Objective

1. The objective of this paper is to agree the role of the Minister of Finance in respect of district Health Boards.

   Statement of the problem and the need for action

2. The Minister of Finance has a strategic role and responsibility for managing the Crown's overall financial position and its portfolio of assets and liabilities. Accountability for the overall stewardship of the Crown's financial position rests with the Minister of Finance.

3. From a Crown risk management perspective, the Minister of Finance will have a significant interest in the financial performance of the DHBs as the combined assets and liabilities of the DHBs will represent a very large component of the Crown's balance sheet ($2.5 billion). Also the financial performance of the DHBs has the potential to impact significantly on the Crown's overall financial position as it represents almost 20 per cent of total Government expenditure.

4. This paper considers options to enable the Minister of Finance to manage those risks.

   Feasible options to achieve desired objectives

5. The paper evaluates two options to enable the Minister of Finance to manage the fiscal risks of DHBs:
   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.

   Non-regulatory measures

6. If agreed the proposals would require the Ministry of Health to provide regular financial performance and risk evaluation information to the Treasury in order that the Minister of Finance may make an assessment as to the level of risk in individual district health boards.

   Regulatory measures

7. The proposals would incorporate the role of the Minister of Finance within the regulations of the New Zealand Public Health and Disability Bill, by setting provision for involvement should it be warranted by the level of risk.

   Statement of the net benefits of the proposals

8. The proposal will enable the Minister of Finance to manage fiscal risks while ensuring that the Minister of Health remains the responsible Minister for district health boards.

   Consultation

9. The following agencies were consulted in preparation of this paper: Treasury, Crown Company Monitoring Advisory Unit, and the State Services Commission.