1. This paper proposes a number of arrangements regarding the composition of DHB Boards, the function of Boards and electoral process issues. It builds on advice submitted previously on DHB Governance and approved by Cabinet (CAB(00)M11/1A(3) refers).

EXECUTIVE SUMMARY

2. This paper provides further advice on a range of DHB governance issues and makes recommendations for inclusion in new legislation.

3. Key recommendations are that:
   1. DHB Boards should be established with six elected members, and up to five appointed members
   2. a quorum for DHB Boards should be half the number of members of the Board where that number is even, and a majority of the members where it is odd
   3. DHB Board members should be remunerated according to the Cabinet fees framework
   4. recourse to the Ombudsman and judicial review provide sufficient protection and appeal mechanisms for elected DHB Board members who believe that they have been dismissed without just cause and an appeal authority for this purpose is not required
   5. an employee of a DHB should be required to resign their employment if successfully elected to that DHB Board or if appointed by the Minister to that DHB Board
   6. under local government legislation (which Cabinet has decided will regulate the open meetings of DHBs) the media has the same access as members of the public to open board meetings
   7. the provisions of the Local Elections and Polls Act 1976 should apply to DHB elections, so far as they are applicable and consistent with other Cabinet decisions about DHB elections
   8. in order to ensure flexibility (pending the review of the local government electoral legislation) the electoral provisions for DHBs should be included in regulation as opposed to legislation
   9. draft DHB boundaries which are aggregations of Territorial Authority areas have been proposed. These will be the subject of further discussion with relevant HHS Boards, local authorities and iwi
   10. members of each DHB Board should be elected from the DHB district as a whole.

4. In recommending processes for DHB elections, board functions, etc., Officials have attempted to use existing processes where possible and allow Boards the ability to have as much control as is appropriate over their procedures. Officials have also been mindful of the need to keep processes as simple and pragmatic as possible.

BACKGROUND

5. Cabinet has considered advice on the high-level governance structure for DHBs and agreed on a number of key points (CAB(00)M11/1A(3) refers). Cabinet has also asked Officials to report back on:
   1. the number of DHB Board members
   2. mechanisms for establishing a quorum
   3. the remuneration of DHB Board members
   4. options for appeal by members dismissed from a Board
   5. the ability of DHB employees to stand for election to, or be considered for appointment to, DHB Boards
   6. restrictions on the media at open Board meetings
   7. the proposed electoral process
   8. the detail of DHB boundaries.

6. This paper provides that advice.

NUMBER OF BOARD MEMBERS

7. Cabinet has agreed in principle that DHB Boards should have a maximum of nine members but that the number of members on each Board may vary (CAB(00)M11/1A(3) refers). Cabinet has also agreed that DHBs will have a majority of elected members (CAB(00)M2/4 refers). Further advice on the number of Board members has been sought.

8. In order to balance the size of DHB Boards with issues of community representation, and Mäori representation in particular, it is proposed that each Board be established with six elected and up to five appointed members. This would bring the maximum number of members up to eleven.

9. The Minister should have the ability to influence the skill mix on the Board through appointing members, but it is not necessary for legislation to require the Minister to make a specified number of appointments. Five appointed members may not be required in all instances.

10. Further work being undertaken on the equitable representation of Mäori on DHB Boards will determine the number and type (elected or appointed) of Mäori Board members. Decisions on Mäori representation will obviously impact on the composition of the remaining members, and, potentially, on electoral processes.

MECHANISMS FOR ESTABLISHING A QUORUM

11. Cabinet has asked for advice on mechanisms for establishing a quorum, and a 'default quorum' (CAB(00)M11/1A(3) refers).

12. It is recommended that a quorum be half the number of members of the Board (irrespective of any extraordinary vacancies) where that number is even, and a majority of the members where it is odd. (Extraordinary vacancies are those where the member has died, resigned, or been dismissed by the Minister.)

13. This is how a quorum is established for local authorities and how it was established for the former Area Health Boards. It ensures that decisions are made by at least half the Board members.

14. The risk of persistent or tactical non-attendance at meetings can be dealt with by the meeting procedures which Boards adopt as well as through accountability mechanisms, and in particular the requirement that Boards are held collectively accountable to the Minister of Health.

15. In determining their meeting procedures, Boards may choose to make provision for a 'default quorum' but Officials do not consider that this should be part of legislation. A 'default quorum' could provide a mechanism where, following the failure a quorum to be reached at a meeting, a further meeting of the Board could automatically be notified to all members.

REMUNERATION OF BOARD MEMBERS

16. Cabinet has asked for advice on the process for determining remuneration of Board members, including the applicability of local government processes (CAB(00)M11/1A(3) refers).

17. Officials have explored three processes for setting the level of remuneration:
    1. local government processes, used to set fees for local authority members
    2. the Cabinet fees framework, used to set fees for many statutory bodies
    3. existing HHS processes, used to set HHS director's fees.

18. Table 1 provides a summary of the three processes and the indicative financial implications.

LOCAL GOVERNMENT	CABINET FRAMEWORK	HHS PROCESS
PROCESS
The Minister of Local Government makes a determination of maximum and minimum salaries and meeting allowances for each authority. Maximum salaries and meeting allowances are based on the size of the local authority's resident population. Local authorities determine individual remuneration within the maximum level set by the Minister. Different remuneration rates apply to Mayors/chairs, committee chairs and members.	The level of remuneration for members of Boards is determined by a framework which recognises the nature of the work the Board undertakes. DHBs would be classed as Management Boards, for which six different fee ranges apply. Responsible Ministers then set fees for individual Boards within the parameters of the framework. Responsible Ministers consult the State Services Commission on fees proposed outside the range of the framework. Remuneration for individual Board members is generally the same and is not left to the discretion of Boards.	The total pool available for salaries is calculated by applying an overall unit rate per director, Chair and deputy. This is approved annually by shareholding Ministers.· Unit rates are in six 'bands' to reflect the contribution required by directors of different companies.· Individual HHS director's fees are set by HHS Boards within this pool. Members are not necessarily remunerated at the same level.
AMOUNT
Maximum salaries and meeting allowances currently range from $3,400 and $105 for small TAs to $15,910 and $185 for large TAs.	Assuming level 3 management scale fees are applied, individual member fees are:Chair: $26,000 - $31,000Deputy chair: $16,250 - $18,750Members: $13,000 - $15,000	Individual ordinary director fees range between $15,000 to $27,000 per year depending on band. Special fees may also apply.
POTENTIAL COST FOR DHBs (based on an eleven member board)
Estimated annual cost of $3.8M for salaries and 12 meetings/annum. This cost rises to $4.1M if 24 meetings a year are held.	Estimated annual cost of between $3.3 - $3.9M. This assumes a commitment of 2.5 days/month.	Estimated annual cost (of ordinary fees) of $5.0M (this is based on the mid point in the range of bands for directors' fees) and ranging between $3.8M and $6.9M. This assumes a commitment of 2-3 days/month.

Table 1: Summary of remuneration processes

19. The local government framework is based on a mixture of meeting fees and a salary, which recognises that members undertake work outside their meeting duties. The Cabinet fees framework and the HHS framework consist of a salary which is based on the expectation of two to three days work a month, including attendance at meetings.

20. With any of these arrangements, DHB Chairs and deputy Chairs should be paid a higher salary than members. A loading of double for Chairs and one-and-a-quarter for deputy Chairs has been assumed in the above calculations, if these fees are not already set.

21. While the above fees are only indicative, Officials consider that the Cabinet fees framework provides the best remuneration process. This process has been developed for the remuneration of members who sit on committees, boards and other bodies in service to the Crown, and is therefore ideally suited for the purpose of remunerating DHB Boards.

22. Officials consider that the local government remuneration framework is less applicable to DHB Boards. This framework, in contrast with the other two described above, imposes no 'cap' on annual expenditure. Further, the fees offered may not encourage people with the most appropriate skills to sit on DHBs, and paying for each meeting provides poor incentives. The local government remuneration process is also being reviewed by the Department of Internal Affairs and may change. In this event, the remuneration framework for DHB Boards would need to be reviewed again (if it were adopted for DHB Boards).

23. The HHS directors framework is similar to the Cabinet fees framework, but as HHSs are being disestablished there seems little point in continuing their fees structure. Using the Cabinet framework reinforces the public nature of DHB Boards.

24. Cabinet has agreed that the Minister of Health will have the ability to dismiss individual appointed members at will, and to dismiss elected members for just cause (CAB(00)M11/1A(3) refers). Cabinet has asked for advice on options for appeal by (elected) members dismissed from a Board.

25. In all instances of dismissal the Minister of Health would need to be satisfied that the grounds for dismissal were well-founded and substantiated. The grounds for dismissal of elected members will be included in legislation. It would be possible for the Minister of Health to Gazette the dismissal of elected Board members. Officials do not consider, however, that this needs to be a requirement in legislation.

26. Individuals who believe that they have been dismissed without just cause from a Board are able to make a case and complain to the Ombudsman. This follows from the function of the Ombudsman, which is to investigate any decision or recommendation made relating to a matter of administration and affecting any person or body of persons. The Ombudsman will make recommendations, but cannot make binding rulings.

27. Aggrieved dismissed members may also seek a judicial review by a High Court Judge, since the decision to dismiss a member is a statutory decision (that is, a decision by a person authorised by statute to make such a decision). The right to judicial review is set out in the New Zealand Bill of Rights Act 1990 and the Judicature Amendment Act 1972, which also sets out the procedure for a judicial review.

28. It would be possible to legislate for an appeal authority to be established to review decisions made regarding the dismissal of elected members of DHBs and prevent the Ombudsman considering cases of dismissal. Officials consider that establishing such an appeal authority is not necessary, and that recourse to the Ombudsman and judicial review provide sufficient protection and appeal mechanisms for elected DHB Board members. An appeal authority would also lead to costs associated with establishing and servicing an authority (both to the Crown and to the appellant).

CONFLICTS OF INTEREST AND DHB EMPLOYEES STANDING FOR ELECTION OR APPOINTMENT

29. Cabinet has previously agreed that people should declare any conflicts, or potential conflicts, of interest before accepting nomination for election to a DHB (CAB(00)M11/1A(3) refers). Cabinet has also agreed that Board members be required to disclose any actual or potential conflict of interest to the Board and not participate in any Board discussion or decision relating to the conflict after the disclosure is made (CAB(00)M11/1A(3) refers). Officials consider that the requirement to declare conflicts of interest and to take no part in any deliberation or decision of the Board relating to that matter, provides enough of a safeguard in managing conflicts of interest. In particular, Officials do not consider that it is necessary to refer to the Local Authorities (Members Interests) Act 1968.

30. Further advice was sought about whether DHB employees should be able to stand for election, or be considered for appointment, to DHB Boards.

31. Preventing DHB employees sitting on the Board which employs them would make it difficult for such employees to exercise their right to stand for election, may limit their income (by requiring that they resign in order to sit on the Board) and may reduce the pool of skilled people available for Board membership. Reducing the pool of skilled people is a particular issue for Mäori.

32. Officials consider, however, that DHB employees sitting on the Board which employs them would be subject to constant and very considerable conflicts of interest. For example, the Board would be considering and making decisions on employee relations, strategies affecting conditions of employment for Board employees, and the appointment, conditions of employment, and performance, of the Board's chief executive. There would, therefore, be considerable, and ongoing, disruption to the Board's normal functioning.

33. For this reason, Officials consider that an employee of a DHB should be required to resign their employment if successfully elected to that DHB Board or if they accept appointment by the Minister to that DHB Board. This should not, however, restrict DHB employees from being elected onto, or being appointed, to a DHB Board which does not employ them (subject to the criteria outlined in previous advice on DHB Governance).

34. It would also be possible to restrict all people who contract with a DHB Board from being members of that DHB Board (for example, general practitioners). Given the broad nature of a DHB's responsibilities to provide, or ensure the provision of services, for their population, restricting Board membership in this way would, however, result in a limited number of people with the appropriate skills being able to be members of a DHB Board. The problem of a limited skill-set would be considerable in DHB districts where the population is small.

35. Officials consider that people who contract with a DHB Board should not be restricted from being members of that DHB, but that, as discussed above, DHB employees should not be able to be members of the DHB Board which employs them.

36. Ministry of Health employees (and all other public servants) are required to comply with the Public Service Code of Conduct and to refrain from conduct which might conflict with their duties as a public servant. In these circumstances, they might have to resign their employment if elected to a DHB.

37. Cabinet has previously agreed that Board meetings be open to the public, subject to the normal restrictions applied to local authority meetings (CAB(00)M11/1A(3) refers). Cabinet also directed Officials to provide further information on how restrictions on the media operate at open board meetings.

38. Meetings of City Councils and District Councils are subject to the Local Government Official Information and Meetings Act 1987. This Act states that every meeting is open to the public, except in specified circumstances. It is proposed that the sections of this Act which refer to meetings (sections 45 to 54) will be used in the DHB legislation. Cabinet has agreed that standard provisions related to procedural matters for Boards will be included in the DHB legislation or constitution (CAB(00)M11/1A(3) refers).

39. The Local Government Official Information and Meetings Act makes no distinction between the news media and the public. Therefore any restrictions on media attendance at Council meetings are the same as those on members of the public. Unless so restricted, the media are entitled to attend any meeting, or part of any meeting, and may get copies of agendas and associated reports related to the meeting. It is likely that the local newspapers will send a reporter to each Board meeting.

40. The Act does, however, give a number of grounds on which a Board may exclude the public (and therefore the media) from meetings and 'go into committee'. These include if this is necessary in order to protect people's privacy and safety, to prevent disclosure of commercially sensitive information, to protect Board employees from improper pressure or harassment, or if discussion of a matter would prejudice the maintenance of the law. Reports presented to the Board while it is in committee are also withheld from the public.

41. The Chair may also require a member of the public (including a member of the news media) to leave a meeting if their behaviour is likely to prejudice the orderly conduct of the meeting.

42. The Act states that, for the avoidance of doubt, any meeting of a local authority (or committee) at which no resolutions or decisions are made is not a meeting for the purposes of the Act. This provision will allow DHB Boards to hold workshops to discuss and debate issues without the public or news media being present.

43. Cabinet has previously agreed that DHB elections will be held triennially and concurrently with local body elections, and will use existing systems and processes to minimise transactions costs (CAB(00)M11/1A(3) refers). Cabinet has asked for further advice on the electoral process.

44. Local authority elections are held by postal vote throughout the country every three years on the second Saturday in October. The next elections are due to be held in October 2001.

45. Officials recommend that the provisions of the Local Elections and Polls Act 1976 should apply to DHB elections, so far as they are applicable and consistent with other Cabinet decisions about DHB elections.

46. Table 2 provides an overview of the process of local authority elections, as set out in the Local Elections and Polls Act 1976, and the proposed corresponding process for DHB elections.

LOCAL AUTHORITY PROCESS	PROPOSED DHB PROCESS
Councils pass a resolution to hold a postal vote.	Legislation ties the DHB process to the local authority process and therefore a postal vote would also be taken
Territorial Authority (TA) returning officers are appointed.	Supervising returning officer for DHB elections appointed in each DHB district. This might well be a role undertaken by a TA returning officer, rather than a separate position.
Residential electoral roll is compiled by the Electoral Enrolment Centre about 15 July	The roll for DHB elections will only include people resident within the district (so non-resident ratepayers would be excluded)
Rolls are made available for public inspection in council offices, libraries, Post Shops and in each ward. Any objections/amendments must be made by the 43rd day before the election when the rolls are closed .
Returning officers place public notices of election no less than 70 days prior to the election day. Notice includes the election date, types of election (eg Mayor, DHB etc), venues for receiving nominations and the closing date for nominations.
Nominations close on the 43rd day before the election. Candidates and not less than two nominees need to have completed the requisite forms and paid a deposit.
Returning officers determine:· which positions there will be an election for (ie more nominations than vacancies)· which positions there will be no election for (ie nominations equal vacancies)· which positions there will be extraordinary vacancies for (ie candidates are fewer than vacancies.
As soon as possible after nominations close returning officers give public notice within their district of the positions or type of election for which elections will be held (Mayor, DHB etc) and the candidates standing for those positions.
Voting papers are posted to electors between the 16th and 10th day before the election.
Voting closes at noon on election day (2nd Saturday in October) and a preliminary count done
Final count completed after special votes are included
Returning officers give public notice of election results and notify candidates