1. This paper proposes that the role of the Minister of Finance in relation to District Health Boards, be on a risk based basis. In particular, this would involve:
   1. joint Ministerial approval being required for DHB decisions that involve significant cost or fiscal risk;

   2. the Minister of Health consulting the Minister of Finance on decisions that have a lower fiscal cost or risk; and

   3. iii. increased Minister of Finance involvement when a DHB represents a fiscal risk to the Crown through poor performance.

2. This risk based approach would require the Minister of Health to consult with the Minister of Finance on key accountability documents. In the event that there are performance concerns regarding the financial performance of DHBs the Minister of Finance would have an enhanced role.

EXECUTIVE SUMMARY

Overview
3. This paper recommends the role of the Minister of Finance in respect of district health boards. The Minister of Health would remain accountable for the performance of DHBs.

4. The paper considers two options:
   1. Option one: Share Responsibility for Ownership Performance

      This would provide the Minister of Finance with the best opportunity to manage fiscal risks within the sector but has some disadvantages in terms of transaction costs and accountability and therefore has not been recommended;

   2. Option two: Risk Based Approach

      This tailors the degree of involvement of the Minister of Finance depending on the extent of perceived fiscal risk. This is the recommended approach.

5. A third option was raised which involved splitting responsibility for purchase and ownership risk. However, this would represent a significant change from proposed policy and has therefore not been discussed in this paper.

6. While Option one provides the best risk management framework for the Minister of Finance there are disadvantages which lead officials to recommend option two (Risk Based Approach). It is noted that the risks posed by DHBs are such that the Minister of Finance would need to be more involved during the initial phase of DHBs than would be expected over time.

   BACKGROUND

7. Cabinet has agreed that in order to achieve their overall objectives Board members will be responsible and accountable to the Minister of Health [CAB (00) M11/1A(3) rec l refers]. Cabinet has [CAB (00) M 15/10 rec iii refers] requested advice on the role of the Minister of Finance in respect of DHBs, including provisions to be made in the enabling legislation. This paper identifies the risks that the Minister of Finance has an interest in and options for managing those risks.