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Investor Confidence Rating (ICR) - Frequently Asked Questions and Answers

The following questions and answers relate to the roll out of the new Investor Confidence Rating (ICR) for investment-intensive agencies.  New questions and answers will be added as they arise.

If you have any further questions please contact Kerry Hollingsworth on 04 917 6153 or email investmentmanagement@treasury.govt.nz

1. What information do we need to provide and when is it required?

The information required for ICR purposes can be found in published guidance at Guidance on the Investor Confidence rating: Assessment and Moderation.

This guidance explains what will be required for each of the eight elements.

For tranche 2 DHBs, all information will be provided by DHBs and suppliers by 30 May 2016, along with draft Long Term Investment Plans (LTIP), to allow for assessment and moderation to commence.  Final LTIPs are due 20 July 2016.

For tranche 3 organisations, all information will be provided by agencies and suppliers by 30 November 2016, with the LTIPs being required at the same time as Four Year Plans (in early December).

2. How much time will this take us as an agency?  How much resource is required?

The amount of resource required will depend on how much of the information you already have available and how much you may need to source specifically for the ICR.

3. How will the Treasury use lessons learnt from each Tranche for future Tranches?

The Treasury will identify learning’s and improvements as we go so that we can continuously improve both the process and the ICR itself.  We welcome your ongoing feedback so that we can consider changes that will improve the ICR processes. We will formally review the approach after each tranche with a lessons learnt session involving the agencies from the completed tranche.

4. How is the Treasury engaging with leadership teams in agencies around the findings, improvements, expectations, etc?

We have held and will continue to hold meetings with senior leaders in each agency to discuss all aspects of the ICR process, assessments and recommendations, as and when requested.  We think it’s important that all stakeholders are well informed about the benefits of the ICR and any potential implications.  The ICR is an important tool for helping to raise investment and asset performance across the whole public sector in order to increase public value.

General ICR questions

5. How will the target levels be set?

For the NZP3M (Portfolio, Programme and Project) assessments, the Treasury will set the appropriate longer term target with input from the agency and supplier. For the Asset Management maturity assessments, the target will be set by the independent assessor after consultation with your agency. For the Organisational Change Management maturity assessment the agency will set the target level via a self-assessment.

The targets for the LTIP and system performance elements have been set by the Treasury.

For the project performance and asset performance elements of the ICR, the target levels will be taken from various sources, including business cases, benefits realisation plans, output agreements or statements of intent. 

The Treasury has a role in ensuring all the assessments are consistent over time and across agencies, and will use a robust moderation process to achieve this.

6. What happens if little or none of the information is available to inform the ICR in the required timeframes?

We will work with you to see what information you can provide and how the assessment could be done using the information that you have.

Ultimately, if no information can be provided for an element it will obtain a zero score. 

Maturity Assessments

7. If we have recently had one of these assessments done, do we need another?

You won't need another one done if the scope of the assessment is the same as that needed for ICR purposes and the assessor was suitably qualified to apply the required methodology.

We’ll discuss with you if the assessment meets the ICR requirements, and if it needs to be refreshed or not.

8. When will the third-party assessments take place?

We will work with your agency contact person to agree the Statement of Work and the supplier or Treasury will plan a time that best suits you.  Ideally third party assessments would be completed in time to inform your LTIP.

9. Can agencies choose the independent assessor?

The Treasury has set up a panel of suppliers each of whom is qualified and experienced at conducting the sort of assessments needed for ICR purposes.

We will discuss the choice of provider with your agency. The Treasury will make any final decisions on the allocation of suppliers to agencies and discuss any variations and manage any conflicts of interests alongside the agency.

Long Term Investment Plan

10. How do we produce a good LTIP if there are only three or so months in which to do this?  What should we focus on?

This will largely depend on where you are starting from and the currency of your agency’s strategic thinking and planning.  It may be possible to use existing materials for ICR purposes.

The LTIP guidance has a useful self-check section and also tips for success. The key is to understand and explain the interplay between business drivers, long term objectives and organisational capacity. 

Please contact us if you would like help with development of your LTIP.

Capital Sustainability

11. What is the benefit to the agency of making a voluntary return of capital to the centre?

For Departments and some Crown entities a voluntary return of capital reduces the amount of taxpayer funds on the balance sheet and reduces the capital charge applied to that agency.  There is no change in baselines so the agency has more spending power (ie, up to $80,000 per annum for each $1 million returned).  However, there could be additional operating costs (eg, extra maintenance on older assets or extra leasing costs).

12. How will the Treasury distinguish between capital pressures that have been caused through poor financial management and those pressures outside the agency's control?  Does the distinction matter?

The distinction doesn't matter for LTIP and ICR purposes.  The solutions to address the pressures may differ though, and this is what needs to come through in the LTIP. 

Benefits and Project (and Programme) delivery

13. What is the level of benefits that a tier 1 agency will be expected to achieve?

The target level for benefits is 100% realisation across the portfolio of investments – based on the last target that was agreed with the approving authority.

14. For benefits and project delivery indicators, how will projects be chosen?  What principles will be used to select the projects?  If an agency is able to provide portfolio-level information will that be used instead of a sample?

In order for the sample to be representative we have indicated that the scope covers all projects completed in the last 2 years irrespective of the funding source and decision rights.  We can be flexible about the period provided the sample is representative of the overall level of agency investment activity.

15. How will you take account of agreed changes in scope, timing, cost and benefits of a project over time?  

We will use the latest scope, timing, cost and benefits information agreed by the relevant decision making authority.

16. How will you take account of projects that were terminated?

Generally these are not included in the assessment.  We can discuss this with you to get a good understanding of these situations.  

Asset Performance

17. What does is the different between Asset Level and Asset Portfolio Level?

Data provided at the asset level will be at the individual asset level. Asset level data example: for Property 1 the condition is a 4 (on a 1-5 scale, 1 being best, 5 being worst). While at the asset portfolio level, this is interchangeable with asset classes, and this data provided at this level are the aggregation of the different assets in that portfolio. Asset Portfolio level example: for the Property portfolio, the aggregated condition of the portfolio is a 3.

18. How will the asset measures be chosen?  Will there be asset measures across every asset portfolio or just the major ones?

There will be a particular focus on technical asset performance measures that cover utilisation, condition and functionality indicators in your major asset portfolios. Other performance indicators may be considered. We are available to work and support the agencies in choosing their measures.  The measures may vary from one agency to another.

19. Does the new Cabinet requirement to disclose asset performance results in the Annual Report duplicate the asset performance information requirement in the ICR (Element 7)?

The underlying information will be the same, the same base asset performance data will be able to be used to satisfy both requirements. However, the timing, audiences and purposes are different and that affects the level of detail in the two exercises, as shown in the table below.

Alignment between ICR requirements and Annual reporting requirements
  ICR Element 7 Asset Performance in Annual Report
Target audience Corporate Centre, and Ministers General public
Data Requirements:    
Performance measures Selected by the agency in accordance with ICR guidance, and in consultation with corporate center Selected by the agency
Time horizon Each ICR cycle examines information for the last two financial years For 2016 the minimum requirement is to reveal the results for 2015/16.  Thereafter there would be a comparison between current year and prior year
Data Level Asset and/or Asset Portfolio level, in consultation with Corporate Centre (required) Asset Portfolio level
(optional) asset level
Target performance As agreed with Board or Minister, or where not available - the executive level As for ICR
Weighting of results Portfolio results are weighted according to the weights used in Asset Management Maturity (Element 1) where weightings exist Not weighted
Assessment Self-assessment checked by The Treasury Self-assessment
Verification The Treasury checks the calculation for ICR purposes and verifies a sample of information provided. The reported result for Element 7 may be adjusted if the sample can’t be verified Verification done by the OAG as part of its review of the Annual Report
Moderation Treasury moderates results across each tranche of assessments No moderation

Implications

20. Will there be time to dispute the assessment findings prior to going to Cabinet in March?  What if there is agreement with the ICR score, but disagreement with the implications?

There will be time to discuss the assessment results and implications with the Treasury and our assessment partners before these go to Cabinet for decisions. 
There will also be time to escalate any disagreement to the Treasury, and if required, to the Investment Ministers for consideration before the results go to Cabinet.  For the second tranche of DHBs this would need to take place by August 2016.

22. How will the ICR affect bids for Budget 2016?

The ICR will be one component of the information that is considered by Investment Ministers and Cabinet when they are prioritising investments for Budget 2016.  The ICR is an indication of the confidence that investors have in an agency's capacity and capability to realise a promised investment result if funding were committed.  It is very likely that the ICR will be in draft at that stage, depending on the timing of Cabinet's approval of the ICRs. 

23. What does the LTIP achievability assessment involve? 

A key part of the LTIP assessment is to test the financial sustainability of the plan. This will involve understanding the agency’s cashflow and balance sheet, in particular looking at efficiency and effectiveness. 

Moderation

24. Who will do the moderation of the overall ICR results?  Is a different party involved in moderating individual elements of the ICR?

The moderation panel members may differ for each ICR element to ensure there is appropriate expertise and to avoid conflicts between roles. 

Typically the moderation session for each ICR element will comprise the lead assessors for each agency, but not agency representatives. That is because the panel’s task is to ensure the judgments made by assessors (whether on a supplier panel or by the corporate centre or self-assessments) are consistent between agencies.

 

Last updated: 
Monday, 16 April 2018