Under the devolved model of government, much depends on the clear and before the fact (ex ante) specification of objectives and performance targets by agencies supplying services to the Crown. The Crown - through the responsible Minister - and such agencies are in implicit partnership in the achievement of these objectives. It is important that they agree on a process for developing ex ante accountability material, and a common understanding regarding the kind of information it is to contain.
This document suggests an appropriate approach to the development of ex ante accountability documentation, with respect to both process and content issues. It is the result of work undertaken by the Ministry in association with representatives of all the agencies receiving ongoing funding through Vote Cultural Affairs.
It is my hope that it will provide a useful guide not only for those organisations that are required under the Public Finance Act 1989 to produce Statements of Intent, but for all the agencies that receive Cultural Affairs funding and which need therefore to represent to the Crown the ways in which this funding will advance mutual objectives - and to give strategic consideration to how this should be done.
The document properly locates the primary responsibility for both the development process and the content of ex ante accountability material with the individual agencies. Nevertheless, as the primary advisor to the Minister of Cultural Affairs - whose own role involves not just ensuring the accountability of cultural sector agencies, but representing their interests within the Executive - this Ministry has a clear interest in providing whatever assistance it can to organisations in their development of this material. Accordingly, I invite users of this document to contact the Ministry at any point to discuss its particular application to the development of ex ante documentation for their own organisations.
I look forward to the Ministry's continuing work with cultural sector agencies on this issue, and to the enhanced accountability documentation that will result.
Martin Matthews
Acting Chief Executive Ministry of Cultural Affairs
April 1999
Governments must make decisions not only about what things they should do, but about how these things should be done. When answering the 'how' question, governments can decide to produce outputs within departments, to establish separate Crown organisations to produce them, or simply to buy the outputs from private organisations.
There are good reasons for locating some activities outside central government departments (and some of these reasons may be particularly pertinent with respect to the cultural sector). The decision to do that, however, places an onus on the agencies in which the activities are located to undertake a rigorous annual planning process and specify clearly their intended programmes of action. This is so that the Government, in the first instance, and subsequently Parliament and the public, are provided with the assurance that the entity is efficiently providing services which advance the purposes for which it has been created and/or funded, that it is in a position to continue supplying these services in the future - and that it is operating in a manner consistent with the legal, financial and moral obligations of a publicly funded organisation.
This document sets out some guidelines to assist those organisations in the cultural sector which supply services to the Crown with the development of their Statements of Intent, or those equivalent 'strategic' documents requiring ex ante specification. (It does not specifically relate to the preparation of more detailed documentation such as purchase agreements, though its broad principles of early dialogue, for example, or meaningful measurement, are applicable to the range of material which articulates an organisation's ongoing relationship with the Crown.)
The guidance in this document is not prescriptive, but it does provide an outline of Government's broad expectations of cultural organisations with respect to ex ante specification, and a platform for more detailed discussion regarding the particular obligations of individual organisations.
One area of distinction is that between the Crown entities which are required under the Public Finance Act to produce a Statement of Intent, those Crown entities which are not required to do so, and private organisations to which - in respect of their own documentation - the Public Finance Act does not apply.
In each case, the organisation is obliged - as a minimum - to do what the law requires of it. But each organisation will also need to make its own judgement as to what further documents or information it could appropriately develop: any legal minimum may not in itself be sufficient to meet fully the Crown's needs, or, indeed, an entity's own sense of what should rightfully be discussed with the Crown and stipulated in documentation.
Whatever the particular characteristics of the various relationships between the Crown and the cultural agencies, however, they have in common the fact that the Crown has both a short and long term interest in an organisation's performance. 1 The accountability documentation prepared by each of the entities should reflect this interest. This document has therefore been drafted with a view to it informing the 'strategic relationship' between the Crown and all organisations receiving ongoing funding through Vote Cultural Affairs.
The following principles underpin an effective process for involving the Crown in the development of ex ante specification documentation:
Ex ante specification should not be viewed as something separate from or outside an organisation's business planning cycle: it is in fact the externally visible element of this cycle, and the documents required by Parliament or by the Crown should be generated by the very planning processes that a board and management undertake in their expert operation of the organisation.
It is important for both parties that an organisation establishes a dialogue with the Government early in its business planning cycle. Delaying this dialogue until significant planning work has already taken place means that the organisation may be put in the position of having to choose between ignoring the Crown's particular perspective or priorities, or repeating its planning process with a view to their accommodation.
As the Auditor-General has noted, it is incumbent on Crown entity boards to set the strategic directions of their organisations in accordance not only with the terms of their legislation, but with the interests of the Crown.2 In recent years, the Government has articulated strategic objectives across a range of sectors. These may or may not have obvious or specific links with the work of a particular organisation, but it is desirable nonetheless that the organisation is made cognisant of them, of the underlying intent of Government, and of the possible implications of these for the organisation's business.
A relatively informal meeting early in the planning cycle allows the organisation to confirm that the broad thrust of its proposals are acceptable to the Crown, or to establish the nature of any concerns that the Crown may have. It enables the Crown to advise whether it has any particular expectations of the organisation for the period to come. A Minister may also have certain broad objectives that could be supported by the work of more than one organisation, and this meeting would provide an opportunity for discussion on the possibility of joint or collaborative projects, with possible facilitation by the Ministry.
While early dialogue is desirable, so too might it be desirable for an entity to consult with the Crown in some circumstances during its planning process. The timetable stipulated by the Public Finance Act does not necessarily facilitate an effective process, and, aside from the formal submission and approval of documents, there may be particular issues or concerns that desirably should be addressed before a draft Statement is submitted. For example, is the organisation proposing any controversial activities, with respect to which the Minister may be approached by the media or lobbied by the public? Where in the process of planning these activities is it most appropriate to have a more detailed discussion with the Crown? Or, are there certain initiatives for which explicit Crown support would be valuable? When would they be best discussed?
Ideally, a recognition of the importance of the organisation and the Crown maintaining a shared sense of the organisation's contribution to mutually supported objectives drives both the content of the documentation, and the timetable agreed for its development. Ideally, also, the absence of a formally timetabled meeting does not get in the way of any required dialogue - both parties maintain an accessible and open approach, one that is responsive to developing issues, and which facilitates their early resolution. A good working relationship is to the benefit of both parties, and will assist both in the achievement of their objectives.
As noted above, effective ex ante accountability documentation should ideally address not only the production of services for the financial years in question, but the capability of the organisation to continue to supply these services in the future. It should reflect the key objectives of the organisation, including its expected financial performance. The documentation needs to be sufficiently comprehensive and precise to meet the needs of the Board and staff of the organisation itself, the Crown, Parliament, and the public. It must convey the sense of an organisation being well governed and managed.
However, Statements of Intent or equivalent documents are not required to reflect the details of organisational planning. They are best presented as high level documents, capturing what is fundamental, critical or 'different' about the period to come, the direction being charted by the organisation, and the strategies to be adopted in support of this.
Useful ex ante accountability information could be considered under six headings:
This information gives the broad context for the organisation's operation in the relevant period, and provides the reader with an understanding of the basis on which the strategic objectives (to be separately addressed) have been selected. The provision of information on the strategic context would appropriately include an emphasis on:
In every sphere of its operation Government is expected to demonstrate that it applies scarce resources effectively, and that their application contributes to the achievement of Government goals. Crown entities are created as instruments of public policy. Accordingly, the relationship between these entities' activities and the public policy objectives of the Government is critical to any assessment and understanding of the entities' strategic objectives.
The purposes and goals of Crown entities are generally - but not always - outlined in their enabling legislation. Where there is no legislative specification, it is likely that an organisation will have developed comparable statements in its strategic planning documentation. Whatever the source of these organisational 'purpose and goals' statements, they are the link between the broader goals of Government and the organisation's particular strategic objectives, and they need to be clearly elucidated in its accountability documentation. Having done this, an organisation is in a position to demonstrate the alignment of its own goals with those of Government - to indicate how Government aims might be pursued through agency activities.
Obviously, however, this assumes also a clear understanding of what it is that Government is seeking to achieve. Government has articulated its cultural sector goals, although they are framed in general terms. It is also possible - from decisions taken by Government in the sector, from the range of relevant operative statutes and from other material - to deduce the particular goals and priorities which are relevant to the activities of individual organisations. The preparation of effective ex ante accountability documentation requires that that deduction be made explicitly, and the Ministry, on behalf of the Minister, is willing to assist each organisation to do so.
Discussion with the Ministry at this time might also provide the opportunity for an organisation to consider the possibility that there are non-cultural Government goals to which its own cultural activities might nevertheless contribute. Such possibilities must be assessed with care, of course. Where an organisation's purposes, goals and functions are specified in legislation it has an unassailable mandate and set of obligations in its area of responsibility, and its response to the strategic interests of the Crown must be made within this context.
In any one period, a number of factors will influence an organisation's ability to achieve its goals. Those factors of sufficient importance to have explicitly affected the strategies developed by the organisation should be identified. What risks does the current environment present? What positive developments should be taken advantage of?
Considered together, the requirement to maintain an alignment of Government and organisational goals and the particular characteristics of the period under review create the context in which the organisation must operate. The best possible response of the organisation - the one which will enable it to operate in this context with maximum effectiveness - should ideally be articulated as a set of strategic objectives.
What is it, then, that the organisation will seek to achieve in support of its broader goals, and in light of the particular contextual factors identified in the section above? The range of identified strategic objectives should include some that apply to each of these areas:
What are the key objectives in relation to the supply of services this period? The level and type of the services to be provided need to be spelt out, and any significant changes in these services from previous years should be explained.
Why has this particular mix of objectives been selected by the organisation? The answer to this question should be clear to stakeholders, and should link naturally with the strategic context in which the entity expects to be operating.
Desirably, the objectives that have been developed by the organisation in relation to the maintenance of ongoing capability should be identified. A useful Statement of Intent will reflect the critical issues and objectives relating to an entity's productive capacity. In any one year these may include, for example, the people employed; the financial resources available; physical assets; production methods; and the organisational culture.
Once again, it should be made clear to the stakeholders why the particular mix of objectives has been identified. What is it about the strategic context, and the services to be provided now and in the future, that drives the selection of objectives with respect to ongoing capability?
Future operations and the decision to select a particular set of strategic objectives will have an impact on an organisation's financial position and performance. It is highly desirable that Statements of Intent are transparent in this regard - that they clearly reflect the financial implications of the organisation's planned activities through the inclusion of appropriate current and forecast information about the financial position and performance of the entity.
Certain factors will present risks to the organisation's achievement of the identified objectives. It is important to demonstrate that these factors have been considered, and the degree of risk assessed. Information would be usefully provided that reflects:
Once again, the risks will relate not only to the production of services in any particular period, but to objectives for maintaining, or developing, the ongoing capability of the organisation.
It is of course fundamental to the concept of ex ante accountability documentation that the effectiveness of the programme of action developed at the beginning of the relevant period is able to be assessed at the end. Were the right decisions made? Have the objectives been achieved? What have been the gains of the period? How are things different than they were at the beginning? In setting strategic objectives, organisations need to articulate a measurable expectation, and ideally provide an indication of the effect of the relevant activities not taking place.
Ex ante accountability documentation therefore needs to incorporate measurement criteria that will allow stakeholders to assess two important aspects of the organisation's operation at the end of the period:
In both cases - but with particular reference to the second point - the organisation will need to think creatively about ways of measuring achievement. It is unlikely that performance measures relevant to both the organisation and the Crown can be simply extrapolated from the workload or output measurements utilised in the day-to-day management of the organisation. Rather, consideration must be given to what it is that genuinely demonstrates organisational success: meaningful measures will be pitched at a level that reflects the achievement of the entity's objectives in relation to the functions it performs.
The Office of the Auditor-General has promulgated a standard that sets out appropriate criteria for performance measures, incorporating characteristics of validity, reliability, relevance, completeness and 'understandability'.3 Organisations - in discussion with the Crown - need to consider how these apply to their own activities and objectives: once again, the earlier in the planning cycle that the parties have their first discussion about such matters, the greater the chance that the final information will be mutually useful.
In preparing material on this issue, the organisation should consider what it will need to know in order to confirm that the objectives - in relation to both production of services and maintenance of ongoing capability - have been achieved. How can this be conveyed effectively to the stakeholders?
The organisation will need to identify what it will need to know to confirm that the achievement of the objectives has actually assisted the organisation in fulfilling its goals - that is, how can it measure not only that the objectives were achieved, but confirm that these objectives were indeed the right ones, and that their achievement has had an effect on the success of the organisation in fulfilling the purposes for which it was created and/or funded?
The point should be made again that consideration of the above issues in no way relieves an organisation of its obligations under the Public Finance Act (or any other relevant legislation) to include particular material or follow specific processes that may not be mentioned in this guide. The requirements of this legislation must in all instances be observed. Entities should review these legislative requirements and ensure any Statement of Intent prepared fully complies with them.
This document sets out some guidelines for the preparation of ex ante accountability documentation: it is intended to provide organisations in receipt of funding through Vote Cultural Affairs with an indication of the kind of material that Government will be seeking.
However, it is not a template, and it is neither prescriptive nor restrictive. The Ministry is conscious that ex ante accountability information is most useful when it is able to reflect the characteristics of a particular organisation at a particular time. It is hoped that this document can, therefore, be used as a basis for ongoing discussion between the Crown and the organisations concerned, towards the development of documentation that meets the needs of both parties.
1 Notwithstanding this, the Crown's ownership interest in Crown entities does carry with it certain obligations that do not exist in the relationship between the Crown and independent suppliers of services.
2 Report of the Controller and Auditor-General on Governance Issues in Crown Entities, November 1996
3 Manual for Audit Service Providers, Office of the Controller and Auditor-General, February 1996
