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).
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.
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.
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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.