E. Output agreements

Section 170 of the Crown Entities Act allows responsible Ministers to require entities to have an output agreement setting out the services and goods to be produced by the entity paid for either by:

• the Crown in accordance with an appropriation, or
• compulsory fees, levies, or charges set under legislation.

This continues and reinforces the usual practice for services paid for by the Crown, and provides a formal basis for clarity about what services and goods will be provided with the money that the Crown pays to entities. The absence of such an agreement can expose Ministers, departments and boards to considerable risk.

An output agreement should be required where there is funding from the Crown unless there is another agreement or document that can adequately serve the purpose. The Act allows considerable flexibility in relation to output agreements which do not have to be contracts (and typically would not be), and do not have to follow any particular format. A memorandum of understanding may serve as an output agreement.

For small entities, the Minister and the entity may agree that the specification of output classes in the SOI is sufficient, and that a separate output agreement is not required.

In some circumstances Ministers may require an output agreement to cover services paid for by compulsory fees, levies or charges set under legislation. This might be important, for instance, where:

• entities receive considerable funding from both Crown and non-Crown sources
• Ministers want a clear agreement about what services are to be provided
• Levy or fee payers want assurance that their payments are used well, or
• Ministers want a clear basis for setting the level of the fees to be charged.

The purpose of an output agreement is to:

• assist the Minister and entity to clarify, align and manage their expectations and responsibilities for the funding and production of outputs
• set standards and conditions under which the entity will deliver and be paid
• for entities funded via output expense appropriations, ensure appropriations and entity outputs are aligned (so funding can be transferred), and
• contract for the supply of information on results, including the nature and timing of performance reporting against outputs in the output agreement.

Board members have a statutory duty to ensure that the entity acts consistently with its output agreement (s49 and s92 of the Act).

Unless directed otherwise, departments will help Ministers negotiate agreements.