1993 Report of the Auditor General of Canada

1993 Report—Chapter 6

Exhibits 6.6—The New Zealand Management Model

The New Zealand management model may be described in terms of the relationship between the chief executive (previously permanent head) of each department and the minister(s) responsible for that department.

The minister has two roles: as purchaser of the department's goods and services (known as "outputs") and as owner of the department's assets.

The chief executive is responsible for the supply of agreed outputs and sound management of all resources. The minister is responsible for the broad social impacts of government activity (or "outcomes").

As purchaser, the minister contracts with the chief executive of the department for the delivery of an agreed quantity and quality of outputs; these agreements are formalized through the parliamentary appropriations process (the Estimates), the chief executive's annual performance agreements, and purchase agreements (a recent development that better specifies the nature of the outputs). As owner, the minister injects capital into the department through capital appropriations and seeks assurance from the chief executive that the resources of the department are managed with due regard for economy, efficiency and effectiveness.

An important concept is that outputs be offered on a competitive or "contestable" basis by departments. Contestability has two dimensions: an ability to compare outputs among departments, so that ministers may purchase the mix of goods and services from different departments that match the outcomes they seek; and an awareness of cost comparisons with producers of similar outputs in the private sector, so that ministers are free to purchase outputs from the private sector.

The need for cost measurement and control, and for financial information to support the minister's interests as owner and purchaser, has led to the introduction of accrual accounting in all departments. Accrual accounting has thus replaced often rudimentary cash-based accounting systems. Audited departmental financial statements are now issued on an accrual basis in annual reports.

The 1989 legislation that established the outputs and outcomes system also modified the appropriations and budgeting process. The previous line-item system (votes subdivided by program and input category) was replaced by votes for three types of appropriation: classes of outputs; transfer payments (payments on behalf of the Crown); and capital contributions. The Estimates and Budget contain annual appropriations for votes of government departments, including statements of projected performance and projected financial statements. After-the-fact performance information and financial statements are presented in departmental annual reports. These performance statements, together with the financial statements, are audited by the New Zealand Audit Office and tabled in Parliament.