Part 3: Preparing four-year plans

Medium-term planning in government departments: Four-year plans.

In this Part, we discuss:

Summary of our findings

Some departments were unsure about the purpose of their four-year plans. This resulted in them writing the plan for a variety of stakeholders, which limited its usefulness.

To ensure that a department's four-year plan provides a consistent view of its medium-term strategy, the department should fully integrate its preparation of its four-year plan into its existing strategic-planning process. Departments generally had a plan for preparing their four-year plans, but these were not always fully integrated into the department's broader planning processes.

Departments had good engagement with the central agencies when preparing their plans.

Departments recognised the importance of four-year plans and ensured that chief executives, other senior managers, and, where appropriate, audit committees were involved in preparing and reviewing the plans.

A good understanding of the purposes and audiences of four-year plans and strategic intentions documents

A department's four-year plan and its strategic intentions document are designed to complement each other:

  • A department's strategic intentions document is high-level information that informs Parliament and the public about the department's strategic objectives and how these relate to the Government's broader strategies and priorities, focusing on the department's intended achievements and contributions.
  • A department's four-year plan is focused on a department's medium-term strategy and, in particular, how the department will implement its strategy and achieve its objectives and strategic intentions. Since 2015, the published guidance has clarified that the primary users and audience of a four-year plan are the department, Ministers of the Crown, and the central agencies.

We expect a department's four-year plan and its strategic intentions to result from the department's strategic-planning process. The four-year plan and strategic intentions document both have a medium-term focus. For example, a four-year plan has a minimum horizon of four years. A department's strategic intentions document relates to the forthcoming financial year and at least the following three years.

Although the four-year plan and strategic intentions document both have a medium-term focus, they have different audiences, purposes, and publishing requirements that departments need to understand, consider, and plan for.

Four-year plans need to be based on good quality and useful information about the medium term to support the decision-making of each department and of the Government. Good quality, useful information about the medium-term directions of the Government's finances, assets, and services is also needed to support Parliamentary decision-making and for public accountability.

A department can, but is not required to, publish its four-year plan. Four-year plans include detailed and potentially sensitive information about funding, staffing, and the trade-offs the department is intending to make to meet its objectives and achieve its strategy.

We found that some departments were unsure about the purpose of the plan and who the intended audience was. There was also uncertainty about what departments should include in plans, because some departments were uncertain about whether the plans would be made public and, consequently, whether the department should include budget-sensitive information in them.

This resulted in a range of issues that included departments:

  • excluding detailed strategies from four-year plans;
  • excluding service delivery trade-offs that were needed for a department to avoid overspending; and
  • comprehensively reworking a four-year plan to exclude sensitive information before it could be made public.

For some four-year plans we reviewed, uncertainty about the audience and purpose of the plans created costs in time and effort, and limited the usefulness of the plans.

One department believed that the problem was not so much that it was unsure or confused by the intended audience. Rather, it found difficulty in writing a document to meet the needs of different audiences.

Integrated view of a department's strategy and robust links with existing plans

A four-year plan should also be aligned and integrated with other departmental strategic-planning documents, providing a complete and integrated view of the Votes administered by the department for all years covered by the plan. We also expect to see strong and clear links between the four-year plan and the department's existing plans, policies, and annual reports.

We saw good examples of four-year plans that had been prepared with a clear strategic direction and that provided enough information to inform the reader of the department's goals and objectives for the next four years.

These examples of four-year plans made it clear what the department's objectives were during the next four years and provided a consistent story that aligned with the department's longer-term vision, strategic intentions, and annual report.

One department provided a list of legislative and strategic priorities. It then used these to inform its four-year plan. Other departments aligned the main themes and objectives in their four-year plans with other documents they published, such as the Statement of Intent (now strategic intentions), the Performance Investment Framework four-year excellence horizon, and the annual report. All these documents included the same issues and objectives for the same four-year period.

However, departments could provide better information and a more integrated view of how they will contribute to their objectives and strategic intentions, how they will achieve these, and the challenges they will face. For example, some plans:

  • were too high-level, with information mainly about the department's vision rather than specific issues the department will face in the next four years;
  • contained too much information about the department's current operations, rather than what the department would do to change in the face of challenges to its operations in the next four years;
  • lacked information or discussion about how the department's strategic vision and goals linked with its current business-as-usual operating model;
  • lacked information on the relationship between the levels of service provided and the funding needed to achieve these targets; and
  • lacked information about how the department's goals would be achieved. For example, the department might know what it would like to achieve but did not state how it would do that or the resources it would need.

A well-defined process for preparing a four-year plan

To produce a four-year plan that is effective, credible, and coherent, a department needs to have a robust four-year plan preparation process. We expected departments to have a well-defined process for preparing a four-year plan.

Figure 2 shows the factors a department should consider when preparing its four-year plan. Essentially, a four-year plan can be viewed as the "integrator" of a department's long-term goals and objectives with the resources available to achieve these long-term goals. Its job is to explain what a department will be doing, what resources it will use, how much the activities will cost, and what the results are expected to be.

Figure 2
Four-year plan preparation process

Figure 2 Four-year plan preparation process.

We saw good examples of departments planning to prepare their four-year plan. In particular, we saw examples of departments preparing timetables and other documents at the beginning of the process that were clear and provided relevant information explaining the milestones needed to meet the Treasury's and internal deadlines. Also, one department split timelines between initial engagement and information gathering, drafting and consultation, and finalisation and delivery, which, in our view, was good practice.

Although departments generally planned for the preparation of their four-year plan, their preparation did not always go as intended and they did not always consider practical matters.

We saw one example of staffing changes adversely affecting a four-year plan. Several staff involved at the end of the process had little involvement in the earlier planning and decisions, so it was unclear who was responsible and accountable when specific concerns arose later.

These difficulties could have been avoided if the department had hand-over protocols to maintain overall ownership of the process during staff changes.

Preparation of a four-year plan was not always integrated into the department's planning process. This increased the risk of no strong engagement in the department about the plans. It also increased the risk that the plan was inconsistent with other plans and accountability documents.

For example, one department established discrete, stand-alone work streams to prepare individual reports that could then be used in the four-year plan. However, these discrete pieces of work did not deliver the appropriate information, meaning further work had to be done. In another situation, the lack of integration into planning processes meant that the four-year plan contained outdated information.

Involvement and oversight from senior management

Because the four-year plan is a crucial medium-term strategic document, it is important that senior management are involved in the preparation and oversight of the four-year plan.

In the departments we looked at, senior management staff, including chief executives, were involved in preparing the plan. The nature of the involvement was good and varied. For example:

  • One department set up a governance group of senior managers to oversee the preparation and completion of its four-year plan. The group met regularly to discuss progress and any issues arising with the preparation of the four-year plan. The governance group appeared to work well.
  • One department allocated responsibility for the plan's preparation to the deputy chief executive, who reported on progress to the senior leadership team.
  • One department allocated responsibility for preparing its four-year plan to its planning and performance team, with the department's senior leadership team reviewing the four-year plan.

Two departments provided drafts of their four-year plans to their audit committees for review.

Overall, senior management were strongly involved in preparing the four-year plans, which is encouraging.

Departments also discussed their draft plans with their Ministers, which, for at least one department, led to a successful budget bid.

Regular communication with the central agencies

Departments have been preparing medium-term plans since 2011, and the preparation process has been evolving to take account of changes to the plans' audience and purpose. Departments have updated their approach to preparing plans accordingly.

To help departments prepare four-year plans, the Treasury and the State Services Commission publish annual guidance. The published guidance includes information about what a four-year plan is, the process for its preparation, the main changes from the previous year's requirements, and what the department's four-year plan should include.

The published guidance previously included a series of Annexes covering workforce capability, financial information, asset management, key assumptions, and anticipated funding requests that departments are required to complete. The published guidance is updated annually to reflect changes from the previous year and include any lessons learnt from previous planning rounds. The 2017 guidance now requires only one (financial) annex, along with key information to be provided in the body of the four-year plan.

Departments had good engagement with the central agencies when preparing their plans. However, at least one department found the published guidance difficult to follow. This department had face-to-face meetings with the Treasury to establish what the requirements were. Another department consulted with the Treasury throughout the four-year plan preparation process.

In our view, experience in government departments and the central agencies in medium-term planning has been developing. The Treasury and the State Services Commission continue to improve their four-year planning guidance in response to feedback from government departments and their own observations about how plans are developing. We encourage the Treasury and the State Services Commission to continue this improvement work.

How to improve four-year planning

To continue to improve four-year plans, departments need to:

  • ensure that staff responsible for preparing four-year plans have a clear understanding of their purpose and audiences so the plans support the department's and the Government's decision-making needs and strategic intentions documents support Parliament's and the public's needs;
  • fully integrate the preparation of four-year plans into their strategic-planning process; and
  • have a well-defined process for preparing a four-year plan that provides for good senior management involvement and oversight, and regular communication with the central agencies and other stakeholders.

To continue to improve four-year plans, the central agencies need to consider the relationship, purpose, and contents of four-year plans and strategic intentions documents to ensure that useful and good quality medium-term information is available for departmental, central agency, and governmental decision-making while serving the needs of Parliament and the public.