Express law No. 05

19 August 2004

Government Response to the Uhrig Review of the Corporate
Governance of Statutory Authorities

The Government has adopted most of the recommendations
of the Review of the Corporate Governance of Statutory
Authorities and Office Holders. Ministers will review all
relevant bodies against the governance templates identified
in the Report. Also, responsible Ministers will prepare
a Statement of Expectation for most bodies, and the bodies
will respond with a Statement of Intent.

The Uhrig Review and Report

The review, headed by Mr John Uhrig, was commissioned
by the Government in November 2002. The objective of the
review was to improve the performance of statutory authorities
and office holders and their accountability frameworks.
The terms of reference required an examination of structures
for good governance, including relationships between statutory
authorities and the responsible Minister, Parliament, and
the public (especially business), and the identification
of policy options for improving performance and structures.

The review reported to the Government in June 2003. On
12 August 2004, the Government released its response to
the Report.

Most recommendations accepted; Reviews, and Statements
of Expectation and Intent

The Government has adopted all of the recommendations,
except the establishment of an Inspector-General of Regulation
to review regulatory authorities' systems and procedures
in administering legislation. Instead of an Inspector-General,
the Government has announced a timetable for the review
of all relevant bodies.

Portfolio Ministers responsible for statutory authorities
and other bodies will assess the bodies against the governance
templates identified in the Report, with a view to implementing
any necessary improvements. The assessments are to be completed
by March 2006.

Significantly, the Government has agreed that responsible
Ministers should prepare Statements of Expectation for
statutory authorities, and other bodies. In response, the
bodies are to prepare Statements of Intent, indicating
how they will meet those expectations. The Statements will
include the values central to the success of the body,
particularly those relating to its relationship with the
public. The Statements of Expectation and Intent will be
made public. The Report recognises, however, that the Statements
will have to be carefully formulated taking into account
each body's establishing legislation, and may not
be necessary in some cases (eg where the government does
not have a role in providing direction, or for government
business enterprises).

Governance templates

The Report outlines two main governance templates for
ideal corporate governance for statutory authorities.

  • Board
    Template: recommended only where the Government delegates
    full power to act (including power to dismiss the chief
    executive), such as for commercial
    operations.
  • Executive Management Template: recommended where the
    Government retains significant oversight, such as for
    regulatory or service delivery organisations.

The Government response
adopted the recommendation flowing from these templates
that Boards are appropriate only
where they can be given the full power to act.

Governance principles

After considering both private and
public sector practices, the Report identified good governance
principles. In
summary, the principles are as follows.

  • Owners, or their
    representatives, need to establish an understanding
    of success for the activity, including their expectations
    of performance.
  • There should be a governance framework
    that is appropriate for the entity given the nature
    of ownership and its functions.
  • To be successful, the body
    must have the necessary power, some of that power must
    be delegated, and the delegates must take responsibility
    and exercise
    the delegated power.
  • There should be clarity of roles within the governance
    arrangements of organizations to ensure that efforts
    are directed towards success and that
    responsibilities are performed in an efficient manner.
  • With responsibility
    there needs to be accountability.
  • For a board of directors
    to be effective, it must have the full power to act,
    including the ability to appoint, supervise and remove
    senior management
    as well as approve strategy.

FMA Act and CAC Act

The Government has also accepted the
recommendation that financial frameworks be based on
the governance characteristics
of the authority. Hence Budget-funded agencies,
whose money and property should be held by the Commonwealth,
typically
should be subject to the Financial Management
and Accountability Act 1997.

Where it is appropriate that
the authority be legally and financially separate from
the Commonwealth
and the authority
is best governed by a board, it should be subject
to the Commonwealth Authorities and Companies
Act 1997.

AGS Governance Forum and further briefing

AGS will be hosting
a Governance Forum later this financial year for which
a more detailed
briefing
will be prepared.
If you would like to be on our mailing list
for that forum, please email Michelle.Easte@ags.gov.au.

The
Report and Government Response are available at:
Report
Government Response

For further information please contact:

David Lewis

Counsel

T 02 6253 7053 F 02 6253 7304
david.lewis@ags.gov.au

Anne Kelly
Special Counsel
T 02 6253 7004 F 02 6253 7316
anne.kelly@ags.gov.au

Important: The material in Express law is
provided as an early, interim view for general information
only and further analysis on the matter may be prepared
by AGS. The material should not be relied upon for
the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the basis
of any of the material in this message.