ISBN: (online) Internet

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2 ISBN: (online) Internet This document will be made available on the State Services Commission s internet site. The URL for this site is It will also be available on the Treasury s internet site. The URL is June 2009 Crown Copyright reserved.

3 Contents About this guidance 2 The purpose of the annual report 3 Key information to be included in the annual report 6 Performance information 7 Annual report content 9 Non-audited information 9 Audited information 15 Timing and process guidance 20 Glossary 26 Annex 1: Information for new, disestablished or restructured entities 26 Annex 2: Information for subsidiaries, multi-parent subsidiaries and Crown entity groups 27 Annex 3: Reporting requirements of Public Finance Act 1989 Schedule 4 organisations 29 Guidance and Requirements for Crown Entities: Preparing the Annual Report 1

4 About this guidance This guidance document sets out what is expected and/or required of Crown entities in preparing their annual reports in accordance with the Crown Entities Act 2004 (CEA), and with other legislative or administrative requirements and expectations. Some sections of this guidance will apply to organisations named in Schedule 4 of the Public Finance Act 1989 (PFA). A list of Schedule 4 organisations, and the relevant requirements that apply to them, appears in Annex 3. The CEA sets out the requirements for Crown entities annual reports in sections Reference should also be made to the entity s specific legislation, which may add to, or modify, these requirements. A checklist on page 5 outlines key requirements for Crown entities to comply with when preparing their annual report. It is not anticipated that this guidance will change every year. The Treasury will keep the guidance under review and amend it as required. Crown entities will be advised when amendments are made. Suggestions for revision or improvements are welcome and can be sent to performanceceinfo@treasury.govt.nz. Application of this guidance Throughout this guidance, references to Crown entity should be read as applying to statutory Crown entities (as defined under section 7(1)(a) of the CEA); and references to the board of a Crown entity should be read as also applying to the sole member of a corporation sole. Expectations and requirements for Crown entity companies (Crown research institutes, Television New Zealand Ltd, New Zealand Venture Investment Fund Ltd and Radio New Zealand Ltd), school boards of trustees and tertiary education institutions are different, and are therefore not covered in this document. Guidance on performance reporting For assistance in ongoing development of robust performance measurement refer to Performance Measurement: Advice and examples on how to develop effective frameworks 1. The Auditor General published a report on performance reporting in June 2008, which may also be useful, particularly Appendix II 2. Assistance from monitoring departments Crown entities should seek assistance on the preparation of the annual report from their monitoring departments in the first instance Guidance and Requirements for Crown Entities: Preparing the Annual Report

5 The purpose of the annual report An annual report is one of the most important means by which Crown entities discharge accountability to Members of Parliament and the public. It is a key resource for financial reviews of the performance and current operations of each Crown entity that select committees conduct each year. Crown entities use resources provided by the public, deliver services to the public, and may also exercise statutory functions and powers given to them by Parliament that affect the public. Public and parliamentary interest lies in what has been done and achieved with those resources and powers, and whether they have been used wisely, prudently, in the public interest, and in accordance with the law. A good annual report can be a powerful way to give an account of how resources and powers were used and what was achieved in comparison to what was planned, and to promote better understanding and debate on how to improve future performance. By doing so, it has the potential to create greater public trust and confidence in the work of Crown entities. As well as their external accountability purpose, performance reports should reflect good management practice. Such practices involve clearly articulating strategy, linking strategy to operational and other business plans, monitoring the delivery of operational and business plans, and evaluating strategy effects and results. (Auditor-General, 2008) The annual report and the performance cycle The annual report is part of the strategic and outcome-based approach to entity planning, management and reporting, leading ultimately to better results for citizens. The annual report is an integral part of the performance framework. It is part of a continuous management cycle that involves reviewing actual results against stated intentions, and then feeding back into the next cycle of direction-setting, planning, implementation and review. There is useful guidance about performance management and reporting and what is expected of Crown entities available under the performance and accountability section of the Crown entity page Because performance management and reporting is ultimately about improving results for New Zealanders, a good measure of progress is the extent to which a Crown entity can demonstrate it has delivered improved results in a manner that is consistent with expectations of Ministers and the public. The CEA requires a Crown entity s annual report to disclose its progress against the measures and standards of its performance as set out in another key accountability document, the statement of intent (SOI) That said, entities Guidance and Requirements for Crown Entities: Preparing the Annual Report 3

6 should not feel constrained to report against only the measures and standards included in the SOI, particularly if those measures and standards were incomplete or under development. The focus should be on providing a coherent account of what has been done and achieved in the year, and explaining variations between planned and actual achievement. 4 Guidance and Requirements for Crown Entities: Preparing the Annual Report

7 Key information to be included in the annual report Below is a list of the requirements for Crown entity annual reports in the Crown Entities Act Not all of these items apply to all Crown entities. Consult the relevant reference in the guidance for more details. Section Information required to be included in the annual report Page 151(2) Information to enable an informed assessment of performance 8 151(1)(f) Directions issued by Ministers 9 151(1)(g) Compliance with EEO policies (1)(k) Other matters relating to the entity s performance (1)(h), 152(1)(a),(b) Remuneration to board/committee members (1)(h), 152(1)(c) Number of employees earning over $100, (1)(h), 152(1)(d) Compensation and other benefits (1)(i) Disclosure of ultra vires transactions with natural persons (1)(j) Permission to act despite being interested in a matter (1)(c), 154(1), (3)(a) Specific information to be included in the annual report covered by the Audit opinion Financial statements comply with GAAP (1)(c), 154(3)(c) Forecast financial statements for comparison (3)(a), (b) Adoption of NZ-IFRS (3)(b) Other financial information (1)(b), 153 Statement of Service Performance (2), 143 Exemptions from the Statement of Service Performance (1)(d), 155 Statement of Responsibility - signed by two board members (1)(e), 156 Audit Report 17 Other requirements 151(3) Annual report signed and dated by two board members Financial statements and annual report provided to the Auditor- General 150(1) Annual report provided to the responsible Minister (3) Annual report presented to the House (4) Annual report published within the correct timeframes (4) Annual report available publicly as soon as it is published Guidance and Requirements for Crown Entities: Preparing the Annual Report 5

8 Performance information Crown entities are encouraged to consider the following principles when thinking about what performance information to present in their annual reports. Critical aspects of performance Other than the mandatory audited statements, Crown entities should focus most of their reporting effort on the critical aspects of their performance. Performance measurement and reporting is not a cost-free exercise, and the reader should not be overwhelmed by a multitude of information without a clear sense of what the most important matters are. When deciding which aspects of performance should be given most attention in explaining achievements and progress, entities may find it useful to consider the significance of performance achievements and variations to intended performance in the context of: value for money the significance of the economic, social and environmental impact the importance to the overall success and future operational effectiveness of the organisation, and the financial magnitude of the output or intervention. Attributes of performance indicators For assistance in ongoing development of robust performance measurement refer to Performance Measurement: Advice and examples on how to develop effective frameworks 3. The State Services Commission and Treasury, with the support of the Office of the Auditor-General, have developed the performance measurement guide to help and encourage state sector agencies to critically assess their progress to date and to map out a clear path forward. The Auditor General published a report on performance reporting in June 2008, which may also be useful, particularly Appendix II 4.. Performance indicators presented in the annual report (or used for evaluative purposes in any forum) should be SMART (specific, measurable, attributable, relevant and timely), while avoiding measures that are at too detailed a level to be meaningful in the context of annual reporting. It may be helpful to include benchmarks of performance against similar organisations, both nationally and internationally Guidance and Requirements for Crown Entities: Preparing the Annual Report

9 Evaluative activity The Department of Prime Minister and Cabinet, Te Puni Kokiri, the Treasury, and SSC have developed a resource that entities can use when undertaking evaluative work for the annual report. Learning from Evaluative Activity - Enhancing Performance through Outcome-focussed Management 5 is a key resource to consider when developing and reporting against the measures and standards outlined in the SOI and annual report. It provides guidance on how, when, and where to use evaluative thinking to improve decisions on strategy and outputs. 5 This can be found at Guidance and Requirements for Crown Entities: Preparing the Annual Report 7

10 Annual report content Coverage The annual report is focused on giving an account of the Crown entity s performance. It encompasses the whole of the entity s business, including interests in other entities. If an entity is the parent of a Crown entity group, its annual report must also cover the activities performed by the group. With the exception of multi-parent subsidiaries, no other entity in the group needs to prepare an annual report. 6 The annual report covers the operations of the entity during the preceding financial year, which for most Crown entities is from 1 July to 30 June. Crown entities are encouraged to include comparative (trend) information from earlier years to give a fuller picture of long-term progress. There are occasions when the annual report may cover a longer or shorter period - such as when an entity is established or disestablished during the financial year. The reporting obligations and options for such entities are discussed further in Annex 1. Responsibility for the annual report An annual report must be in writing, be dated, and be signed on behalf of the board by 2 members, or, in the case of a corporation sole, by the sole member. [section 151(3) of the CEA] The expectation that Boards are involved in the annual report process is reflected by the requirement that the annual report is signed and dated by two of the Crown entity s board members. This requirement can be met by having the board members sign and date a simple statement to the effect that they are pleased to present the annual report of the entity, though normally the statement would also provide an overview of the entity s achievements and challenges during the financial year. Non-audited information Not all the information provided in the annual report requires a formal audit opinion. However, the auditor is required to undertake such work as is appropriate to give an opinion on the specific matters required by relevant legislation. The auditor will also address matters such as authority, accountability, performance, probity, and waste, as well as to confirm that the annual report as a whole is consistent with the audited statements and the substance of the underlying information. Therefore the auditor will comment, for example, where the Crown entity has not met legislative requirements, or 6 More information on Crown entity groups and multi-parent subsidiaries is included in Annex 2. 8 Guidance and Requirements for Crown Entities: Preparing the Annual Report

11 where the information provided elsewhere in the report is not consistent with the audited statements. It is important for the effectiveness of an annual report that readers can see the links between the audited statements and the other information provided on the entity s operations and performance, as well as the links between financial and non-financial information in the audited statements. Reporting on operations The overarching expectation of an annual report is that it provides sufficient information to allow the reader (particularly the primary readers, including Ministers, MPs and select committees) to make an informed assessment of the Crown entity s performance during the financial year. This expectation is explicitly reflected in the CEA. The annual report must provide the information that is necessary to enable an informed assessment to be made of the entity s operations and performance for that financial year, including an assessment against the intentions, measures and standards set out in the statement of intent prepared at the beginning of the financial year. [section 151(2) of the CEA] There is no prescribed format for reporting on an entity s operations and performance. Each Crown entity should determine a format that suits its particular organisation and that it believes will best promote understanding of its operations and performance. However, from a reporting perspective, it is sensible that the annual report reflect the framework of the SOI which is the plan against which the annual report provides an account of actual performance. The annual report must include an assessment against the relevant intentions, measures, and standards set out in the entity s SOI. This will generally encompass reporting against: the specific impacts, outcomes and objectives the Crown entity stated in its SOI that it was seeking to achieve or contribute to, and how it intended to conduct its operations to achieve those impacts, outcomes and objectives the entity s main performance measures and standards for assessing: - those impacts, outcomes and objectives, and - the organisational health and capability of the entity, and any other matters discussed in the SOI as being necessary to understand the entity s performance. The relevant intentions, measures and standards are those indicated in the SOI as applicable to the financial year in question. Forecast figures from the SOI should be included for comparison, and where there is a marked Guidance and Requirements for Crown Entities: Preparing the Annual Report 9

12 difference between forecasts and actuals this should be discussed in the annual report. For those SOI intentions and standards that are set only for future years, the entity should look at whether it can nonetheless report on progress made to date towards meeting those intentions or performance standards. In order to enable the reader to make an informed assessment of a Crown entity s performance, it may need to continue the development of its performance indicators after the SOI is published. We therefore encourage entities to include new information and indicators in their annual report where this is meaningful (that is, not inappropriately detailed for such reporting). This also applies in respect of any new services funded, functions acquired, and any major evaluative activity performed during the year. Annual reports should note any major evaluative activity started if entities are not at a stage to report on completed findings. Crown entities should ensure that non-audited information in the annual report is consistent with the statements that are required to be audited and the substance of the underlying information. While the auditor is required to attest only to the audited information, they have a responsibility to consider whether other information in the annual report is consistent with the audited information and may therefore raise questions on other matters in the annual report. Directions issued by Ministers An annual report must contain in respect of the financial year to which it relates any direction given to the entity by a Minister in writing under any enactment during that financial year. [section 151(1)(f) of the CEA] Responsible Ministers can direct a Crown Agent to give effect to, or an Autonomous Crown entity (ACE) to have regard to, Government policy. Ministers do not have the power to direct an Independent Crown entity (ICE) or a Crown entity company to have regard or give effect to a government policy unless the entity s own act specifically provides for this. Responsible Ministers can also direct a Crown entity to amend certain information in the SOI, including the nature and scope of the entity s activities, and its statement of forecast service performance (section 147 of the CEA). As well as the directions outlined above, Crown entities are also required to disclose any whole-of-government directions made jointly by the Ministers of Finance and State Services that affect the entity. The first such direction, 10 Guidance and Requirements for Crown Entities: Preparing the Annual Report

13 Direction regarding all-of-government shared authentication services, was presented to Parliament on 22 July Equal employment opportunities An annual report must contain in respect of the financial year to which it relates information on compliance with its obligations to be a good employer (including its equal employment opportunities programme). [section 151(1)(g) of the CEA] A Crown entity should not simply state in its annual report that its obligations to be a good employer have been met and that it has an EEO programme in place. There needs to be some demonstration of this or a link to evidence that supports their meeting good employer obligations. 8 Other matters An annual report must contain in respect of the financial year to which it relates any matters that relate to or affect the entity s operations that the entity is otherwise required, or has undertaken, or wishes to report on in its annual report. [section 151(1)(k) of the CEA] Crown entities sometimes make voluntary commitments to provide specific information in their annual reports. For example, some entities report on a triple bottom-line basis. In addition, an entity may have specific reporting obligations imposed by other legislation or government requirements. It will need to comply with these when preparing its annual report. Entities that were required to have a statement about prompt payments in their Statement of Intent should report against this in their Annual Report A3A800CD7569/89821/DBHOH_PAP_16939_6114.pdf The EEO Commissioner s guidance around good employer obligations can be found at Guidance and Requirements for Crown Entities: Preparing the Annual Report 11

14 Further disclosures Disclosure of payments to members and employees Disclosure of remuneration to board and committee members The annual report must include for each [board and committee] member, the total value of the remuneration (other than compensation or other benefits referred to [below] in paragraph (d)) paid or payable to the member in his or her capacity as a member from the entity during that financial year. [section 152(1)(a) and (b) of the CEA] 9 Disclosure of employee remuneration The annual report must include the number of employees to whom, during the financial year, remuneration (other than compensation or other benefits referred to [below] in paragraph (d)) was paid or is payable in their capacity as employees, the total value of which is or exceeds $100,000 per annum, and the number of those employees in brackets of $10,000. [section 152(1)(c) of the CEA] Disclosure of compensation or other benefits The annual report must include the total value of any compensation or other benefits paid or payable to persons who ceased to be members, committee members or employees during the financial year in relation to that cessation and the number of persons to whom all or part of that total was paid or payable. [section 152(1)(d) of the CEA] In the case of a Crown entity group, the annual report must include the above disclosures for each Crown entity in the group. Disclosure of ultra vires transactions with natural persons Statutory Crown entities cannot act in a way that is contrary to, or outside the authority of, an Act of Parliament [section 19 of the CEA]. However, this requirement does not prevent a person dealing with a Crown entity from, in certain circumstances, enforcing a transaction that is a natural-person act 10 [section 20 of the CEA] Committee members who are also employees are exempt from this requirement. A natural person act is an act that a natural person of full age and capacity can do. 12 Guidance and Requirements for Crown Entities: Preparing the Annual Report

15 Each entity must report in its annual report each transaction it has performed in the year that was invalid under section 19 but enforced under section 20. A statutory entity must report, in its annual report, each transaction that the entity has performed in the year to which the report relates that was invalid under section 19 [of the CEA] but was enforced in reliance on this section. [section 20(3) of the CEA] Permission to act despite being interested in a matter A member who is interested in a matter relating to a Crown entity must not vote or take part in any discussion or decision of the board or any committee relating to that matter [section 66 of the CEA]. However, the chairperson of a Crown entity, or in particular circumstances the responsible Minister, may exempt one or more board members from this requirement if it is in the public interest to do so [section 68 of the CEA]. Where such an exemption is given, this must be disclosed in the annual report. The board must disclose an interest to which a permission relates in its annual report, together with a statement of who gave the permission and any conditions or amendments to, or revocation of, the permission. [section 68(6) of the CEA] Guidance and Requirements for Crown Entities: Preparing the Annual Report 13

16 Audited information The Auditor-General is the entity s auditor, although he or she will generally appoint another auditor to act on his or her behalf. The auditor is required to audit the annual financial statements and statement of service performance, as included in the annual report. More information on what must be provided to the Auditor-General, and when this must be provided, can be found on page 21. Annual financial statements Reporting for a Crown entity group A Crown entity that is a parent of a Crown entity group 11 must, in addition to its own financial statements, prepare consolidated financial statements in relation to the group for that financial year. Each member of the group must still prepare its own financial statements, even if that member is not required to prepare a full annual report. Statements required by GAAP The financial statements must comply with generally accepted accounting practice. [section 154(3)(a) of the CEA] The annual financial statements required under the CEA must be prepared in accordance with generally accepted accounting practice (GAAP), which is a defined term in section 136 of the CEA. This will typically require an entity to report: a statement of financial performance a statement of financial position a statement of movements in equity a statement of cash flows a reconciliation of net cash flows from operating activities to the net surplus or deficit in the statement of financial performance, and a statement of significant accounting policies. 11 For more information on subsidiaries and Crown entity groups, see Annex Guidance and Requirements for Crown Entities: Preparing the Annual Report

17 Financial statement comparisons GAAP requires entities to include comparative figures from the prior reporting period for all items in the financial statements. In addition, the CEA requires the inclusion of the forecast financial statements for the reporting period. The financial statements must include the forecast financial statements prepared at the start of the financial year, for comparison with the actual financial statements. [section 154(3)(c) of the CEA] International Financial Reporting Standards From 1 July 2007 Crown entities fully adopted the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). This means that GAAP is now the same as NZIFRS. When preparing financial statements, Crown entities should refer to the NZ IFRS compliant model financial statements prepared by Audit New Zealand. These are available at: Other financial information The financial statements must include any other information or explanations needed to fairly reflect the financial operations and financial position. [section 154(3)(b) of the CEA] This might include more specific disclosures (eg, a breakdown of consultant costs) or explanations of significant variances from forecast. Guidance and Requirements for Crown Entities: Preparing the Annual Report 15

18 Statement of service performance A statement of service performance reports on the extent to which intended levels of service and service performance were met during the period at an output class level. (1) A statement of service performance must: (a) be prepared in accordance with generally accepted accounting practice; and (b) describe each class of outputs supplied by the entity during the financial year; and (c) include, for each class of outputs: (i) the standards of delivery performance achieved by the entity, as compared with the forecast standards included in the entity s statement of forecast service performance at the start of the financial year [in the SOI]; and (ii) the actual revenue earned and output expenses incurred, as compared with the expected revenue and proposed output expenses included in the entity s statement of forecast service performance at the start of the financial year [in the SOI]. (2) A Crown entity need not prepare a statement of service performance in respect of outputs for which it has an exemption under section 143. [section 153 of the CEA] Outputs are final goods and services - that is, they are provided outside the entity. The statement of service performance should not report on internal entity activities or intermediate products consumed in-house. Outputs are usually defined in an entity s output agreement with its responsible Minister. Output classes are groups of similar outputs. The structure and descriptions of output classes are expected to be consistent with those already disclosed in the statement of forecast service performance in the entity s related SOI. Where a Crown entity receives funding from the Crown, the descriptions of output classes in the statement of service performance and annual report should be aligned with the description of the corresponding nondepartmental output expense appropriations in the Estimates of Appropriations. This facilitates reporting and accountability to Parliament for public money - it allows Parliament to be confident that the outputs supplied on behalf of, or to, the Crown by the entity reflect the scope of the appropriation and the amount appropriated. If consistency between the entity s statement and the Estimates cannot be shown, the Minister responsible for the appropriation and the department administering the Vote run the risk of breaching appropriations. 16 Guidance and Requirements for Crown Entities: Preparing the Annual Report

19 The CEA requires Crown entities to provide output performance information in their statement of service performance. The emphasis in preparing the annual report should be on providing a coherent account of achievement. Entities are encouraged to present information to make clear how outputs are impacting on outcomes and may therefore wish to include information on their contribution to achievement of impacts, outcomes and objectives in their statement of service performance. In 2009 the auditors will continue to provide detailed feedback on the statement of service performance. From the 2010 report onwards there will be a revised auditing standard for the statement of service performance. This revised auditing standard proposes that auditors report on whether service performance reports: provide an adequate basis for the assessment of service performance, and fairly reflect the entity s service performance. The New Zealand Institute of Chartered Accountants has prepared a Technical Practice Aid on Service Performance Reporting, which entities may find helpful when preparing their statement of forecast service performance. 12 Exemption from the Statement of Service Performance Requirement exemption for certain outputs [section 143 of the CEA] The Minister of Finance may exempt any class of outputs from being included in a statement of service performance if the Minister is satisfied that it is: not directly funded in whole or part by the Crown in accordance with an appropriation, or by levies, fees or charges prescribed by or under any Act, or to be adequately reported on to Parliament in that financial year by a Minister, department or another public entity. An output class that the Minister exempts may include outputs that do not qualify under either of the two criteria above, as long as the non-complying outputs are of insignificant value. Any output classes that were exempted from the statement of forecast service performance (in the SOI) need not be included in the statement of service performance (in the annual report) Volume_files&Template=/CM/ContentDisplay.cfm&ContentID=6971 Guidance and Requirements for Crown Entities: Preparing the Annual Report 17

20 The statement of service performance must include a statement of any exemptions granted. If all of the output classes are exempted, the annual report only needs to include a statement to that effect. Where a Crown entity believes that it may qualify for an exemption from including one or more output classes in its statement of service performance, it should approach its monitoring department in the first instance. Statement of responsibility The statement of responsibility must: (a) contain a statement of the signatories responsibility for the preparation of the financial statements and statement of service performance, and for the judgements made in them; and (b) contain a statement of the signatories responsibility for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial reporting; and (c) contain a statement that, in the opinion of the signatories, the financial statements and statement of service performance for the financial year fairly reflect the financial position and operations of the Crown entity; and (d) be dated and signed on behalf of the board by 2 members, or, in the case of a corporation sole, by the sole member. [section 155 of the CEA] The statement of responsibility accompanies the annual financial statements and statement of service performance. It is an explicit and detailed statement of the Board s responsibility for these other statements - both of which are audited by the Auditor-General. Audit report An annual report must contain the audit report. [section 151(1)(e) of the CEA] The Auditor-General, or the appointed auditor, is required to provide an audit report for inclusion in the Crown entity s annual report. The legislative timetable for the audit is explained in the next section. The auditor forms an opinion as to whether the financial statements and supplementary schedules comply with GAAP and fairly reflect: the financial position of the reporting entity as at the balance date the results of the reporting entity s operations and cash flows for the year ended on that date the reporting entity s service performance achievements measured against the performance targets adopted for the year ended on that date, and 18 Guidance and Requirements for Crown Entities: Preparing the Annual Report

21 any assets, liabilities etc managed by the Crown entity on behalf of the Crown. The auditor plans and performs the audit so as to obtain reasonable assurance that the financial statements do not have material misstatements, whether caused by fraud or error. The auditor also forms an opinion as to whether or not the Crown entity has complied with its legislative reporting requirements. The audit procedures generally include a determination of whether significant financial and management controls are working and can be relied on to produce complete and accurate data. Guidance and Requirements for Crown Entities: Preparing the Annual Report 19

22 Timing and process guidance Timing The timeframes below summarise the processes required by sections 150 and 156 of the CEA and outlined in this guidance. Variations to the timeline for recently established or disestablished entities are discussed in Annex 1. Timetable 1 - assuming House is in session and has not been dissolved for the general election (see page 22) Action A - Provide annual financial statements and statement of service performance to the Auditor-General [section 156(1)(a)] B - Provide draft annual report to Auditor-General [section 156(1)(b)] C - Receive audit report from the Auditor General [section 156(2)(b)] D - Provide annual report to responsible Minister [section 150 (1)(b)] E - Responsible Minister presents annual report to the House [section 150(3)] F - Crown entity publishes the annual report [section 150(4)] Final Date By 30 September (within 3 months of the end of the financial year - 30 June) By Early October By 31 October Within 15 working days of C Within 5 working days of D Within 10 working days of D Timetable 2 - assuming House is in not session and has been dissolved for the general election (see page 22) Action A - Provide annual financial statements and statement of service performance to the Auditor-General [section 156(1)(a)] B - Provide draft annual report to Auditor-General [section 156(1)(b)] C - Receive audit report from the Auditor General [section 156(2)(b)] D - Provide annual report to responsible Minister [section 150 (1)(b)] E - Crown entity publishes the annual report [section 150(4)] F - Responsible Minister presents annual report to the House [section 150(3)] Final Date By 30 September (within 3 months of the end of the financial year - 30 June) By Early October By 31 October Within 15 working days of C Within 10 working days of D On second day of the meeting of the new Parliament 20 Guidance and Requirements for Crown Entities: Preparing the Annual Report

23 The audit process (1) A Crown entity must forward to the Auditor-General: (a) its annual financial statements, statement of service performance, and any other information that the Auditor-General has agreed, or is required, to audit within 3 months after the end of each financial year; and (b) its annual report in a timely manner to enable the Auditor-General to review that report before providing the audit report required under subsection (2)(b). (2) The Auditor-General must: (a) audit the statements referred to in subsection (1)(a); and (b) provide an audit report on them to the Crown entity within 4 months after the end of each financial year. [section 156 of the CEA] A Crown entity must provide the Auditor-General (or the appointed auditor) with its annual financial statements and statement of service performance by the end of September. The auditor must then audit those statements and provide an audit report on them by the end of October for inclusion in the annual report. Recently established or disestablished entities may have slightly varying requirements (see Annex 1). Style of the Annual Report There is no prescribed format for the annual report. However, from a reporting perspective, it is sensible that the annual report reflect the framework of the SOI which is the plan against which the annual report provides an account of actual performance. However, as the annual report is a key public accountability document designed to give Parliament a full and balanced view of the Crown entity's actual performance, the information should be set out in a way that is clear and accessible to these varied audiences. Annual Reports should be plain in style, concise, relevant, accessible, and focussed on meeting the needs of Ministers and Members of Parliament. Output classes in the annual report should be aligned with those in the statement of intent and in the Estimates of Appropriations. Guidance and Requirements for Crown Entities: Preparing the Annual Report 21

24 Presenting the annual report to the House A Crown entity must provide the [annual] report to its responsible Minister no later than 15 working days after receiving the audit report. [section 150(1)(b) of the CEA] A responsible Minister of a Crown entity must present the entity s annual report to the House of Representatives within 5 working days after receiving the annual report or, if Parliament is not in session, as soon as possible after the commencement of the next session of Parliament. [section 150(3) of the CEA] Crown entities have 15 working days 13 from the time the audit report is provided to finish and print their annual report and provide it to their responsible Minister so that the Minister can present it to the House. It can be useful to provide the monitoring department with a near-final copy so that the Minister can be briefed on key issues in the report before it is presented to the House. The CEA provides that reports may be presented to the House on any working day, whether or not the House is sitting at the time, unless the House is not in session. 14 Requirements for the printing and presenting of annual reports are outlined in the 2006 Office of the Clerk circular Presentation of Papers to the House. 15 Variation possible in election year The House is in session until formally dissolved for a general election. In an election year, it is possible that the House will not be in session at the time annual reports are due to be presented, and that therefore the annual reports cannot be tabled as envisaged in the first part of s 150(3). If the House is not in session at this time, the CEA provides that the reports must be presented as soon as possible after the commencement of the next Session of Parliament. The first opportunity to present these reports to the House after the election will be on the second day that the new Parliament sits Working day is defined in section 2(1) of the PFA to mean any day except Saturday, Sunday, Good Friday, Easter Monday, Anzac Day, the Sovereign s Birthday, Labour Day, Waitangi Day; and the day observed as anniversary day in Wellington; and a day in the period commencing on 25 December in one year and ending on 15 January in the next year. Timetable 1 on the page 20 outlines these dates. The circular covers requirements such as the size, number of copies and delivery requirements for papers presented to the House, and can be found at NZ/PB/Presented/Papers/e/1/c/00HOOOCPBPresentedPapersPapers1-Presentation-of-papers-tothe-House.htm, or by contacting the Office of the Clerk. Standing Order 14 refers. 22 Guidance and Requirements for Crown Entities: Preparing the Annual Report

25 The CEA provides that if the report cannot be presented to the House, the entity must publish the report not later than 10 working days after the annual report is received by the Minister. The timetable for presentation and publication of annual reports when the House is not in session is set out in Timetable 2 on page 20. Any questions on the presentation of reports should be directed to the Office of the Clerk (Bills Office), which manages the presentation process. Annual reports as Parliamentary papers Some Crown entity annual reports, once presented to the House, are treated as parliamentary papers and ordered to be published by the House. Such annual reports must conform to requirements for parliamentary papers, which have been promulgated by the Office of the Clerk. Under current requirements, parliamentary papers must be produced in A4 size and include the appropriate shoulder number in the top right-hand corner of the cover and title page. Shoulder numbers are issued by the Office of the Clerk (Bills Office). The title page should include the formal name of the Crown entity and the financial year to which the annual report relates. It should also indicate that it is presented to the House of Representatives pursuant to section 150(3) of the Crown Entities Act Entities are advised to contact the Office of the Clerk (Bills Office) if they are unsure whether or not their annual report is a parliamentary paper. Publishing the annual report A Crown entity must publish its annual report as soon as practicable after it has been presented to the House of Representatives, but in any case not later than 10 working days after the report is received by the Minister... [section 150(4) of the CEA] Whether or not the House orders the publication of the annual report, section 150(4) of the CEA requires Crown entities to publish their annual reports. The version published must be the version that was presented to the House. Electronic publication All Crown entities are encouraged to publish their annual reports electronically, according to the practice recommended in the New Zealand Government Web Guidelines at Guidance and Requirements for Crown Entities: Preparing the Annual Report 23

26 Note that the Auditor-General requires a disclaimer to be included with audited financial statements when published on websites. The text of the disclaimer is as follows: I, as Auditor-General, and my appointed auditors, accept no responsibility for any changes that may have occurred or may occur to financial statements audited by us in regard to the presentation of those financial statements on this web site. Our audit reports refer only to those financial statements named within a particular audit report. They do not provide an opinion on any other information that may have been hyperlinked to/from those audited financial statements. If readers of this web site are concerned about the inherent risks arising from electronic data communication, they should refer to the published hard copies of the audited financial statements to confirm the information. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Annual reports are public documents Annual reports are public documents. They are an important reference document for people both within and outside the Crown entity. Crown entities should therefore ensure that the report is available electronically as soon as it is published, and that they have sufficient printed copies to meet expected demand. Staff who are most likely to respond to public enquiries should be aware of the annual report and the expectation that it will be made available to the public. Previous SOIs and annual reports should also be available (eg, on Crown entities websites or via hyperlinks). The preceding year s SOI provides comparative context for the annual report. ISSN numbers There is no requirement for annual reports to have ISSNs. If a Crown entity does not presently have an ISSN for its annual report, it is not required to obtain one. If, however, a Crown entity already has an ISSN for its annual report, it may continue to use this. The ISSN for the annual report does not change between years, and should be used and printed on the cover in the bottom left-hand corner. There are a number of benefits to having an ISSN in terms of referencing and research. Crown entities which wish to obtain a number for their annual report should contact the National Library. 24 Guidance and Requirements for Crown Entities: Preparing the Annual Report

27 Glossary Capability Intervention Impacts Monitoring department Objectives Outcomes Outputs Standard What an organisation needs in terms of access to leadership, people, culture, relationships, processes and technology, physical assets, and structures to efficiently deliver the goods and services required to achieve the results sought by the entity - whether those results are set by reference to Government policy or by statute. Interventions include legislation, policies, transfers, programmes and service delivery arrangements. The contribution made to an outcome by a specified set of outputs, or actions, or both [section 2(1) of the Public Finance Act]. A department or agency that provides support to a Minister in carrying out his/her role and responsibilities in relation to Crown entities. These are not defined in the Public Finance Act so has its ordinary meaning of goal or aim. Its inclusion in the Crown Entities Act 2004 alongside impacts and outcomes recognises that not all outputs and activities are intended to achieve outcomes as that term is defined below. Some outputs and activities do not target a direct societal, economic or environmental effect, and their effectiveness should not be judged on that basis. Nevertheless, they can be important in the context of Crown entities' performance, and objectives will feature in the shaping of some entities' results-focused planning. Examples include expenditure for administrative or support services internal to the Crown (intra-government activities) and capital expenditure. A state or condition of society, the economy or the environment and includes a change in that state or condition [section 2(1) of the Public Finance Act]. Outputs are final goods and services - that is, they are supplied to someone outside the entity. They should not be confused with goods and services produced entirely for consumption within the Crown entity. Output classes are groups of similar outputs. A target or an intended level of performance within a stated timeframe. Guidance and Requirements for Crown Entities: Preparing the Annual Report 25

28 Annex 1: Information for new, disestablished or restructured entities First annual report of newly-established entities [section 45I of the Public Finance Act (PFA)] The Minister of Finance may exempt an entity that is established - or otherwise becomes subject to the requirement to provide an annual report for presentation to the House - within 4 months of the end of the financial year from the obligation to provide an annual report for that year. If such an exemption is granted, the entity must provide an annual report that covers the period from the date on which it was established until the end of that next financial year as soon as practicable after the end of the next financial year. Final annual report for disestablished entities [sections 45J and 45K of the PFA] A Crown entity that is disestablished prior to the end of a financial year must, as soon as practicable after the date on which it is disestablished, provide a final report (as if the final report were an annual report) for the period up until that date. The Minister of Finance may approve the transfer of some or all of the responsibility for completing a final report to another party. If this occurs, the party which assumes responsibility must sign the statement of responsibility. A Crown entity that is disestablished has an extra 20 working days to provide its final report and have it audited, except that the start of this period is the date on which the entity is disestablished, not the end of the financial year. For example, if the entity was disestablished on 31 March, it would need to have provided the relevant information to the Auditor-General by around 28 July (ie, within 3 months plus 20 working days of disestablishment), with the audit report due by 28 August, and the audited report due with the responsible Minister within a further 15 working days. Transferred operations [section 45L of the PFA] The Minister of Finance may exempt a Crown entity that is being disestablished, and whose operations are transferred to another entity during the financial year, from the requirement to include a statement of service performance and a full report on its operations in its final report. If an exemption is granted, the information for the period up to the point of transfer must instead be included in the annual report of the entity to which the operations were transferred. Crown entities that wish to seek an exemption or transfer of responsibility under any of these sections are advised to contact their monitoring department in the first instance. That department should liaise with the Treasury. 26 Guidance and Requirements for Crown Entities: Preparing the Annual Report