Public sector governance — challenges and approach
The public sector constitutes the backbone of any government or society, and effective governance within the public sector can make a vast difference to how public sector entities perform and to the outcomes sought by a government. This makes it a compelling reason for public sector entities to periodically review and refine their approach to governance.
Accountability and responsibilities within the public sector
The Commonwealth, state and territory public sectors are comprised of multiple types of organisational forms and are generally established by an Act of Parliament administered by the executive government through the relevant Minister, or are deemed by legislation to be a public sector entity because they are controlled by another public sector entity or by a specific constituting Act for the purpose of fulfilling an identified public good. Ministers can take advice from a range of different sources; however, their primary advice on portfolio matters is the chief executive (Secretary or Director-General) of the government department(s) which report to them.
‘One size’ does not fit all
It is imperative that a public sector entity has regard to the law that creates it, and the policy and all relevant rules and directives of public administration within which it operates, as this can help ensure that an integrated governance framework is in place.
There is no single model of good governance for all public sector entities and there is no ‘one-size-fits-all’ approach. Different legal structures established for these entities have implications for the type of governance framework that is implemented by each entity. Those entities that are statutory bodies (including universities), or commercialised government-owned entities (including government and state-owned corporations, government business enterprises and government trading enterprises) will have a governing body, generally, but not always, called a board.
Interdependencies and complexities facing a public sector board
Generally, the ‘board’ of a public sector entity is required to consider the myriad of accountabilities and level of transparency enshrined in the entity’s constituting legislation and the public sector framework within which it operates. The board must also consider the complexities associated with the entity’s potential collaboration or interaction with other government agencies and Minister(s), as well as the common and statutory laws of fiduciary duties directors are subject to. There are also many instances where responsibility for achieving a state, territory or national outcome spans more than one national or state department or agency. These factors all provide significant challenges to those sitting on a public sector board. The accountabilities enshrined in government legislation or as prescribed by the relevant Minister provide a challenge to those private sector individuals seeking public sector board appointments without due consideration of the significant shift in the independence paradigm.
Governance principles for boards of public sector entities
Acknowledging these challenges, Governance Institute has released Governance principles for boards of public sector entities in Australia. The Principles and Recommendations are particularly relevant to Commonwealth, state and territory public sector entities that have governing boards but are not-for-profit entities.
Top tips from the guidance include:
- Clarify and document the public sector entity’s accountability to and relationship with the government and the portfolio Minister(s)
- Ensure that the roles and responsibilities of the board have been clearly defined and recorded, as well as the delegations of authority
- Ensure that the board adds value to the community and other stakeholders, by having clarity on the public sector entity’s long-term strategy; documenting the processes which inform the structure and composition of the board; developing processes to evaluate the board and management; and clarifying how board remuneration is determined and reviewed
- Develop, document and implement an ethical framework using appropriate codes, policies and practices and put in place structured processes to monitor conduct and professional behaviour
- Develop rigorous processes to manage and safeguard the organisation’s resources, including performance measurement processes
- Manage and safeguard knowledge and information sources and establish effective audit processes to provide effective stewardship of resources
- Develop an effective risk management framework to protect the public interest, including oversight mechanisms
- Put an effective communication framework in place, including the organisation’s strategy in regards to stakeholder engagement and processes for handling grievances and whistleblowers
- Ensure the organisations reporting requirements to the government have been documented and clarify how disclosure about the entity will operate.
You can download the Principles for free at /knowledge-resources/public-sector-governance/. We would be interested in hearing about your experiences of governance in the public sector.