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The Investor Confidence Rating

“Establishing how agencies are managing investment and assets is critical to ensuring taxpayer money is being used as effectively as possible”
- Hon Bill English, Minister of Finance

What is the ICR?

The ICR assesses the performance of agencies in investment and asset management.

It is an indication of the level of confidence that investors - Ministers - can have in an agency's ability to deliver investment results as promised. This helps inform decisions about where and how to invest public funds.

This evidence-based assessment is conducted every two years for investment-intensive agencies.

The Corporate Centre in conjunction with independent experts considers eight ‘elements' of agency investment and asset performance, such as long-term planning and asset management. It assesses these against an appropriate target level of performance for each agency.

Diagram 10 shows the eight elements that agencies are assessed on. Four of the elements are lag indicators, which mean they look at past performance, and four are lead indicators, which means they are forward looking.

Diagram 10: The eight elements of the ICR assessment
Diagram 10: The eight elements of the ICR assessment  .

Diagram 11: The implications of ICR scores

Diagram 11: The implications of ICR scores .

Implications of the ICR

The ICR provides a basis for us to tailor system settings based on agency performance. Agencies will experience different investment arrangements depending on their result.

This generally means that agencies that receive a very good rating can expect greater autonomy, such as a higher threshold for needing Cabinet to approve an investment, and reduced monitoring and reporting requirements. Agencies that do not rate as well are likely to receive less flexibility, but also more support to help lift their performance.

Results

To manage the large number of agencies being assessed, the ICR has been split into stages, called ‘tranches'.

The results from Tranche One, which covered six agencies, were made public in July 2016.

The results of Tranche Two, which covers five DHBs, will be published in December 2016 on the Treasury website: www.treasury.govt.nz/statesector/investmentmanagement/review/icr/results

Diagram 12: Results from Tranche One
Diagram 12: Results from Tranche One.

Why is the ICR a valuable tool in the investment system?

The ICR is designed to lift agencies' investment management capability and performance. It does this by:

  • Providing greater transparency to Ministers and the public about how government is performing in investment and asset management.
  • Incentivising good investment management performance through the implications attached to each rating. System settings - like expenditure thresholds for Cabinet approval, and monitoring and reporting requirements - can be tailored based on agency performance in the ICR. This means more flexibility for those that achieve higher than a C, and more support for those lower than a C.
  • Identifying where agencies can best target improvement activity, and identifying for the Corporate Centre where it needs to target support, especially where gaps are common across agencies.

Lifting agency performance

The ICR results provide agencies with good information about where best to focus their efforts to improve performance.

The Corporate Centre has seen improving agency capability and performance since the ICR has been introduced. It also anticipates that agencies will improve even more over time as they embed new practices, for example, around long term investment planning.

To date, the most common areas identified for improvement are in managing benefits and reporting asset performance. Support for agencies to raise their capability in benefits management has increased this year through updated guidance documents, a community of practice, and benefits realisation plan templates (more information is available on page 33). A library of asset performance measures is also under development, including the best examples from across a range of agencies (more info on asset performance information is available on page 14-17).

Agency perspective: Department of Corrections

During 2015/16 the Department of Corrections actively contributed to the design of the Investor Confidence Rating, and was assessed in tranche one. The opportunity to obtain greater autonomy, higher financial delegations and reduced monitoring and reporting requirements was a good incentive to focus the Department on scoring well now and in the future.

“The Department recognises the importance of the assessment and the need to improve in the areas it identified such as Portfolio, Programme, and Project Management Maturity Model (P3M3), Benefits Realisation and the Long Term Investment Plan.

We found the blend of the lead and lag indicators particularly useful, the lead indicators provide a strong connection between our current capability and future performance. The assessment also did identify areas in which the Department is performing well, including strong leadership helping deliver its projects to a high standard.

We are currently undertaking a work programme to embed our practices and structures more consistently, and to capture benefit data more routinely, to ensure that the Department's rating improves in the next assessment completed in December 2017. This work is being done with assistance from an expert consulting firm with P3M3 methodology expertise, with a focus on our property investment portfolio and associated asset management planning practices.”

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