health Board that overspends must manage debt in future years.

The Crown is not liable for debts incurred by Crown entities, except where specified by legislation (eg, in the case of an earthquake under the Earthquake Commission Act 1993).

While a Crown entity and its monitoring agent usually report to the same Minister, central agencies can advise their own Ministers independently.

The health and education sector Crown entities comprise a significant portion of all Crown entities in terms of budget, numbers of institutions (particularly schools) and numbers employed. Accountability arrangements described below highlight generic arrangements (discussed above) and how arrangements are adapted to meet the specific needs of each sector.

Notes

  • [37]See section 7 of the Crown Entities Act.
  • [38]Functionally, this is the equivalent of a department’s output plan.
  • [39]For example, Ministers can direct a Crown agent to give effect to a government policy, but Ministers cannot direct Independent Crown Entities on policy matters. Ministers can also issue whole-of-government directions (section 107 of the Crown Entities Act) to a number of Crown entities. For full coverage of the limitations on Ministers, refer to the Crown Entities Act.
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