Circular 2005/17 - Crown Entities Act 2004 (Governance)
This circular outlines the changes to the governance responsibilities of boards of trustees introduced by the Crown Entities Act. Information about the changes to Boards' financial responsibilities is contained in Circular 2005/16.
Date: September 2005
Circular Number: 2005/17
Crown Entities Act (Governance)
This circular is about: This circular outlines the changes to the governance responsibilities of Boards of Trustees introduced by the Crown Entities Act. Information about the changes to Boards' financial responsibilities is contained in Circular 2005/16.
The action required is: Note the changes to current Board responsibilities and ensure that your school follows these.
It is intended for: Chairpersons of Boards of Trustees, all trustees and principals of all state and state integrated schools.
For further information: Direct any enquiries about this circular to the manager of your local Ministry office.
Purpose of the Crown Entities Act
The Crown Entities Act (the Act) came into force on 25 January 2005 as one part of a range of measures designed to strengthen the whole State sector.
How the Act affects boards of trustees
School Boards of Trustees are recognised in the Act as forming a special category of Crown entity, and are subject to only those parts of the Act that are appropriate to their existing roles and responsibilities. The Act introduces a small number of governance provisions that apply to Crown entities generally, including Boards of Trustees, as well as a series of changes that are specific to Boards by amending the Education Act 1989.
The general governance provisions contained in the Act are new to Boards and are intended to bring greater consistency to the governance responsibilities of all Crown entities. The specific changes are also intended to bring consistency across Crown entities, but have been tailored to suit Boards of Trustees, in particular, and are included in the Education Act 1989 for accessibility.
The amendments to the Education Act 1989 include new provisions that either strengthen the values and standards expected of trustees or bring greater clarity to their existing roles and responsibilities. There are also new provisions that bring greater freedom to the way that Boards of Trustees are able to conduct their business.
Details of the changes, and guidance on how to interpret and apply them, are included below. A list of all the relevant sections in the Act, cross-referenced to any consequent amendments in the Education Act 1989, is attached as Appendix 1.
Changes for all Crown entities
Boards included in whole-of-Government directives
The Minister of State Services and Minister of Finance can jointly direct Crown entities on general matters that affect significant whole-of-Government or national issues. Examples of whole-of-Government or national issues could include:
- serious threats to public safety or to the environment;
- requirements under international agreements to which New Zealand is a party; and
- e-government requirements to improve public services.
Ministers can issue whole-of-Government directions to all Crown entities, including all Boards of Trustees, or to individual categories of Crown entities. However, these powers would be used only rarely, and would need to meet clear guidelines described by the Act. These would ensure that affected Crown entities are consulted before any direction is given and that any proposed direction is put before Parliament.
In addition, the Act ensures that no whole-of-Government direction can be given that would compromise or prevent a Board of Trustees from carrying out any of its independent duties included in the Education Act 1989.
If Ministers decide that it is appropriate to apply a whole-of-Government direction to Boards of Trustees (and if this is agreed by Parliament), failure to comply with the direction could result in the Board being dissolved under the Education Act 1989.
Ministerial power to request information from boards
The boards of all Crown entities must supply to their responsible Minister any information relating to their operation or performance that the Minister requests.
As Boards of Trustees are already subject to the Official Information Act and to provisions in the Education Act 1989 that allow for the Secretary for Education to inspect or remove any Board documents, this requirement should have little impact.
Trustees' status as "officials"
All trustees, office holders, committee members and employees of Boards of Trustees are classified as "officials" for the purposes of sections 105 and 105A of the Crimes Act 1961. This means that any trustee, office holder, member or employee of a Board can be liable for offences involving corruption and bribery of an official, and the corrupt use of official information under the Crimes Act 1961.
This reinforces the values and standards that all Board trustees, office holders, committee members and employees are expected to hold.
Changes for Boards of Trustees
New eligibility criteria
There have been changes to the grounds that define when a person is ineligible to be a trustee.
Any person who is an undischarged bankrupt is ineligible to be a trustee.
Conviction of an offence
Any person who has been convicted of an offence punishable by imprisonment for a term of 2 years or more is ineligible, unless he or she has served the sentence, obtained a pardon or otherwise suffered the penalty imposed.
In addition, two new grounds for ineligibility have been introduced. These are:
- prohibition from being a director, promoter or management associate of a company under the Companies Act 1993; and
- application of an order under the Protection of Personal and Property Rights Act 1988 where this impacts on a person's ability to manage his or her property affairs or personal care and welfare.
Requirements before appointment as a trustee
Before anyone is elected, co-opted, or appointed as a school trustee, they are now required to confirm that, to the best of their knowledge, they are eligible to be a trustee. This means that they will have to confirm that they are not ineligible on any of the grounds specified in sections 103 and 103A of the Education Act 1989 (see above for details of the recent changes to trustee eligibility).
Confirmation of eligibility should be given by completing and signing an approved Nomination or Eligibility Attestation form, which require prospective trustees to declare that they have read and understood the trustee ineligibility criteria (included on the reverse of the form).
The approved Nomination form for election of trustees and the Eligibility Attestation form for co-opted or appointed trustees are available on the New Zealand School Trustees Association website.
No compensation when trustees leave the Board
The Education Act 1989 now clearly states that trustees are not entitled to any compensation or other payment or benefit if they cease for any reason to hold office as a trustee.
Although this ban on compensation is new to the Education Act, it involves no practical change for Boards.
New requirements when updating school charters
Boards must now amend their school charters as soon as they become aware of any information in the charter that is either false or misleading and provide a copy of any amended charter to the Ministry of Education via the Charter Report Portal.
The Education Act 1989 now also clearly states that the school charter must be prepared and updated annually.
Broader delegation powers for Boards
Section 66, Boards may appoint special committees, and section 66A, Boards may delegate powers to staff, of the Education Act 1989 have been replaced with a single delegations section, which amends the process of delegation and appointment and expands the range of delegation powers available to Boards.
Delegations should be given only by Board resolution, with the nature and conditions of the delegation to be specified in writing and provided by notice to the delegated person or persons.
It is recommended that your Board review both its financial and non-financial delegations to ensure that delegations are current and clearly recorded. See the School Finances section for specific advice on financial delegations.
Delegations may be given to any of the following:
- the principal or any other employee or office holder of the Board;
- a committee consisting of at least two people, one of whom must be a trustee; and
- any other person approved by the Minister of Education.
This allows Boards to form committees containing persons other than trustees where, for example, specialist input or advice is required. Non-trustees can now sit and vote as full members of the committees they are part of.
Sub-delegation is also now permitted, subject to the prior written consent of the Board and within the same conditions outlined in the original written notice of delegation.
Delegates should retain this written notice of delegation, as they must produce evidence of their authority to perform a function or exercise authority if reasonably requested to do so.
A delegation can be revoked by resolution of the Board and written notice to the delegate.
No delegation of power to borrow
There has been no change to this restriction.
A committee may now be appointed only by Board resolution. The Board can invite anyone to be a member of a committee, but disclosure of any financial interest (as outlined in section 103A of the Education Act 1989) is now a condition of appointment.
It is important to note that the Board of Trustees retains the overall responsibility and accountability for the actions of any delegate, and that it cannot delegate the general power of delegation. The Board should ensure that appropriate training and governance support is provided to any non-trustee who is appointed as a member of a Board committee of any type. This is especially important in cases where experts from outside the education sector are brought in to provide specialist advice to Boards.
Boards should seek professional advice when making decisions about delegations and keep in mind that it will not be appropriate to delegate powers in every instance. For example, a Board's duty in regard to student suspensions should always be attended to by the Board itself or by a committee of trustees.
Conflicts of interest
Trustees must be excluded from any Board meeting where they have any interest that may reasonably be regarded as likely to influence their ability to carry out their duties and responsibilities as trustees.
This is a new requirement, and is additional to the existing requirement that trustees be excluded from meetings where they have either a pecuniary interest in a matter or where it relates to them as a student or employee of the Board.
Trustees will need to assess the risk of a conflict of interest on a case-by-case basis, but there are some situations that would be clearly inappropriate under the expanded rules for Board meetings, including:
- involvement in meetings where decisions relating to close relatives (eg, students or staff) are being discussed;
- attendance at meetings by principals or staff representatives where any matter relating to their own employment is being discussed; and
- attendance at meetings by the student representative where any matter relating to that student is being discussed.
In addition, proprietor's representatives on integrated schools' Boards need to consider whether it is appropriate to attend meetings where there could be a real or perceived conflict of interest between the interests of the proprietor and the interests of the school.
The Board may still allow an excluded trustee to attend a meeting to provide information to the Board or to answer any question the Board may have for them.
Quorum for meetings
The quorum for Board meetings is unchanged and meetings can still be held at times when the full Board of Trustees is unavailable, provided more than half the trustees then holding office are present.
Video- or teleconferencing
Boards may now hold meetings by means of audio or electronic communication (e-communication), such as video or teleconferencing, provided that:
- all trustees who wish to participate in the meeting have access to the technology; and
- a quorum of trustees are able to communicate with each other at the same time throughout the meeting.
As most Board meetings are open to the public, Boards will also need to ensure that interested community members can access the same technology as trustees in order to observe and/or listen to the meeting in progress. There will be exceptions to this when the Board/committee excludes public business from the meeting.
For most routine matters, the ability to hold meetings using e-communication methods will not introduce any new responsibilities for trustees, other than the need to maintain appropriate security and to ensure that confidentiality is protected when the Board is "in committee" (ie, public excluded business).
Boards need to ensure that if they make use of e-communication when making important decisions or acting in a quasi-judicial capacity, such as in suspension meetings, their decision-making processes can still withstand any legal challenge.
For example, although it is now possible to hold a suspension meeting via a teleconference to allow for absent trustees to participate, students and their parents may feel that due process has not been followed if this limits their own ability to participate in the meeting. For this reason, it may be more appropriate to allow for students and their families to speak directly to trustees through face-to-face hearings, and to use teleconferencing, if needed, only for the purposes of Boards' final decision-making, which can be conducted in private.
Trustees are now able to sign or agree in writing to Board resolutions by way of post or electronic communication, such as a fax or email. In the case of emails, an electronic signature is acceptable.
While these resolutions have the same status as those resolutions passed at a regular Board meeting, they must be signed or agreed to in writing by all Board members rather than by a majority.
More clarity on legal responsibility
The Education Act 1989 also now includes seven clauses that clarify the legal responsibilities of Boards in relation to the validity of Board transactions. In general, these provisions codify previous common law understandings and do not represent any changes for Boards.
The New Zealand School Trustees Association is under contract to the Ministry of Education to provide free advisory and Helpdesk services to Boards of Trustees, and is available to provide further assistance to trustees on the matters outlined in this circular.
Appendix 1 - Legislative references
|Provision||New||Amendment to status quo||Reference in Crown Entities Act||Consequent change to Education Act 1989|
|Whole-of-Government directions||_||Section 107||New clauses 1G(1) and (2) inserted in Sixth Schedule|
|Power to request information||_||Section 133||Listed in new Schedule 5A|
|Status as "officials"||_||Section 135||Listed in new Schedule 5A|
|Trustee eligibility criteria||_||_||Schedule 6||Repeals section 103(1)(c) to (db) and substitutes new subsections (c) through to (de)|
|Requirements before appointment as a trustee||_||Schedule 6||Inserts new section 103B|
|No compensation for loss of office||_||Schedule 6||New section 78NA|
|New requirements when updating school charters||_||Schedule 6||
|Delegations||_||Schedule 6||Section 66 repealed and new section 66 inserted|
Conflicts of interest
Quorum for meetings
Use of video- or teleconferencing
|New wording inserted in clause 8(8) of Sixth Schedule
New subclause (11A)(a) inserted in Sixth Schedule
New subclause (11A)(b) inserted in Sixth Schedule
New subclause (11B) inserted in Sixth Schedule
|More clarity on legal responsibility
Status of Board
Things Board can do
Validity of Acts
Some natural person acts protected
Acts that are not in best interests of Board
Dealings between Boards and other persons
|Inserts new clause 1 in Sixth Schedule
Inserts new clause 1A in Sixth Schedule
Inserts new clause 1B in Sixth Schedule
Inserts new clause 1C in Sixth Schedule
Inserts new clause 1D in Sixth Schedule
Inserts new clause 1E in Sixth Schedule
Inserts new clause 1F in Sixth Schedule
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