The annual report and the Crown Entities Act
Statutory requirement: Section 151(2) of the CEA:
The annual report must provide information that is necessary to enable an informed assessment to be made of the entity's operations and performance for that financial year, including an assessment against the intentions, measures, and standards set out in the statement of intent prepared at the beginning of the financial year.
An annual report is one of the most important means by which Crown entities discharge accountability to Members of Parliament and the public they represent. It enables Members of Parliament to review the performance of agencies and sectors and to hold them to account for the use of resources and powers, as well as their delivery of outputs and contribution to outcomes. The annual report is a key resource for select committees conducting financial reviews of departments and Crown entities. Select Committee interest lies in what has been done, and achieved with those resources and powers, and whether they have been used wisely, prudently, in the public interest, and in accordance with the law. While the annual report covers the operations of the Crown entity during the preceding financial year (usually 1 July to 30 June), Crown entities are encouraged to include comparative (trend) information from earlier years to give a fuller picture of long-term progress.
Crown entities and the annual report
Although the annual report can be viewed purely from a legal compliance perspective, this approach serves to obscure the extent to which the annual report is a mechanism to:
- enable effective governance and management of the Crown entity
- promote better understanding and debate on how to improve future performance, and
- assess the Crown entity's performance over time, including its performance in collaboration with other entities in relation to a common purpose.
The annual report and the performance story
The annual report is part of a continuous management cycle that involves reviewing actual results against stated intentions, which then feeds back into the next cycle of direction-setting, planning, implementation and review.
The reporting in the annual report should give a clear picture of the overall performance story for the Crown Entity in context: where has it been and where is it now. So, in addition to the financial statements, the annual report should report on progress against the outcomes and measures detailed in the Strategic Intentions, the Statement of Performance Expectations and any other information or measures necessary to provide this overall performance story.
Other than the mandatory audited statements, Crown entities should focus most of their reporting on the critical aspects of their performance and assess these against their strategic intentions.
Performance measurement and reporting is not a cost-free exercise, and the reader should not be overwhelmed by a multitude of information without a clear sense of what the most important matters are. When deciding which aspects of performance should be given most attention in explaining achievements and progress, Crown entities may find it useful to consider the significance of performance achievements and variances to intended performance in the context of:
- value for money
- the significance of the economic, social, and environmental impact, and
- the importance to the overall success and future operational effectiveness of the Crown entity.
Attributes of performance indicators
Performance indicators presented in the annual report (or used for evaluative purposes in any forum) should be SMART (specific, measurable, appropriate, relevant and timely), while avoiding measures that are too detailed to be meaningful in the context of annual reporting. It may be helpful to include benchmarks of performance against similar organisations, both nationally and internationally.
For assistance in developing robust performance measurement, refer to Performance Measurement: Advice and examples on how to develop effective frameworks. The State Services Commission and Treasury, with the support of the Office of the Auditor-General, have developed the performance measurement guide to help and encourage state sector agencies to critically assess their progress to date and to map out a clear path forward.
Quality of non-financial performance information
Central agencies and the Auditor-General continue to express concerns about the quality of non-financial performance information provided in annual reports. Crown entities are encouraged to think about the overall performance story that the annual reports provide.
It is also helpful to understand what the Auditor-General looks for when forming an independent opinion on service reporting. The Auditor-General assesses performance information on whether the information complies with GAAP, and fairly reflects the Crown entity's service performance for the year. To do this the auditor forms a view about:
- whether the strategic intentions provides an adequate framework for reporting service performance, and
- whether the statement of performance complies with GAAP and fairly reflects the service performance of the Crown entity.
Among other things, this requires the auditor to both:
- draw a conclusion on the appropriateness of the content of the statement of performance performance, and
- verify that content.
Presenting reports together
Following the changes made to the CEA in 2013, Crown entities now have the option of presenting and publishing their annual report in a single document containing any other report or set of information with those of other Crown entities or departments. This flexibility allows Crown entities to present readers with a more complete picture of performance where multiple entities may be working towards the same outcomes. It also allows annual reports to be presented in the same document as strategic intentions. When utilising this flexibility, Crown entities must ensure that all reports are separately identifiable within the overall document.
Structure of the annual report
The CEA specifies the kind of information that Crown entities must provide, but not the form in which it must be provided. The structure of the annual report is the responsibility of each Crown entity, as the document needs to reflect the nature and complexity of each entity's particular functions.
Crown entities should seek assistance in relation to the preparation of the annual report from their monitoring department(s). Monitoring departments will consult with central agencies, as necessary, before providing feedback.