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Investor Confidence Rating (ICR) - Frequently Asked Questions for Agencies

Page updated 13 Jun 2017

The following questions and answers relate to the roll out of the Investor Confidence Rating (ICR) for investment-intensive agencies. New questions and answers will be added as they arise.

If you have any further questions please email investmentmanagement@treasury.govt.nz

1. What information do we need to provide and when is it required?

The information required for ICR purposes can be found in published guidance at Guidance on the Investor Confidence rating: Assessment and Moderation.

This guidance explains what will be required for each of the nine ICR elements.

Table 1 outlines the planned Programme for Round 2. This will be a phased approach across 4 tranches over 24 months from August 2017 - July 2019.

The initial tranche of Investor Confidence Ratings for Round 2 will be limited to agencies that were not assessed in Round 1. Assessment of these agencies will take place between August 2017 and December 2017, with final Cabinet decisions on ratings expected in March 2018.

The next three tranches will follow a similar order as Round 1 assessments. This is to ensure agencies are given sufficient time to make improvements between cycles. Tranche 1 assessments will take place between February 2018 and May 2018, to allow for Cabinet decisions by July 2018. Tranche 2 assessments will take place between September 2018 and December 2018, with Cabinet decisions expected in March 2019. The final tranche in Round 2, Tranche 3, will take place between February 2019 and May 2019, with Cabinet decisions expected in July 2019.

Table 1: ICR Programme for Round 2
Tranche Investment intensive agencies Assessment period Data due
Initial tranche Southern DHB Aug 17 - Mar 18 30 Nov 17
  Ministry of Social Development    
Tranche 1 Ministry of Education Feb 18 - Jul 18 30 May 18
  Ministry of Defence    
  Housing New Zealand Corporation    
  NZ Transport Agency    
Tranche 2 Accident Compensation Corporation Sep 18 - Mar 19 30 Nov 18
Department of Conservation
Department of Corrections
  Department of Internal Affairs
Inland Revenue    
  Ministry of Business Innovation and Employment    
  Ministry of Health    
  Ministry of Justice    
  New Zealand Police    
Tranche 3 Auckland DHB Feb 19 - Jul 19 30 May 19
Canterbury DHB    
Counties-Manukau DHB    
Ministry of Foreign Affairs and Trade    
New Zealand Customs Service    
Northland DHB    
Waitemata DHB    
Capital & Coast DHB    
Waikato DHB    
  Ōtākaro Ltd    

2. How much time will this take us as an agency?  How much resource is required?

The amount of resource required will depend on how much of the information you already have available and how much you may need to source specifically for the ICR.

3. How will the Treasury use lessons learnt from each Tranche for future Tranches?

The Treasury will identify learnings and improvements as we go so that we can continuously improve both the process and the ICR itself.  We welcome your ongoing feedback so that we can consider changes that will improve the ICR processes. We will formally review the approach after each Round, incorporating lessons learned and feedback from agencies and the corporate centre. Where suitable, changes may also be made between tranches within Rounds.

4. How is the Treasury engaging with leadership teams in agencies around the findings, improvements, expectations, etc?

We have held, and will continue to hold, meetings with senior leaders in each agency to discuss all aspects of the ICR process, assessments and recommendations, as and when requested.  We think it’s important that all stakeholders are well informed about the benefits of the ICR and any potential implications.  The ICR is an important tool for helping to raise investment and asset performance across the State Services in order to increase public value.

General ICR questions

5. How will the target levels be set?

For the P3M3 (Portfolio, Programme and Project), the supplier will conduct a facilitated diagnostic assessment with the agency. This will be used to determine the agency’s current level of maturity. The target level of maturity, in consultation with the agency and supplier, will be set by the Treasury.

For Asset Management Maturity, current and target levels will be determined by the independent assessor with input from the agency.

For the Organisational Change Management maturity assessment the agency will determine the current and target level via a self-assessment which will be reviewed by a panel of organisational change management expert assessors.

The targets for the LTIP and system performance elements have been set by the Treasury.

For the project performance and asset performance elements of the ICR, the target levels will be taken from various sources, including business cases, benefits realisation plans, output agreements or statements of intent. 

The Treasury has a role in ensuring all the assessments are consistent over time and across agencies, and uses a robust moderation process to achieve this.

6. What happens if little or none of the information is available to inform the ICR in the required timeframes?

We will work with you to see what information you can provide and how the assessment could be done using the information that you have.

Ultimately, if no information can be provided for an element it will obtain a zero score. 

Maturity Assessments

7. If we have recently had one of these assessments done, do we need another?

You won't need another one done if the scope of the assessment is the same as that needed for ICR purposes and the assessor was suitably qualified to apply the required methodology.

We’ll discuss with you if the assessment meets the ICR requirements, and if it needs to be refreshed or not.

8. When will the third-party assessments take place?

We will work with your agency contact person to agree the Statement of Work and the supplier or Treasury will plan a time that best suits you.  Ideally third party assessments would be completed in time to inform your LTIP.

9. Can agencies choose the independent assessor?

The Treasury has set up a panel of suppliers each of whom is qualified and experienced at conducting the sort of assessments needed for ICR purposes.

We will discuss the choice of provider with your agency. The Treasury will make any final decisions on the allocation of suppliers to agencies and discuss any variations and manage any conflicts of interests alongside the agency.

Long Term Investment Plan

10. How do we produce a good LTIP?  What should we focus on?

This will largely depend on where you are starting from and the currency of your agency’s strategic thinking and planning.  It may be possible to use existing materials for ICR purposes.

The LTIP guidance has a useful self-check section and also tips for success. The key is to understand and explain the interplay between business drivers, long term objectives and organisational capacity.

Please contact us if you would like help with development of your LTIP.

Capital Sustainability

11. What is the benefit to the agency of making a voluntary return of capital to the centre?

For Departments and some Crown entities a voluntary return of capital reduces the amount of taxpayer funds on the balance sheet and reduces the capital charge applied to that agency. There is no change in baselines so the agency has more spending power (ie, up to $80,000 per annum for each $1 million returned). However, there could be additional operating costs (eg, extra maintenance on older assets or extra leasing costs).

12. How will the Treasury distinguish between capital pressures that have been caused through poor financial management and those pressures outside the agency's control? Does the distinction matter?

The distinction doesn't matter for LTIP and ICR purposes.  The solutions to address the pressures may differ though, and this is what needs to come through in the LTIP. 

Benefits and Project (and Programme) delivery

13. What is the level of benefits that an investment-intensive agency will be expected to achieve?

The target level for benefits is 100% realisation across the portfolio of investments – based on the last target that was agreed with the approving authority.

14. For benefits and project delivery indicators, how will projects be chosen? What principles will be used to select the projects?  If an agency is able to provide portfolio-level information will that be used instead of a sample?

Controlled randomisation will be used to determine a representative sample of investments. Consideration will be given to the size and type of investments and their respective proportions in an agency’s portfolio, with the aim of replicating this for the sample. The scope covers all projects completed in the last 2 years.  We can be flexible about the period provided the sample is representative of the overall level of agency investment activity.

15. How will you take account of agreed changes in scope, timing, cost and benefits of a project over time?

We will use the latest scope, timing, cost and benefits information agreed by the relevant decision making authority.

16. How will you take account of projects that were terminated?

Generally these are not included in the assessment.  We can discuss this with you to get a good understanding of these situations.  

Asset Performance

17. What is the difference between Significant Asset Level and Significant Asset Class/Portfolio Level?

The definition of significant as defined by Cabinet Office circular CO(15)5 means a high degree of importance in terms of it’s likely impact on and likely consequences for the agency.

Data provided at the significant asset level is at the individual asset level eg, for the agency's Head Office property building, the condition is a 4 (on a 1-5 scale, 1 being best, 5 being worst).

Whereas data provided at the significant asset class or portfolio level is aggregated information. Data provided at this level is the aggregation of different asset level information in that class or portfolio. A significant asset class example: At the Non-Residential Building asset class level, the aggregated condition of all Non-Residential buildings is a 3. A significant asset portfolio level eg, for Corrections property portfolio, the aggregated condition is a 3.

18. How will the asset measures be chosen? Will there be asset measures across every asset portfolio or just the major ones?

Agencies will choose their asset performance measures (the Treasury is available to work and support agencies in choosing these measures). There will be a particular focus on coverage for technical asset performance measures in utilisation, condition and functionality indicators in their significant asset portfolios eg, fleet is excluded. The significant asset portfolios will be agreed on a per agency basis, and this will typically align with the Element 1 Asset Management Maturity assessment portfolios. Other performance indicators such as availability may also be considered. Measures may vary from one agency to another.

19. Does the new Cabinet requirement to disclose asset performance results in the Annual Report duplicate the asset performance information requirement in the ICR (Element 8)?

The underlying information will be the same, the same base asset performance data will be able to be used to satisfy both requirements. However, the timing, audiences and purposes are different and that affects the level of detail in the two exercises, as shown in the table below.

Table 2: Alignment between ICR requirements and Annual reporting requirements
  ICR Element 8 Asset Performance
in Annual Report
Frequency of reporting or assessment Every 2 years Yearly
Submission

To the Treasury depending on when the agency is being assessed for their ICR

Submitted in the ICR Form for Agencies Lag Indicators

To the Treasury in September 2017 for the 2016/17 year

Submitted in the format that is consistent with the agency’s annual report or in a separate document using the worked example in the Annual Report Guidance Asset Performance Indicators - Annex 1 

Target audience Corporate Centre and Ministers General public, Corporate Centre, Office of the Auditor-General and Audit NZ
Data Requirements:
Performance measures Selected by the agency and in consultation with Corporate Centre As for ICR
Time horizon (history of data) Previous two financial years  For 2016/17 and beyond, previous two financial years is required
Data Level (information level) At the Significant Asset Portfolio level (typically 2 or 3), or the Significant Asset Class, or the Significant Asset level as determined by the agency in consultation with Corporate Centre At the Significant Asset Portfolio level (typically 2 or 3), or the Significant Asset Class is required as determined by the agency in consultation with Corporate Centre
Target performance As agreed with Board or Minister, or where not available - the executive level As for ICR
Weighting of results Portfolio results are weighted according to the weights used in Asset Management Maturity (Element 1) where weightings exist Not weighted
Assessment Self-assessment verified by The Treasury Self-assessment

Verification and Adjustments:

Coverage (portfolios and indicators) and Quality checks 

The Treasury verifies the information provided for portfolio coverage and whether the measures cover all 3 indicators required (Utilisation, Condition, and Functionality). Then a further verification by selecting a sample of information provided for evidence of actuals and targets. Adjustments may be made to the raw score after verification if the information does not cover the full requirements or cannot be verified  From when the agencies publish the asset performance information in their agency annual reports, the auditors are obligated to review the information for material inconsistency and misstatement of fact
Moderation Treasury moderates results across each tranche of assessments No moderation

Implications

20. Will there be time to dispute the assessment findings prior to going to Cabinet in March?  What if there is agreement with the ICR score, but disagreement with the implications?

There will be time to discuss the assessment results and implications with the Treasury and our assessment partners before these go to Cabinet for decisions.

There will also be time to escalate any disagreement to the Treasury, and if required, to the Government Investment Ministers for consideration before the results go to Cabinet.

21. How will the ICR affect bids for future Budgets?

The ICR will be one component of the information that is considered by Government Investment Ministers and Cabinet when they are prioritising investments for the Budget. The ICR is an indication of the confidence that investors can have in an agency's capacity and capability to realise a promised investment result if funding were committed. 

22. What does the LTIP achievability assessment involve? 

A key part of the LTIP assessment is to test the financial sustainability of the plan. This will involve understanding the agency’s cashflow and balance sheet, in particular looking at efficiency and effectiveness. 

Moderation

23. Who will do the moderation of the overall ICR results? Is a different party involved in moderating individual elements of the ICR?

The moderation panel members may differ for each ICR element to ensure there is appropriate expertise and to avoid conflicts between roles.

Typically the moderation session for each ICR element will comprise the lead assessors for each agency, but not agency representatives. That is because the panel’s task is to ensure the judgments made by assessors (whether on a supplier panel or by the corporate centre or self-assessments) are consistent between agencies.

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