Formats
Introduction#
1This circular sets out the requirements for developing and maintaining Performance Plans.
2Achieving a sustainable fiscal outlook while delivering efficient, effective, and responsive public services requires planning and oversight of fiscal risk and performance within and across government.
3Performance Plans give effect to Cabinet’s intention to have a better plan for spending over the medium-term by:
3.1providing assurance to Ministers that each department has a plan in place to deliver within set baselines, subject to Ministerial comfort with associated trade-offs (supports fiscal sustainability); and
3.2transparently and systematically surfacing financial sustainability, department performance and delivery risks to Ministers, identifying levers available to address these, and confirming the ongoing approach to managing them (active management and department performance).
4Information in Performance Plans will support ongoing Budget planning, assessment and decision making. Responsible Ministers must ensure the production of a Performance Plan for each of its departments.
5The Cabinet Expenditure and Regulatory Review Committee (EXP) (or a Cabinet committee established by the Prime Minister with a similar terms of reference) leads the scrutiny of Performance Plans. Performance Plans are intended to be reviewed and will be subject to EXP scrutiny periodically.
6For the purpose of this circular, ‘department’, is defined in the Public Finance Act 1989 with two exceptions - Performance Plans are not expected for interdepartmental executive boards or interdepartmental ventures. Ministers and chief executives should ensure that the requirements in this circular are conveyed to all departments and entities affected by this circular.
7In developing Performance Plans, departments are required to consider all public spending for which departments have responsibilities (including companies and entities that they have monitoring responsibilities for).
8The Speaker of the House will convey the requirements to the Office of the Clerk of the House and the Parliamentary Service.
9The requirements outlined in this circular should be viewed alongside the following (where applicable):
9.1other Cabinet Office Circulars, in particular Proposals with Financial Implications and Financial Authorities [CO (18) 2] and Investment Management and Asset Performance in Departments and Other Entities [CO (23) 9];
9.2Treasury Circulars and associated templates; and
9.3Treasury instructions.
Operational requirements#
Information requirements#
10The Treasury will issue a Treasury Circular setting out the specific information requirements and contents of Performance Plans, including the Performance Plan template. This circular will also set out the timeframe for the completion of Performance Plans.
11At a high-level, a Performance Plan must provide a plan for the department to deliver within set baselines with the associated risks and trade-offs, and explain the value and performance delivered by the department.
12A Performance Plan must therefore provide information about the department’s:
12.1purpose and resources, e.g. strategy, spend, income;
12.2impact, e.g. how the department is currently delivering value and plans to sustain or improve this in the future; and
12.3drivers of cost pressures and other risks to deliver its strategy within baselines, including a plan to manage these.
13To supplement annual financial planning provided through other processes (e.g. the Budget), information in Performance Plans should cover operating expenditure over the forecast period[1], with a longer-term view (minimum of 10 years) provided on capital expenditure’s long term drivers and investments[2]. This will enable a greater understanding of the medium-term fiscal sustainability of the department, in a way that can surface options for Ministers earlier than what may be possible if the focus is on what needs immediate funding in the upcoming Budget.
14To ensure a comprehensive overview of Government expenditure, information should be provided on all funding flowing to and through the department, including departmental and non-departmental spend.
15The expectation is that Performance Plans for departments with monitoring responsibilities for Crown companies and entities will include reporting on significant issues or opportunities related to the fiscal sustainability and performance of the monitored Crown companies and entities.
Relationship between Performance Plans and the Budget process#
16Ministers and departments need to understand the planning parameters and assumptions to apply when preparing Performance Plans.
17Unless formally confirmed by the Minister of Finance (or Cabinet), the default position is that Performance Plans are prepared on the basis of no new funding (i.e. operating within existing baselines). The Performance Plan should articulate how the department will manage within existing baselines, including the decisions made by the responsible Minister (working with Ministers responsible for the funding administered by the department) to ensure this.
18The Minister of Finance may, from time to time, adjust the planning parameters for individual departments based on priorities for the upcoming Budget. This will be communicated to the relevant Minister/s and department/s.
19Unless agreed through the Budget process, Performance Plans should not include new or additional funding. Further, Performance Plans do not constitute a Budget submission, initiative, or ‘bid’. Where a Performance Plan suggests further funding is needed, there is no guarantee that this funding will be provided.
20Paragraphs 26 to 29 below outline the roles and responsibilities of Cabinet and Cabinet committees in the review and scrutiny of Performance Plans. However, review and scrutiny of the Performance Plans does not constitute agreement to adjustments to a department’s finances, which must proceed via the decision-making processes set out in the Cabinet Office circular Proposals with Financial Implications and Financial Authorities [CO (18) 2].
21Once Budget decisions have been confirmed by Cabinet, Ministers and departments need to revise their Performance Plans to take these Budget decisions into account.
Relationship of Performance Plans with public accountability and planning documents#
22There should be consistency between the Performance Plan of a department and its related public accountability documents (e.g. the department’s information on strategic intentions), reporting on Government Targets (and associated delivery plans underpinning these) and internal business planning.
23The preparation of Performance Plans should draw on information contained in existing financial and performance planning documents. Similarly, public accountability documents may need to be updated to reflect finalised Performance Plans. However, the Performance Plans are not intended to be public accountability documents in their own right and there is no requirement for them to be audited.
Reporting and revision#
24To support regular Ministerial conversations about trade-offs and prioritisation, Cabinet or the delegated Cabinet committee will specify the frequency of review and reporting against Performance Plans. At a minimum, Performance Plans need to be reviewed and reported annually ahead of the Budget strategy each year. Treasury Circulars will provide detailed timeframes for the annual review process.
Assurance#
25There is no requirement for Performance Plans to be audited. However, Ministers and departments are encouraged to agree on an approach to provide assurance of the Performance Plan ahead of its submission for Cabinet consideration. For example, an assurance approach could include a role for the department’s Risk and Assurance Committee or an independent review required to ensure a high quality Performance Plan.
Roles and expectations of parties in the system#
Cabinet#
26Cabinet is ultimately responsible for the expectations and requirements set out in this circular, and for ensuring these remain fit for purpose.
27Cabinet is also ultimately responsible for Budget/fiscal allocation decisions. This can include considering Performance Plans (individually and in aggregate), and central agency advice on them, when making those financial allocation decisions.
Cabinet committees#
28EXP (or a Cabinet committee established by the Prime Minister with a similar terms of reference) leads the scrutiny of Performance Plans, although it may refer Performance Plans to other Cabinet committees for consideration.
29Cabinet committees required to review and scrutinise Performance Plans will support Cabinet to perform its role under this circular, by:
29.1considering the extent to which Performance Plans adequately canvass financial sustainability, risk, and performance matters;
29.2discussing prioritisation of resources and management of immediate or longer-term risks that arise through Performance Plans in order to meet the government's fiscal objectives;
29.3discussing trade-offs and priorities within, and between, Performance Plans to inform Budget planning and decisions by Budget Ministers and then Cabinet, but not make Budget decisions (refer to paragraph 19 to 21 for further information);
29.4providing recommendations to the Responsible Minister on areas where the Plans need to be revised (or clarified) without impeding Budget Minister decision-making (specifically in relation to discussion of cost pressures or new policy initiatives);
29.5encouraging Ministers to ensure that Performance Plans are finalised to reflect Cabinet committee recommendations, and to take into account Budget decisions so that they are financially sustainable;
29.6indicating when Cabinet committees would like to re-examine a Performance Plan and any specific actions they expect to be updated on, with support from central agencies.
Ministers#
30Ministers can create the conditions for better medium-term fiscal planning and performance (in respect of a department for which they have portfolio responsibility) by:
30.1understanding the government’s overall policy and fiscal agenda, and how the department can contribute to this;
30.2reinforcing expectations for the department’s delivery within set baselines, including working with other Ministers with responsibilities within that department to understand the overall funding situation for the department and making trade-offs where needed;
30.3reinforcing an expectation on the department of continuous improvement in the efficiency of delivery and effectiveness of activity, including understanding the ongoing need for government intervention and the various approaches to intervention;
30.4upholding and reinforcing an expectation of fiscal sustainability, which includes working with the Chief Executive to understand cost drivers, risks, and opportunities on the horizon, and putting in place appropriate plans;
30.5setting, monitoring, and ensuring accountability for the level of performance and impact agreed.
Responsible Minister#
31The Minister responsible for a department, or a lead Minister appointed by the Minister of Finance, will own the Performance Plan for that department. This will involve:
31.1engaging with Chief Executives to ensure the Performance Plan is completed and that there is an appropriate assurance process for ongoing preparation and review;
31.2agreeing on the Performance Plan, including any amendments to the Performance Plan;
31.3participating in Cabinet and Cabinet committee discussions on their Performance Plan, and taking forward agreed actions;
31.4revising their Performance Plan based on Cabinet and Cabinet committee recommendations, Budget decisions, or other matters that have resulted in the need for adjustment; and
31.5monitoring their Performance Plan in relation to major risks or issues, and holding the relevant Chief Executive to account for delivery against the Plan.
32Where a department has multiple appropriation Ministers, the responsible Minister is expected to engage with the other appropriation Ministers as part of agreeing the Performance Plans.
33When preparing Performance Plans, Responsible Ministers and/or Lead Ministers should have regard to ensuring expenditure is:
33.1delivering public goods, social insurance, regulating market failure and political choice; and
33.2based on data and evidence, with the expectation that programmes are stopped if they are not delivering results.
Chief Executives#
34Chief Executives can help create the conditions for improved fiscal sustainability and performance within the department by supporting Ministers to understand:
34.1how funding is currently spent, what it delivers, and its impact; and
34.2the choices for Ministers to improve outcomes for New Zealanders through improved effectiveness and efficiency, including by taking a longer-term view.
35Further, Chief Executives can support their Responsible Minister to perform their role under this circular by working with the Minister, relevant Ministers, and other relevant stakeholders, to develop the department’s Performance Plan, having appropriate processes in place to provide assurance, and supporting associated monitoring and reporting.
36Chief Executives will ensure departments adopt and apply, as good management practice, relevant central agency and system leader guidance.
Central agencies#
37Central agencies will provide a performance overview of each department as well as advise key risks, trade-offs, and opportunities impacting the overall fiscal strategy and performance of the public sector. Central agencies will support Cabinet committees with insights and with recommendations on actions, monitoring and prioritisation of Performance Plan reviews.
Rachel Hayward
Secretary of the Cabinet
Enquiries:
Performance Plans Team - [email protected]
Your Treasury Vote Team