Third Party Service Provision and the Collaborative Turn

Objectives

Third party service provision

Explore what is meant by “collaboration”

Understand the appropriate accounting in respect of for funding of non-government organisations

Getting things done through other organisations

It has been suggested that in a number of western democracies the current model of public sector management is in decline and being replaced by “a new government model in which executives’ core responsibilities no longer centre on managing people and programs but on organising resources – often belonging to others – to produce public value”

(Eggers, 2008, p. 25).

Funding of non-government organisations

Governments all around the world have developed new ways to deliver services and to work with their communities, other levels of government, business, and non- government organisations.

This has changed the range of ways in which public funds are used. An increasing proportion is now spent through funding arrangements with individuals or organisations outside public entities, such as commercial providers or non-government organisations.

The Collaborative Turn

This change involves a shift from a hierarchical and contractual model of public sector governance, based on principal-agent relationships and market-like mechanisms, that has under-pinned much of the public management reforms of the last thirty years.

Rather than being seen as passive consumers of public services (Jun, 2009) citizens and community based groups are emerging as participants in the processes associated with both the design and delivery of those services. In so doing they are raising questions as to the nature and location of power, risk and accountability.

The Collaborative Turn

This change can be seen to be driven by:

•a recognition that many of the complex and enduring economic, environmental and social problems faced by governments cannot be solved by individual government agencies working to siloed accountabilities;

•fiscal pressures that are forcing governments to seek alternative means of service provision that include the use of not-for-profit and private sector organisations;

The Collaborative Turn

This change can be seen to be driven by:

•the growth of a younger and more educated electorate that has increased expectations of its ability to have an input in to government decisions and a role in their implementation;

•a ‘re-birth’ of the previously subsumed voice of indigenous populations; and

•the expanding role of information and communication technologies in facilitating accessibility to public information.

Cooperation

Coercion

Consultation

Coordination

Collaboration

Self-Determination

Citizen Power

Low political riskHigh political risk

Government Power

PURCHASE PROVIDE

High political riskLow management risk High management risk

Coercion

To the extent that planning and decision making powers remain with government agencies we may conceive of the resulting relationships as being largely coercive in nature.

As Wanna (2008) suggests, “collaboration can involve power and coercion, the ability to force outcomes or impose one’s own preferences on another, to some extent, with their compliance or involvement” (p. 3).

In other words, while a relationship may involve a degree of participation by both parties at least one of them may not do so voluntarily or with a view to a common set of objectives.

Consultation

Even though planning and decision making power may effectively remain with ministers and central government agencies, they may undertake consultative processes which involve: “seeking feedback on, say, a policy proposal that is already prepared and which those consulted can only modify, endorse or reject” (Ryan, 2012, p. 99)

Cooperation

Whilst members of the public may be engaged in consultation on issues that affect them, their engagement or involvement in the decision and implementation processes may be very limited.

Cooperation, on the other hand, implies the sharing of information and the acceptance by both parties of the need to change existing or planned practices.

Coordination

On the other hand, as a response to resource interdependencies, coordination between two or more entities suggests the existence of at least compatible objectives and more formal communication and planning processes.

Whilst each entity retains its independent authority, O’Flynn notes “risk enters into the equation” as organisations become more inter-dependent with others to achieve their broader and longer term objectives

Collaboration

Both management, and ultimately political, risk will also be incurred as organisations more actively collaborate through the creation of new structures, the joint acquisition and pooling of resources, and the sharing of rewards.

Collaboration may involve planning, communicating and sharing information across multiple levels within each organisation

Self-determination

Formally, the concept of self-determination may be defined as the ability to make decisions for oneself without influence from outside.

A central feature of such arrangements is the receipt of public funding together with considerable freedom to decide how that funding will be employed.

Providing such an ability to groups of citizens involves a more significant transfer of power from the state and a related increase in both managerial and political risk.

Cooperation

Coercion

Consultation

Coordination

Collaboration

Self-Determination

Citizen Power

Low political riskHigh political risk

Government Power

PURCHASE PROVIDE

High political riskLow management risk High management risk

Funding of non-government organisations

At both central and local government levels an increasing amount of public services is being provided by non-government organisations that include:

•not-for-profits

•community-based organisations

•tribal-based organisations ( co-production, & whanau ora)

•social enterprises

•private sector organisations (public private partnerships)

Funding of non-government organisations

A number of principles underpin how public sector organisations should account for these relationships:

•the purchased services should contribute to the achievement of government outcomes and objectives;

•the services should reflect the needs of the ultimate users or recipients;

•contracts should provide appropriate accountability for public money; and

•services should represent value for the public money.

The New Zealand Auditor-General’s principles:

Lawfulness: Have activities, resourcing, and accountability requirements been undertaken within the authority granted by Parliament?

Accountability: Have public entities given full and accurate accounts of their activities? Are governance and management arrangements suitable to address any concerns?

Openness (transparency): Is the nature of the funding arrangement, and the way in which it was entered into, clear to all parties?

The New Zealand Auditor-General’s principles:

Value for money: Are resources used effectively and efficiently, without waste, and in a way that optimises the public benefit?

Fairness and Integrity: Are public entities and NGOs that are involved in funding arrangements together meeting Parliament’s and the public’s expectations of an appropriate standard of behaviour in the public sector?

Funding options

Before entering into a particular funding arrangement, it can be useful to pause and think about the purpose of the funding and the relationship that is being set up, and to check that the form of the funding arrangement matches those goals.

The funding arrangement is a means to an end, so it is important that it fits with the purpose. The form that is chosen for the funding arrangement will then inform the public entity’s approach to planning, choosing a provider, and managing the funding arrangement. Problems can arise if the form does not fit the goal or the relationship.

[C & A-G, 2008]

Funding options

“Shopping” or “buying” arrangements (procurement) are a form of purchase, and can range from simple and low-value purchase transactions to major construction or other infrastructure developments that may be managed through full and formal procurement processes.

“Investing” arrangements often take the form of grants, and are designed to build capacity or to support a particular activity or organisation.

“Giving” arrangements, along with donations and other forms of unconditional grants and payments, are where the public entity provides something without any conditions attached.

Funding options

full funding – may occur on the basis of the cost or the price of the services.

partial funding – in some cases government agencies may provide funding explicitly on the basis of making a contribution to a service or activity undertaken by an NGO.

This may be relevant when the NGO already undertakes the activity, the funding is to be for a short term only, the NGO wishes to contribute from its own resources, or other organisations are contributing.

Funding options

contracting for outcomes – it is possible to contract for outcomes although this will normally involve providing information on the services to be provided as well.

Note, this requires the outcome to be within the control of the provider and depends on the disclosure relevant information.

paying to develop capacity – where the main objective from the Government’s point of view is to develop the capacity of the NGO, without any expectation that a service will be provided.

Funding options

grants – may be appropriate where:

•a grant is requited by law (e.g. the Education Act 1989 describes the subsidy provided to early childhood centres as a grant);

•the legal framework makes it difficult to establish a contractual intention;

• the NGO is entitled to payment once it satisfies the eligibility criteria;

•the NGO lacks contracting capacity; or

•the payment represents a subsidy for the work of an organisation.

Funding of non-government organisations

The purposes for which funding is provided will determine the options chosen and the relevant sections of the Public Finance Act 1989 that apply.

The provision of funding that does not strictly comply with the terms of the relevant Appropriation Act is illegal.

Appropriations are:

• limited by amount (s. 8); i.e. the appropriation represents an upper limit to the amount that may be spent;

• limited by scope (s. 9); which determines the permitted uses or activities, actions and functions, that may be undertaken;

• limited by type.

Appropriations

A particular distinction is drawn between expenses, which relate to the current financial year, and capital expenditure which will deliver benefits in future financial years.

A distinction is also drawn between:

i.departmental appropriations voted by Parliament to enable the Minister to provide funding (i.e. purchase services from or provide capital to) a government department; and

ii.non-departmental appropriations which enable the Minister to directly fund (e.g. purchase services from) a non departmental provider.

A departmental output appropriation

This would require that a department is purchasing services from a provider that will be delivered either directly to the department or to a third party on behalf of the department in the fiscal year to which the appropriation applies.

It also requires that the services be defined in terms of the quantity, quality, timeframe and cost their delivery.

Most importantly, if services are funded from a departmental output appropriation, the department must have sufficient control over the delivery of the outputs for it to be held accountable for them.

A departmental capital appropriation

This would require that expenditure relate to the provision of benefits that will be received, possibly in the current financial year, but also in future years. The scope of the capital appropriation must be explicit about the capital item, or items, being purchased or developed.

It also requires that the asset (the right to the benefits to be delivered) is owned by the Crown and is included in the departments balance sheet.

Payments to non-departmental service providers would, therefore, not be an appropriate use for funds appropriated in this way.

A departmental other expense appropriation

Other expense appropriations were established to provide authority for expenses that are not output expenses, capital expenses, or benefits and other unrequited expenditure. Departmental other expense appropriations are normally for non-output related expenses such as costs relating to organisational restructuring.

Their use to fund non government service providers would therefore seem to be inappropriate.

A non-departmental output appropriation

Non-departmental output appropriations are used to fund services purchased by the minister, as opposed to the department.

Although the department is charged with administering the funding process, it does not have control over, and can not be held accountable for, the delivery of the outputs. Accountability for output delivery lies with the minister.

Same information requirements as for departmental appropriation but may specify ‘for the purchase of services’ (i.e. price).

A non-departmental capital appropriation

Non-departmental capital expenditure normally covers items such as the acquisition of an ownership interest in other entities such as a state-owned enterprise, the purchase of tangible assets such as land for a national park, the purchase of intangible assets such as fishing quota, or the purchase or creation of a financial asset such as an advance to a Crown entity.

Non-departmental capital appropriations can not be used to fund the acquisition or development of assets owned by a non-departmental service provider.

A non-departmental other expenses appropriation

Non-departmental other expense appropriations may be appropriate when the minister is not purchasing specific goods or services from a non-departmental service provider. Such an appropriation may take the form of a grant to a non-departmental service provider.

However, the scope of the appropriation should still be defined in terms that are specific enough to act as a constraint against expenditure on unauthorised activity.

Funding of non-government organisations

The increased use of third party service provision, whether under the rubric of:

•high trust contracting,

•co-production,

•whanau ora, or

•public private partnerships

does not remove the statutory requirements for appropriate accountability mechanisms.

Summary

Internationally, governments are increasingly entering into funding arrangements with non-government organisations.

While those arrangements should be flexible enough to support the purpose of the funding, they must also be appropriate structured so as to be lawful, transparent and accountable.

In summary, rather than exact descriptions these versions of the collaborative turn are broadly representative of the different approaches that may be taken, and can be observed, in the relationships between public sector organisations and between those organisations and different elements of the community.

However, whatever form the collaborative turn may take there remains a number of questions around the appropriate forms of accountability that apply to the use of public money.

Accountability and the Collaborative Turn

As Gregory has recently observed:

“It is ironical, if not paradoxical, that the emergence of a more diverse and variegated means of delivering public goods and services, without total reliance on state bureaucracies, has simultaneously made it increasingly difficult to satisfy public demands for enhanced accountability of public officials. “

(Gregory, 2012, p. 685)

Accountability and the Collaborative Turn

Describe an arrangement by which your organisation purchases from, or provides services via, a third party.

How is that arrangement managed?

Third Party Service Provision