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12 Apr 2012

Writing good governance frameworks: A how-to guide

by Vanessa McBride, Isabelle Reinecke

We show you how to write a strong public sector good governance framework using the Lighthouse Model.

With the release of Dr Kerry Schott's Interim Report on NSW Public Sector Management in late January 2012 and the creation of the NSW Public Service Commission in November 2011, good governance reform is an immediate public sector priority in NSW. Getting the basics right through writing strong good governance frameworks is now essential. Here, we show you how.

What is a public sector good governance framework?

A good governance framework is a conceptual structure and set of rules that outlines how an organisation is managed and controlled. Good governance frameworks should be developed for all new government bodies and programs, including departments, state owned corporations, and other non-departmental government agencies both at a general level and for each major project being managed by the agency. This will maximise the potential for government bodies to perform at an efficient level, achieve their objectives and enhance public confidence in their decisions, while still conforming to their obligations and responsibilities. It should also result in decisions being made at the appropriate level within the organisation.

Public sector good governance frameworks are built upon six underlying principles: accountability, transparency and openness, integrity, stewardship, efficiency, and leadership.

How to write an effective framework – what is the lighthouse model?

Pen poised – where do you start? The NSW Auditor-General has created a 'lighthouse model' of good governance, based on the ASX Corporate Governance Principles and Recommendations, and adapted to the public sector. This model reinforces how good governance can shine a light on what agencies and government are doing. Using the 17 key components of the Lighthouse Model is an ideal way of developing an effective public sector good governance framework.

We've developed some tips on how to draft your framework.

Lessons learnt: Action to take now

NSW Government agencies surveyed by the NSW Auditor-General in 2009 and 2011 performed well against several targets: creating strategic and business plans; board structure; financial reporting; and timely annual reports. However, many were graded poorly in connection with continuous disclosure, risk management processes, stakeholder communication and fraud control.

In building effective good governance frameworks, Australian public sector organisations start from an excellent platform. The OECD has identified Australia as having "a strong culture of professional commitment among staff in the public administration, a highly skilled and professional public administration with experience of working with regulatory reform in government and a strong and well embedded institutional framework."

However, the changing shape of government services necessitates old and new agencies to remain vigilant to emerging challenges. Auditor-General for Australia Ian McPhee advises that the most successful projects are delivered by "switched on teams following sounds governance practices" and warns that demand for more integrated government services will continue, must drive agencies to "contribute across the full spectrum of delivery mechanisms", and employ adaptable governance arrangements that extend beyond form to substance.

For this reason, our drafting tips seek to establish active procedural steps rather than merely espouse the virtues of esoteric notions of transparency and accountability. Agencies should strive to deliver:

  • an approach that focuses on strategic imperatives of an organisation rather than merely the formal requirements;
  • governance frameworks that are easily accessible and credible to staff, and driven from the top, so that each staff member is well supported and guided in their daily tasks and decisions by a comprehensive set of ideal behaviours and values;
  • an alertness to cost-shifting in other jurisdictions where federal programmes complement state or local government programmes; and
  • regular reporting and monitoring, complemented by revaluation of performance expectations and adjustments where necessary.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.