11 June 2018

Board members must know what they and their entity are charged with doing and how they are empowered to carry out their functions and powers.

Section 25 of the Crown Entities Act 2004 (CE Act) states that the board is the governing body of statutory entity with the authority to exercise the powers and perform the functions of the entity.  All decisions relating to the operation of the entity must be made by, or under the authority of, the board in accordance with the CE Act or the entity's establishing legislation

Functions of the board

Under s. 14 of the CE Act the functions of a statutory entity are:

  • the functions set out in the entity's establishing legislation;
  • any functions that the Minister has added in accordance with the establishing legislation; and
  • any functions that are incidental and related to, or consequential on, the entity's functions.

The CE Act contains several safeguards for the independence of entities in carrying out their functions and other business:

  • s. 105 provides that a Minister may not direct an Independent Crown Entity (ICE) to have regard, or give effect, to a government policy unless another Act specifically provides for it;
  • s. 113 provides that a Minister may not:
    • direct a Crown entity or member, employee or office holder of a Crown entity in relation to a statutorily independent function (entities other than ICEs may also have statutorily independent functions); or
    • require the performance or non performance of a particular act or the bringing about of a particular result in respect of a particular person or persons,

(Refer to section on powers of direction, in Chapter 1: Relevant legislation.)

Objective of an entity as it relates to its functions

Section 14(2) of the CE Act states that, in performing its functions, an entity must act consistently with its objectives. "Objectives" is not defined in the CE Act but would include objectives in the entity's Act.  It would also cover any objectives, aims and goals expressed in the board documents like a Statement of Intent. For example, the Land Transport Management Act 2003 requires the New Zealand Transport Agency to "undertake its functions in a way that contributes to an affordable, integrated, safe, responsive, and sustainable land transport system." Other entities may have social responsibility objectives.

Government policy statements

Under some entities' establishing legislation, the Government can issue a government policy statement on specified matters. Such a statement can, for example, describe what the Government wants to achieve in an area, the Government's objectives, funding for a sector, what areas will be funded and how funding will be raised. As with objectives, these can affect how an entity undertakes its functions. Government Policy Statements may be revised or new ones issued.

Policy functions

Public Service departments are the usual organisational form for policy functions. However, a minority of Crown entities do have policy functions which are reflected in their establishing legislation. Boards need to be aware of what, if any, their policy functions are, to have clear arrangements on how any such functions will be implemented, and advise the Minister and monitoring department of this.

Powers of the entity

As noted previously, an entity's powers are exercised by, or under the authority of, the board.

The CE Act divides powers of entities into:

  • Statutory powers: s. 16 provides that a statutory entity may do anything authorised by the CE Act or the entity's establishing Act. Powers may include, for example, the power to make decisions, issue a licence, or execute a search warrant.
  • Natural powers: s. 17 provides that boards of entities have all the powers of a natural person of full age and capacity. Boards may only act for the purpose of performing the statutory functions of the entity. The CE Act contains some specific constraints on the exercise of natural powers, for example: the requirement to consult the State Services Commissioner before agreeing to the terms and conditions of employment of an entity's chief executive, constraints on bank accounts and limits on powers to indemnify and insure. Ministers' powers of direction, where applicable, can also act as a restraint on a board's powers.

Exceptions to board implementing functions and powers under legislation

Very occasionally the chief executive or other office holder in an entity has specific statutory functions or powers under the entity's establishing legislation (eg, the Director of Maritime New Zealand). In these cases, the board is not responsible for the exercise of those powers and functions.  Boards and chief executives or other office holders need to be very clear about where responsibility lies in these situations.


The structure of the entity, including the board and committees, should support the implementation of the functions and powers of the entity and should be reviewed from time to time. A diagram of the structure of the board and entity would be a useful addition to a governance manual.

Governance manual content: Functions and powers of the entity

At a minimum a good governance manual should cover:

  • the functions as set out in the entity's establishing legislation including clear arrangements for the delivery of any policy functions;
  • any functions that the Minister has added in accordance with the entity's establishing legislation (if applicable);
  • any functions that are incidental or related to, or consequential on, the entity's functions;
  • any underpinning objectives or government policy statements of which the board is required to take account;
  • any exceptions to the board implementing the entity's functions and powers, i.e. where these are the responsibility of the chief executive or other office holder; and
  • a diagram of the structure of the board and entity would be a useful addition.