A major reason for establishing Crown entities is to take advantage of governance arrangements that are different than those for a department. Monitoring activity must recognise the role of the board as the governing body of the entity. The monitoring department should not attempt to be a substitute for the board or management. It should focus on advising the Minister whether the entity's strategic direction complements Government and sector goals and legislation, advising on performance, and adding value where it can through its advice to the Minister and its work with the entity.
A central facet of a department's monitoring responsibility is to provide Ministers with an independent view of the performance of the entity. This includes capability issues that may impede performance and any emerging risks and issues that may damage the organisation's reputation.
What this advice covers, and what monitoring is proportionate, will vary by entity. Departments will have to make judgments about the nature and depth of engagement and analysis required to provide the advice required. For example, 'light touch' monitoring may be proportionate where the risk assessment suggests that there are no material causes for concern that are beyond the capacity of the Board and management to deal with.
Monitoring is an art, not a science, and what is good practice is still emerging. Departments are experimenting with various monitoring approaches, including more formal risk assessment tools, relationship assessment tools, monitoring plans, periodic reviews (discussed further below) and evaluations undertaken to review policy effectiveness. In future, departments will have to address how to use the results from any Performance Improvement Framework (PIF) undertaken for an entity (see discussion under G - Tendering Policy Advice, below).
Monitoring departments should consider having explicit agreements with their Minister that set out their monitoring responsibilities and approach. Where a department has significant monitoring responsibilities, any agreement should cover the:
- specific tasks that will be undertaken
- monitoring priorities based on the risks faced by the entity
- relationship management arrangements
- level and type of monitoring capability that will be sustained
- kind of information and analysis that will be provided to the Minister, and
- frequency with which the above information will be supplied.
Where a department monitors a group of entities in a sector, monitoring agreements could also include:
- the effectiveness and efficiency of cross-agency initiatives
- whether there are gaps in delivery or expected results, and
- what changes are needed to ensure better integration and performance across a portfolio of entities.
The key levers that the Minister can use to monitor performance are shown below.
See this section in the Guide for Ministers for a discussion of what Ministers should be able to expect from their department on monitoring performance.
Many monitoring departments set milestones around which they organise major activities, and make sense of what can otherwise be a noisy environment. They:
- run meetings with chairs of boards and senior staff to agree the results sought for the entity or sector
- maintain monitoring and reporting calendars, and schedule preparatory work
- maintain risk assessments at the sector and entity level to help the department prioritise tasks as they come in, and commission proactive work when needed
- work together to ensure performance information is available
- commission benchmarking studies or in-depth analyses and evaluations, and
- run rolling reviews of major entities or interventions.
Monitoring departments cannot and should not monitor everything. They should focus monitoring activity on major opportunities and risks, both across the portfolio they monitor, and for individual entities. Detailed reviews and in-depth monitoring should reflect Ministers' needs, the scale of investment in and spending on entities, the risk posed by entities, and the opportunities that could be realised across the area. For more resources on monitoring see the MAGnet site: https://psi.govt.nz/magnet/default.aspx .