EXECUTIVE SUMMARY

3. In order to identify the appropriate organisational arrangements for the "other agencies", Officials have considered the following:
   1. the entities' current ownership, corporate structure and accountability arrangements;
   2. the desired and appropriate degree of independence for the individual entities;
   3. linkages with key structural changes occurring in the health sector e.g. establishment of DHBs and changes to the Ministry of Health.
   4. potential liability and/or risk for the Crown;
   5. flexibility/durability of organisational form and the scope of the entities' activities;
   6. desired skill set of any Directors;
   7. need for legislation.

4. On the basis of these factors Officials reached the following conclusions:
   1. NZ Blood Service. The New Zealand Blood Service's functions should remain unchanged. Officials note that in fulfilling these functions the NZBS should be structured as a Crown Entity, and within this model either as a Crown Company (Treasury preferred option) or a Statutory Corporation (MoH and SSC consider that either model could apply).

   2. Health Benefits Ltd. HBL should remain as a Crown Entity (with its current limited liability company status) until a review of its functions by MoH, HFA and Treasury is completed by 30 September 2000, at which time recommendations on its long term functions and HBL's long term future organisational form will be determined.

   3. PHARMAC. Pharmac's functions should remain unchanged. Officials note that in fulfilling these functions Pharmac should be structured as a Crown Entity (and within this model could either be structured as a Crown Company (Treasury preferred option) or a Statutory Corporation (MoH and SSC consider that either model could apply).

   4. Residual Health Management Unit. RHMU should continue with its current set of functions. These functions should be reviewed by MOH, Treasury and CCMAU and the outcome of this review reported to the Ministers of Health and Finance by 30 April 2001.

   5. National Health Committee. NHC should continue with its current set of functions. The NHC should remain as an independent advisory committee to the Minister of Health, but should not be included in legislation, to allow flexibility around its future role.

5. Treasury considers the key decision about the New Zealand Blood Service and Pharmac is whether or not they should be Crown Companies or Statutory Corporations. Treasury supports Pharmac and the New Zealand Blood Service continuing with their existing company form because:
   1. Both agencies function well in their current Crown Company form. If the Crown Company form is viable, there is no benefit in applying Statutory Corporation form, which is useful for cases where specific legislation is necessary to provide customised design.
   2. Statutory corporation form requires most features of the agency to be set out in legislation, replicating desirable features of a Crown Company. This runs the risk of error and delays in legislation.
   3. A Crown Company form may be more attractive to individuals with business skills because it conveys similar status and responsibilities as a director of a private company.
   4. A Crown Company potentially offers more flexibility in changing the future functions or directions of both entities.
   5. There is greater common understanding about how companies will behave, and vigorous bargaining for the best price or services is more likely to be acceptable.

6. It is the Ministry of Health's and SSC's view that either the company model or the Crown entity (Statutory Corporation) could equally apply in enabling PHARMAC and the NZ Blood Service to effectively and efficiently carry out its functions.

7. Detailed discussion on each of the agencies is attached as Appendix 1.

BACKGROUND

8. In determining the most appropriate governance arrangements for the "other agencies" Officials considered the applicability of the Government Department, SOE and Crown Entity models. Crown Entities are further divided between (a) Crown Company, (b) Trust and Corporations Sole and c) Statutory Corporations (Crown Agent, Independent Crown Entity and Autonomous Crown Entity).

9. Officials' analysis has focused on the Crown Company and Statutory Corporation models. The alternatives (ie SOEs and Trusts and 'Corporations sole') were not seen as appropriate for any of the entities because:
   1. SOEs are only appropriate where there are clear commercial objectives

   2. Corporations sole are only used in exceptional circumstances where it is desirable to have a statutory officer established outside the Crown whose office has the powers of a legal person.

   3. Trusts are unsuitable for entities intended to carry out Government policy and which are subject to ministerial direction, and lack a statutory basis to carry out regulatory functions.

10. A full discussion of the differences between the governance models is outlined in Appendix 2. This includes:
    1. an overview of the current developmental work occurring within the "Crown Entities Initiative; and
    2. key differences between Crown Companies and Statutory Corporations.