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

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PUBLIC SECTOR GOVERNANCE Governance ain’t Governance – a comparative review

weplgovernanceconsultants

“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 sector Private sector

Department Large conglomerate

Agency Company div / subsid’y

Statutory body Company

GOC (commercial) Company

Local government Small conglomerate

High level relative entity comparison

Entity /Dimension

Dep’ts Agency Statutorybodies

Commer’lGOCs

LocalGov’t

Main driver

Policy + social service

Specificrole / service

Specificrole/ service

Mixed – $s + some social?

Social service

Relative size /complex’y

Large Small / Medium

Small / medium / large

Small / medium / large

Small / Medium

Relative activity ange

Range - wide

Focused Focused Focused Range – wide (but local)

Entity comparison (cont)

Stake-holder range (relative)

Wider Narrower Narrower Wider Wider (but local)

Govern-ing ‘body’

Dept head Admin head

Admin head or board

Board Council

Riskmanage’t(relative)

Complex – multi-faceted

Less complex

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 + some gov’t policy

Reg’y

Entity comparison (cont)

FinancialManage’t /reporting

Public sector

Public sector

Public sector

Public & / or private sector

Public sector(LGA)

FOI Yes Yes Varies Varies Varies

Risk appetite(relative)

Low Low Low / medium(depends)

Low / medium(depends)

Low

Ministeroversight

Direct Direct Varies Indirect Indirect

Entity comparison (cont)

Auditor generaloversight

Yes Yes Varies Varies Yes

General reporting

Public sector

Public sector

Public sector

Public + private sector

LGA

Autonomy to set strategy

Yes Constrain-ed

Yes (limits) Yes (limits) Yes

Gov bodysuccessionplanning

No No Varies Yes (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 KnowSir 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 2011 - 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 2004 - 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:www.csaust.com/knowledge-resources/public-sector-governance-library.aspx