PUBLIC SECTOR GOVERNANCE Governance ain’t Governance – a comparative review wepl governance consultants

“Oils ain’t oils” Remember Castrol Australia TV ad for Castrol GTX oil? Tagline - Oils ain’t oils Proposition for this session - Governance ain’t governance in public sector, but frameworks are required

Aims of this session Aims = Examine different public sector entity types (at high level) Look at governance issues - large & small - these raise Look at possible solutions to issues It’s a participatory session!!

Public sector entities Public sector has had own practices in past; has looked to private sector– not always appropriate (?). Public sector far more heterogeneous Current public sector trend = consolidation (reducing sector entities and types) Many good comparisons of private vs public sector governance. But what about within public sector?

Public sector entities (cont) High level review - Departments – Federal, State / Territory - wide variety of size and type (eg PM&C vs Defence) Gov’t agencies – very wide variety eg Aust Electoral Commission, National Blood Authority, Private Health Insurance Administration Council

Public sector entities (cont) Statutory bodies – ‘corporate’ & not. Eg Reserve Bank, ACCC, ASIC, CSIRO, auditors general/audit offices, Crime & Misconduct Commission (Qld) Government-owned corporations – commercial (eg Qld and NSW GOC power generators) & not; Corp’s Act companies (eg NBN Co) and not

Public sector entities (cont) Local government – large & small eg BCC vs remote regional councils Trusts (a few) eg National Heritage Trust Controlled entities of public entities Partnerships with private sector (PPPs) Cross-gov’t and intra-gov’t agencies (eg Translink in Qld). Other types & examples?

Public sector entities (cont) Even within sector - large differences As with private sector, need to recognize differences within sector & need for differing governance solutions, BUT - Frameworks needed (to avoid proliferation of entity types & confusion over governance)

Public sector entities (cont) Simplified dissection for this session: Dep’ts of state (C’th, State & Territory) Agencies (admin entities) within dept’s Statutory bodies Government-owned corporations – focus on commercial in this session. Local government

Public v private – equivalents? Public sectorPrivate sector DepartmentLarge conglomerate AgencyCompany div / subsid’y Statutory bodyCompany GOC (commercial)Company Local governmentSmall conglomerate

High level relative entity comparison Entity / Dimension Dep’tsAgencyStatutory bodies Commer’l GOCs Local Gov’t Main driver Policy + social service Specific role / service Specific role/ service Mixed – $s + some social? Social service Relative size / complex’y LargeSmall / Medium Small / medium / large Small / Medium Relative activity ange Range - wide Focused Range – wide (but local)

Entity comparison (cont) Stake- holder range (relative) WiderNarrower WiderWider (but local) Govern- ing ‘body’ Dept headAdmin head Admin head or board BoardCouncil Risk manage’t (relative) Complex – multi- faceted Less complex Complex- comm’l + Gov’t Complex – multi- faceted Compl- iance Gov’t policy + reg’y Gov’t policy + some reg’y Reg’y + some gov’t policy Reg’y

Entity comparison (cont) Financial Manage’t /reporting Public sector Public & / or private sector Public sector (LGA) FOIYes Varies Risk appetite (relative) Low Low / medium (depends) Low / medium (depends) Low Minister oversight Direct VariesIndirect

Entity comparison (cont) Auditor general oversight Yes Varies Yes General reporting Public sector Public + private sector LGA Autonomy to set strategy YesConstrain- ed Yes (limits) Yes Gov body succession planning No VariesYes (limits)No

Entity comparison (cont) Above not an exhaustive review Other areas or elements that demonstrate differences within the sector? Clearly, sector not homogeneous

Public sector – some governance issues Script extract from YES MINISTER, Episode Six: The Right to Know Sir Humphrey: Minister, I have something to say to you which you may not like to hear. Jim Hacker: Why should today be any different? Sir Humphrey: Minister, the traditional allocation of executive responsibilities has always been so determined as to liberate the ministerial incumbent from the administrative minutiae by devolving the managerial functions to those whose experience and qualifications have better formed them for the performance of such humble offices, thereby releasing their political overlords for the more onerous duties and profound deliberations which are the inevitable concomitant of their exalted position. Jim Hacker: I wonder what made you think I didn't want to hear that?

Public sector governance issues (cont) Political & bureaucratic perceptions of sector as homogenous; result = inclusion of all / many entities in same policy & reg’y webs eg. stat’y bodies, GOCs Apart from departments (MOG changes) & local gov’t (LGA), lack of sufficient forethought when establishing new entities………

Public sector governance issues (cont) ….ie. lack of clarity of structure, roles, responsibilities, &/or accountabilities of entity itself and ‘players’- incl with cross- agency and inter-gov’t entities Sometimes unclear relationships between entities and stakeholders eg. the informal, unofficial Ministerial ‘desire’ vs formal written Ministerial direction

Public sector governance issues (cont) Conflicts - organisational & individual eg are governing body members representative of stakeholders or looking first to entity’s interests? (Some) ‘over-sized’ governing bodies - usually representative bodies eg. CRCs Inadequate skill mix of some types of governing bodies eg. local gov’t councils?

Public sector governance issues (cont) For some entities eg. commercial GOCs – clash / tension between org (commercial) and owner (political) agendas Conformance (at expense of performance) Risk management immaturity? (relative to private sector) Lack of robust organisational KPIs

Public sector governance issues (cont) Lack of link between senior management pay and organisational performance Unclear or duplicated organisational external reporting Others?

Public sector – some governance solutions Senior recognition that sector not homogenous; differing governance needed within sector, BUT…… Need to define frameworks (from which entity types can be selected & which provide basic attributes) & guidance. Provides for clarity around progressive independence from Minister. Examples……

Public sector – some governance solutions (cont) Example 1 – C’th frameworks under a) C’th Authorities & Companies Act (commercial entities, appropriately overseen by board) and b) Financial Management and Accountability Act – (non- commercial entities, appropriately managed by exec group & overseen by dep’t secretary) …….

Public sector – some governance solutions (cont) Example 1 (cont) ……. 3) Commonwealth Government Business Enterprise Governance and Oversight Guidelines apply to GBEs that are C’th authorities or wholly-owned C’th companies, and 4) Cth’s Governance Arrangements for Australian Government Bodies

Public sector – some governance solutions (cont) Example 2 - NZ’s Crown Entities Act applies to various ‘Crown entities’ incl ‘statutory entities’, ‘Crown entity companies’, ‘Crown entity subsidiaries’, ‘school boards of trustees’, and ‘tertiary education institutions’. These further broken down and defined

Public sector – some governance solutions (cont) Framework and entity ‘clean-up’ at C’th level; maybe further thought required - more comprehensive approach(?) Framework approach needed at State / Territory level - define entity types Framework challenge = balance between finite categories of entities and flexibility Ensure MOG change protocols cater for frameworks and their differing entities

Public sector – some governance solutions (cont) When establishing entity, have clear documented reasons & mandate eg. statutory corporation vs statutory authority Clarify roles / responsibilities / account’ies for ‘players’ – esp between Minister and entity; for whole of gov’t (WOG) or cross- agency entities; & for any governing body

Public sector – some governance solutions (cont) Clarify entity reporting lines Define stakeholders and relationships If ‘governing body’ has deficient skill-mix, consider advisory board or similar Look more at performance not just conformance – more use of org KPIs Clarify government (Crown) immunity status

Public sector – some governance solutions (cont) Establish appropriate risk manage’t framework; define risk appetite – sector overly risk averse?; identify and deal with key risks Recognise org conflicts early and discuss For entities with group governing body – robust appoint’t processes; clarify role - ‘representatives’?; consider member independence; periodic performance self- evaluation

Public sector – some governance solutions (cont) Clarify entity reporting obligations. Most entities ultimately report to Minister BUT significant exceptions eg. Auditors General) Look to international public sector models as well as private sector (eg. ASX Principles) Examine need for current practices eg. Ministerial ‘statements of expectations’ and entity ‘statements of intent’; clarify legal status

Public sector – some governance solutions (cont) Clarify FOI status; FOI not appropriate for commercialised entities On-going good governance education. (Go CSA !) Continuing auditors general efforts Other solutions?

Conclusion Public sector is complex from governance viewpoint Differing entities require differing solutions – “Oils ain’t oils”, but…… Important for govt’s to provide both frameworks (from which entity types can be selected & which provide basic attributes) & guidance

Further reading Refer CSA member webpage on public sector library: governance-library.aspx