Deciding to create a new non-departmental entity

Before you begin

Before you begin to design a new non-departmental entity, you should ensure you understand what the Victorian public sector does and the key features of departments, administrative offices and public entities.

Read more:

• The Victorian Public Sector
• Victoria's system of government 

This guidance is general in nature. You should ensure that you understand the relevant pieces of legislation that govern the establishment of public sector bodies, starting with the Public Administration Act 2004. As you progress through the process of deciding on the best form for the public sector body there will be other legislation that you should read and understand.

The figure below provides an overview of the Victorian public sector and how it is organised.

Initial considerations

Non-departmental entities exist in a variety of legal and other forms. Before deciding on the right form you should consider:

• why a new entity is needed
• how new entities are created
• how their functions relate to existing entities.

Premier's Circular

The Premier’s Circular No. 2013/2: Creation and Review of Non-Departmental Entities (the Circular) outlines the policy for the creation and review of entities.

The Circular outlines four criteria which much be addressed when proposing the establishment of a new non-departmental entity:

1. Is there a role for government?
2. What degree of autonomy from departments or ministers is required?
3. What is the appropriate form of entity?
4. Can the functions be performed by an existing entity?

This guidance provides a framework to explore the criteria. It also sets out a requirement that entities must be reviewed regularly to ensure that they are operating effectively and are still necessary.

The following questions should be worked through to assist in determining whether it is appropriate to create a new non-departmental entity.

The Premier’s Circular also outlines review requirements for entities. This Guidance may assist in evaluating whether the governance structures of the entity have been set up in way that is appropriate for the way the entity is required to operate in practice.

A copy of the Circular is available upon request from the Department of Premier and Cabinet’s (DPC’s) Governance Branch at publicsectorgovernance@dpc.vic.gov.au

What are the functions and policy objectives?

The functions and policy objectives of an entity should inform its legal form.

Most non-departmental entities have more than one function. Often, the primary function of an entity will determine its form. However, all functions should be assessed when determining the appropriate form of the entity, including when merging existing entities. For example, an entity might have a secondary function that involves reporting on a department’s performance, which means that the entity should not be established in a form that is subject to the direction of the Department Head.

Consider the following:

• What are the desired functions and/or policy objectives?
• What is the primary function?
• Are there any functions that could not be fulfilled by a certain type of entity?
• What are the day-to-day activities required to achieve the functions and policy objectives?

Read through the table below which outlines functions of the public sector.

What is the role for government?

For a new public sector body to be established, there must be a clear reason for the functions to be performed by government.

Assess whether government performing this role maximises net benefits for the community. This can include a mix of policy and governance considerations.

Consider issues such as:

• Is there a legal requirement for the function?
• Has a specific policy decision been taken for government to achieve a policy outcome that requires this function?
• What are the benefits and risks of government performing this role?
• Will government performing this function maximise the net benefits for the community?
• What would be the cost and impact of not delivering this service or function?
• Is there a market failure?
• Does the activity involve providing goods and services in a market?
• Can it be contracted?
• Do alternative non-government providers exist (or could exist)?

While this can be a complex question, consideration of this criterion should, at least, ensure that there is a clear reason to establish a new non-departmental entity.

Can some of all of the proposed functions be performed by an existing entity?

For a new public sector body to be established, consider whether the functions can be delivered by an existing entity. Where a similar or appropriate entity already exists, that entity should perform the additional proposed function to avoid additional cost and complexity.

Consider the following questions:

• Do any existing entities perform similar functions?
• Do any existing entities deal with similar industries, clients or stakeholders?
• Are the powers and governance arrangements of entities performing similar functions appropriate to achieve the proposed function?
• Can the remit of existing entities be expanded to accommodate the proposed functions?

The VPSC maintains a list of current Victorian government employer bodies, which can be searched for employing public sector bodies by industry and sub-sector group. The list can be accessed on the VPSC's list of public sector employers.

In addition, the VPSC maintains the Government Appointments and Public Entities Database (GAPED) which provides information of Victorian State Government boards and committees. It can be filtered by department and portfolio fields to identify any existing non-departmental entities performing similar functions. You can find it online at Public Board Appointments Victoria.

Read more about the Government Appointments and Public Entities Databse Administrative Guideline.

Is a new public sector body required?

In general, the default position is that functions should be performed by a department.

The creation of a new non-departmental entity may be appropriate if:

• No existing public entity or public service body performs similar functions, and the functions of an existing body cannot be expanded to undertake additional functions.
• Effective delivery of the function requires operational autonomy from a department, often including the employment of dedicated staff.
• A more structured, limited or specific level of ministerial oversight and powers are required to deliver the functions (in comparison to a department).
• Independence from the Crown is required, for example when the government may be bound by the decisions of the non-departmental entity or the entity is established to scrutinise the government’s decisions.
• A clearly defined range of specialist functions may improve efficiency and effectiveness, by allowing those governing and managing the entity to focus solely on the defined role.
• The function is discrete and expected to be time limited.