Aratohu tāpiri — mā te poari tumu whakarae Supplementary guidance note — interdepartmental ventures

An interdepartmental venture is a new model of Public Service agency.  Public Service agencies are defined at section 10 of the Public Service Act 2020. They form part of the legal Crown, and operate under lawful instruction from ministers. They are distinct from other government entities that are legally separate from the Crown and operate at arm’s-length from ministerial control, such as Crown entities.

Like joint ventures in the private sector, the interdepartmental venture is used to bring resources together to contribute to a specific activity relevant to 2 or more portfolio areas. For example, an interdepartmental venture may be formed to:

• join up delivery of one or more functions that would otherwise be delivered separately by departments to provide more accessible services for New Zealanders
• allow for joint investment in an asset that will benefit multiple departments.

In practice, it operates like a separate department, though governed by a board rather than a single chief executive. Under section 36(1) of the Public Service Act 2020, the board is made up of existing chief executives of the departments relevant to the function of the venture (who also retain their substantive role as chief executive of their department). The remit of a venture is determined by the functions Cabinet allocates to it. The prime minister designates a minister who is assigned responsibility for the venture. Under section 35, Public Service Act 2020, members of the board are jointly responsible to that minister for the venture’s functions (this relationship could be managed by the chair of the board). This is similar to how a Crown Entity board operates.

Section 36(1), Public Service Act 2020 — New Zealand Legislation 

Section 35, Public Service Act 2020 — New Zealand Legislation 

The venture can hold assets, employ staff, enter into contracts and administer appropriations in the same way as a Public Service department. Ministers may either decide that new investment is needed to fund this venture, or that venture staff, assets and appropriations could be transferred from departments alongside any related functions being drawn into the venture.

Section 2, Public Finance Act 1989 — New Zealand Legislation

Figure 1: Structure of an interdepartmental venture

Background and objectives

A credible commitment by 2 or more organisations to share funding, staff and/or assets can ensure successful collaboration by providing stability and easing information flow between the organisations. In the private sector, a joint venture can be used to secure this type of commitment.
A joint venture is a business arrangement where 2 or more parties agree to contribute resources to do a specific activity, usually by creating a jointly owned company.

Public Service departments can’t enter into traditional joint ventures with one another, as they are not distinct legal entities but separate administrative units of the same legal entity (the Crown). This means that departments can’t enforce contracts with one another or hold separate ownership stakes in a company. This results in a commitment problem for Public Service departments attempting to join up frontline resources in response to a shared cross-cutting problem, or to join up services around citizens.

The interdepartmental venture was developed as a mechanism to formalise and strengthen joint working arrangements between departments through a legislated model, with the members of the venture board jointly responsible to the appropriate minister for the operation of the venture. While only departmental or departmental agency chief executives can be board members of an interdepartmental venture, the venture can still enter formal joint ventures or contracts with others outside the Public Service (for example Crown agents).

Interdepartmental ventures are used to consolidate service delivery functions while leaving strategic policy responsibilities with the individual partner agencies. The key uses of the interdepartmental venture model are to join up or align service delivery and/or regulatory functions where this makes sense, though an interdepartmental venture could also have an operational policy function related to its core purpose.

An interdepartmental venture may be useful:

• where there is a need for shared ownership of some assets and/or resources by two or more agencies
• for regional (one-stop-shop style) offices for the public service, with administrative staff, back office functions and facilities delivered through the joint venture
• as an administrative funding vehicle for collaborative initiatives.

An interdepartmental venture would work best where:

• there is a history of joint delivery between the agencies
• service provision is the most important way to group/divide agencies
• the services can easily be separated and transferred to another agency
• the potential gains and benefits justify significant disruption, upfront costs and potential exit costs.

Interdepartmental ventures may be appropriate for short-term flexibility, to trial new initiatives or realign resources in response to changes in the operating context or government strategy.

Joining up policy advice can be achieved more easily through the establishment of an interdepartmental executive board, which allows for a wider remit of agencies to be involved, and a servicing department to assist the board.

Because establishing a venture is in practice very similar to setting up a new department, agencies need to be clear that the benefits of the model outweigh the costs of establishing the venture. This model should not be used where:

• there is little overlap between services
• New Zealanders can navigate services without difficulty
• shared delivery can be established more easily through other means (for example, where co-location or a collective impact network is sufficient to generate the commitment from partner agencies to deliver joint services to the public).

Role of the board

An interdepartmental venture is a distinct organisation within the Public Service, much like a department, but rather than a chief executive at the head, it has a board of chief executives. This board is made up of the existing chief executives of departments relevant to the venture’s functions. Under section 33(3) of the Public Service Act 2020, ‘departments’ include departments, departmental agencies, the New Zealand Police and the New Zealand Defence Force. The board may decide to appoint a director to lead the work of the venture on a day-to-day basis. Under section 34 of the Public Service Act 2020, the board’s decision rights over the venture are identical to decision rights of departmental chief executives in regard to the day-to-day running of their departments. These could be delegated to the director where appropriate.

Section 34, Public Service Act 2020 — New Zealand Legislation 

Unlike an interdepartmental executive board, under section 67 of the Public Service Act 2020, the venture board is the legal employer of its staff, and has all the responsibilities of an employer including personnel matters (for example, appointments, transfers, personal grievances), and other associated responsibilities (such as health and safety).

Section 67, Public Service Act 2020 — New Zealand Legislation 

The chief executives on the board bring to the venture a strategic lens from their own department. The venture’s work should be aligned with the policies of those departments. The chief executives on the board will be responsible for ensuring the venture delivers its functions in a way that is aligned with the policies of their own portfolios, and works closely with the relevant departments.

Under section 35 of the Public Service Act 2020, the venture’s board reports directly to the venture’s minister, and the members of the board are jointly responsible to that minister for the operation of the venture. In practice, the board may decide that the day-to-day relationship with the minister is managed by a particular individual (for example, the chair of the board or the director). Chief executives on the board of the venture retain their usual responsibilities and reporting lines to their individual ministers for matters relating to the operation of their individual departments.

Section 35, Public Service Act 2020 — New Zealand Legislation 

Ministerial relationships

The responsible minister for the venture has the same decision rights over the venture as that of a responsible minister for a department. Like the board, they will be responsible for ensuring that the venture delivers its functions in a way that is aligned with the policies of the relevant portfolios, and working closely with the ministers of those departments.

Financial management and reporting

Under section 2 of the Public Finance Act 1989, an interdepartmental venture is treated as a department, and can therefore administer appropriations under section 7C of that Act. This also means that an interdepartmental venture has the same reporting requirements as a department, unless otherwise specified. This means the venture can either administer its own appropriation, or the chief executives on the board can allow the venture to use appropriations administered by their own department. If the venture administers its own appropriation, it is responsible to the appropriation minister for what is achieved with that appropriation (the Treasury website has detailed information about the responsibilities of an appropriation administrator.)

Section 2, Public Finance Act 1989 — New Zealand Legislation

A Guide to Appropriations — The Treasury

The venture’s board is responsible for ensuring the venture complies with the reporting requirements under the Public Finance Act 1989. A venture is required to provide its responsible minister with information on the venture’s strategic intentions (unless this requirement is waived by the Minister of Finance) and prepare annual reports for each financial year.

If the venture manages assets and liabilities it will need to include financial statements in its annual report, unless this requirement is waived by the Minister of Finance. Under section 45AB of the Public Finance Act 1989, a waiver may be granted to the venture only if the Minister of Finance considers the functions and operations of the venture and the materiality of the assets, liabilities, expenditure, and revenue of the venture do not justify the preparation of separate financial statements.

Section 45AB, Public Finance Act 1989 — New Zealand Legislation 

Further guidance on the financial management and reporting requirements of interdepartmental ventures is available on the Treasury’s website: https://www.treasury.govt.nz/publications/guide/public-finance-act-guidance-for-specified-agencies

Consultation

Te Kawa Mataaho Public Service Commission and the Treasury must be consulted about any proposal that might lead to the establishment of an interdepartmental venture.

Cabinet decision

Prior to establishing an interdepartmental venture, Cabinet decisions on the purpose of the venture, scope of work, functions and any appropriations the venture will administer, are required — as with any proposal to establish a new entity.

Order in Council

Once policy decisions have been made by Cabinet, an Order in Council is required under section 33 of the Public Service Act 2020 to establish the venture. It must state:

• the name of the venture
• the departments with responsibilities that relate to the services or regulatory functions that will be delivered or carried out by the venture (those departments whose chief executives will comprise the board of the venture).

Section 33, Public Service Act 2020 — New Zealand Legislation 

Board composition

Under section 36 of the Public Service Act 2020, the chief executives of the departments listed against the venture (in the Schedule) are the members of the board. The Public Service Commissioner will designate one of the members as the chairperson of the board. Before designating the chairperson, the Commissioner must invite the Minister for the Public Service and the minister for the board to identify any matters the Commissioner must consider.

Section 36, Public Service Act 2020 — New Zealand Legislation 

Transfer of staff and functions

Ministers may either decide that new investment is needed to fund this venture, or that venture staff, assets and appropriations could be transferred from departments alongside any related functions being drawn into the venture. Section 86 of the Public Service Act 2020 provides that where functions are transferred from one public service agency to another, it is possible to transfer the employees carrying out those functions to the agency now carrying out that function. (This was not possible under the previous legislation, the State Sector Act 1988, so transfers previously required roles to be disestablished, with a separate offer and acceptance process taking place before employees could continue with their role in the new organisation).

Section 86, Public Service Act 2020 — New Zealand Legislation 

Operating procedures

Under section 37 of the Public Service Act 2020, the board of the interdepartmental venture must develop operating procedures, which are published online. These will set out the working arrangements between the board members, and will likely vary for each venture. They may include aspects such as responsibilities of the chair, how many members make up a quorum, when the board meets, any rules on delegating attendance, how agendas are established, and how decisions are made. They need to include provision for the Commissioner to assist in the resolution of conflict if there is a breakdown of relationships.

Section 37, Public Service Act 2020 — New Zealand Legislation