1 Financial stewardship linked to purpose and strategy
Link financial decisions to organisational purpose and strategic priorities, rather than treating them as compliance exercises.
Oversee and ensure:
- clear alignment between strategy documents (e.g. SOIs and investment plans) and financial resources
- explicit trade-offs between affordability, impact, and risk from the long-term financial implications of policy and service delivery choices.
The Auditor-General notes that weak alignment between strategy and finances undermines value for money and long-term performance in Crown entities (Office of the Auditor-General, 2022).
2 A long-term view of financial sustainability and resilience
Focus beyond annual budget cycles and understand intergenerational and long-term impacts
Boards should actively oversee:
- medium and long-term financial forecasts and scenarios
- balance sheet strength, liquidity, and capital structure (for SOEs)
- cost drivers and funding dependencies
- the organisation’s capacity to absorb shocks and adapt.
Treasury guidance emphasises that sound public sector financial management involves understanding assets, liabilities, commitments, and future fiscal risks — not just current expenditure control.
3 Investment and asset stewardship
Boards are expected to:
- ensure investments are justified by clear strategic and financial cases
- challenge assumptions about benefits, costs, and delivery risk
- monitor whether assets remain fit-for-purpose and value-adding
- actively steward existing assets, not just approve new spending.
Cabinet and Treasury guidance on investment management makes clear that boards have a responsibility for active stewardship of Crown resources and alignment with long-term government priorities.
4 Financial risk oversight and control environment
Boards are accountable for ensuring that financial risks are understood, monitored, and managed. Management designs and operates financial controls
Strategic financial management therefore incorporates:
- clear articulation of financial risk appetite
- oversight of debt, revenue volatility, cost escalation, and contingent liabilities
- understanding interactions between financial risk, service risk, and reputational risk
- assurance that systems, internal controls, and financial capability are fit for purpose
- ‘Three lines of defence’ models of risk management (recommended).
The Auditor-General consistently links poor financial outcomes in Crown entities to weak board visibility of risks rather than technical accounting failures.
5 Performance, value for money, and public accountability
In a public sector context, strategic financial management is inseparable from performance and value for money
Boards must ensure that financial information enables:
- good judgement about whether resources are effectively and efficiently converted into outcomes
- open, timely and transparent reporting to Ministers and Parliament enabling rapid identification of results
- honest assessment of efficiency, effectiveness, and affordability.
Financial information must support decision-making, not simply meet statutory disclosure requirements.
6 Quality of financial advice and board capability
Ministers expect boards themselves to demonstrate financial literacy and challenge, not passive reliance on management or advisers.
Strategic financial management therefore includes:
- board capability to interrogate forecasts, assumptions, and scenarios
- clear distinction between management’s role in execution and the board’s role in judgement
- access to timely, forward-looking financial insights rather than retrospective reporting
- financial audit assurance and formal board performance evaluation.
High performing boards ask good questions - they probe
Strategic financial management therefore requires boards to ask:
- How does our balance sheet, debt, or deficit affect wider Crown fiscal risk?
- Are we creating future pressure for policy or funding decisions elsewhere in the system?
- What external dependencies (appropriations, levies, fees, Vote funding) constrain our financial strategy?
Failure to ask these questions can be thought of as ‘system blind governance’.