Part 1: Introduction

Improving value through better Crown entity monitoring.

In this Part, we describe:

There are more than 2700 organisations in the public sector that sit outside central government. Many of these are Crown entities.1 Crown entities are established by statute and carry out important public services or functions. They are funded in various ways but often receive some Crown funding.

Crown entities deliver significant public services. In 2020/21, they were responsible for 39% of central government expenditure, 46% of central government assets, and 74% of the central government workforce.

All Crown entities are set up to be at "arm's length" from government.2 We looked at statutory Crown entities.3 There are three types of statutory Crown entities with different degrees of autonomy:

  • Crown agents have the closest relationship to government. Responsible Ministers can direct Crown agents to give effect to government policy that relates to their functions and objectives. This includes core public-facing service delivery.
  • Autonomous Crown entities must have regard to policy that relates to their functions and objectives if directed by their responsible Minister.
  • Independent Crown entities cannot be directed by their responsible Minister on matters of government policy unless its statute specifically provides for it.

In this report, we use the term "Crown entity" to mean statutory Crown entities.

The Crown Entities Act 2004 provides the basis for establishing, governing, and operating all Crown entities. Each Crown entity has a board (or equivalent)4 and a Minister responsible for the performance of a Crown entity (responsible Minister) – both have responsibilities under the Act. The responsible Minister's role is to oversee and manage the Crown's interests in each Crown entity.

A "monitoring department" is a government department that supports responsible Ministers to carry out their functions and duties in relation to a Crown entity, including ensuring that the Crown entity meets its statutory obligations. Monitoring departments normally monitor multiple Crown entities in the same sector. For example, the Ministry of Transport monitors Maritime New Zealand, Waka Kotahi New Zealand Transport Agency, the Civil Aviation Authority, and the Transport Accident Investigation Commission.

In this report, we use the term "Crown entity monitoring system" to describe the network of roles, responsibilities, and relationships between responsible Ministers, monitoring departments, Crown entity governing boards, and Crown entities.

We refer to the arrangements between a responsible Minister, a monitoring department, and an individual Crown entity as "monitoring arrangements".

Why we carried out this audit

Concerns are sometimes raised about the quality of Crown entity monitoring. In recent years, some Crown entities have had well-publicised performance issues. We wanted to assess the effectiveness of Crown entity monitoring arrangements and identify opportunities where monitoring could be improved.

Specifically, we wanted to:

  • understand the challenges and opportunities experienced across the public sector of current monitoring arrangements;
  • better understand the role of the Treasury and Te Kawa Mataaho Public Service Commission (Te Kawa Mataaho) in providing leadership for monitoring arrangements; and
  • observe whether the Crown entity monitoring system is effective.

In 2009, four years after the Crown Entities Act came into effect, we carried out an audit in which we assessed how well three monitoring departments were supporting responsible Ministers in carrying out monitoring activities.5 We also wanted to provide assurance that these monitoring departments had effective mechanisms to support responsible Ministers with their responsibilities for Crown entities, including their specific functions under the Crown Entities Act.

Our 2009 report highlighted several areas that those three monitoring departments needed to improve. This included clarifying roles and responsibilities, making better use of information about issues and risks to inform their monitoring work, and providing relevant, timely advice to Ministers about each Crown entity's statement of intent and its financial and non-financial performance.

In carrying out this audit, we took a broader view of the Crown entity monitoring system. We were interested in whether we could identify improvements to monitoring arrangements since our 2009 report.

What we looked at

We wanted to understand whether the monitoring arrangements for statutory Crown entities are effective. Specifically, we looked at whether:

  • monitoring departments have a comprehensive framework for monitoring statutory Crown entities;
  • the monitoring activity is appropriate and proportionate to the Crown entity being monitored; and
  • monitoring departments use the information they get from monitoring effectively.

Our audit looked at statutory Crown entities. We based our assessment on It Takes Three: Operating Expectations Framework for Statutory Crown Entities,6 which is the main guidance that monitoring departments use. We discuss this guidance in more detail in paragraphs 2.23-2.25.

What we did not look at

We did not look at state-owned enterprises, Crown entity companies or subsidiaries, district health boards, tertiary education institutions, school boards of trustees, or local government organisations. However, some of our findings might apply to them.

We wanted to develop system-level observations and recommendations. Therefore, we did not assess:

  • how any single monitoring department or Crown entity was performing; or
  • the effectiveness of any individual Crown entity board.

We did not look specifically at the quality of Crown entities' performance frameworks or accountability documents.

How we carried out this work

We looked at nine different monitoring arrangements between Crown entities and their monitoring departments. These monitoring arrangements involved five monitoring departments and nine Crown entities. For each arrangement, we spoke with the Crown entity and its monitoring department. These organisations ranged in size and role and covered several sectors.

We also spoke with the Treasury and Te Kawa Mataaho because of their roles supporting the Crown entity monitoring system.

We analysed documents and interviewed people, including:

  • some responsible Ministers;
  • chairpersons of the governance boards of Crown entities;
  • chief executives and senior managers of Crown entities;
  • those responsible for monitoring teams within monitoring departments; and
  • those who carry out day-to-day monitoring within monitoring departments and Crown entities.

We also surveyed the board chairpersons and chief executives of 58 Crown entities7 and the senior managers of monitoring teams in 12 monitoring departments. Of those organisations, 67% of Crown entities and 100% of monitoring departments responded to our survey. The responses gave us a wide view of the monitoring experiences and practices of Crown entities and monitoring departments. The findings from the survey and our more detailed review of the monitoring arrangements were consistent.

We looked at several Performance Improvement Framework reviews, which Te Kawa Mataaho carry out. Performance Improvement Framework reviews inquire into the capability and delivery of government departments and what the department needs to improve in the medium term. They look at the monitoring functions of departments if it is a substantial part of the department's operations.

Structure of this report

In Part 2, we consider the framework for Crown entity monitoring.

In Part 3, we discuss Crown entity monitoring practices and activities.

In Part 4, we discuss how well Crown entity performance information is understood and used.

In Part 5, we discuss the challenges we saw and identify opportunities to improve Crown entity monitoring arrangements.

1: There are five categories of Crown entities. These are statutory Crown entities, Crown entity companies, companies listed in Schedule 4 and 4A of the Public Finance Act 1989, tertiary education institutions, and schools.

2: Arm's length means the Crown entity operates with less influence from government.

3: Statutory Crown entities are defined in Schedule 1 of the Crown Entities Act 2004.

4: Some Crown entities have Commissioners that fulfil both the governance and executive functions of a Crown entity. Examples include the Productivity Commission, the Commerce Commission, and the Privacy Commission.

5: Office of the Auditor-General (2009), How government departments monitor Crown entities at

6: Te Kawa Mataaho Public Service Commission (2014), It Takes Three: Operating Expectations Framework for Statutory Crown Entities, at

7: Our survey excluded some statutory Crown entities, including the New Zealand Walking Access Commission and the New Zealand Antarctic Institute. The departments that monitor these entities, the Ministry for Primary Industries and the Ministry of Foreign Affairs and Trade respectively, were excluded because they do not monitor any other Crown entities. We also excluded district health boards because we considered that the high number of them could have a disproportionate effect on the survey results.