Stocktake of ACC accounts: proposed terms of reference

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service initiatives including terminating the physiotherapy contract that allowed freephysiotherapy, [Withheld under sections 9(2)(b)(ii) and 9(2)(f)(iv) of the OfficialInformation Act 1982], and an internal value-for-money exercise the results ofwhich will be made available to the Stocktake steering group. ACC will also makeavailable to the steering group the results from other initiatives it has underway.[Withheld under section 9(2)(f)(iv) of the Official Information Act 1982].Purpose of Stocktake10 The overall purpose of the Stocktake is to provide an assessment of theperformance of each of the ACC Accounts, an analysis of how the Scheme could beimproved to deliver value for money to levy payers and taxpayers, andidentification of potential financial savings. The aim is to deliver practicalrecommendations for improving performance and to ensure our accident insurancescheme remains affordable.11 It is important that the Stocktake be seen to be independent, so that its findingsand advice are widely accepted.12 The Stocktake will provide the base from which decisions can be made on how toturn ACC around so that costs are controlled and the current trend of cost riseseases.Content of StocktakeIntroducing competition into the Work Account13 Our pre-election commitment to investigating competition was separate to theStocktake as originally conceived. However, there is a question as to whetheropening up the Work Account to competition should now be part of the Stocktake.The scale of problems found in ACC when we came into government meant that Ihave had to shift my focus to dealing with immediate cost containment issues. Thefinancial situation we inherited, and the fact that the Work Account is the onlyAccount that is solvent at present, lead me to believe that the Stocktake should notinclude investigating competition. This does not preclude this matter beinginvestigated at a later date.Elements of stocktake14 The Stocktake steering group will commission the actual work required to meet thepurpose set out above. It is envisaged that the pieces of work commissioned willtake the form of discrete elements that together feed into a whole picture of theScheme. Background information will be available from ACC’s own reviews to feedinto the work.15 I propose the Stocktake includes:Analysis of each active Account, covering:• its underlying cost drivers (these are likely to vary for each Account) andstrategies to address them• how many people come into the Account, how long they receive entitlementsunder the Account; the entitlements they get, how the interpretation oflegislation impact when providing those entitlements; how and whether injuryprevention works in the Account• any subsidisation occurring within the Account or across other Accounts• options for funding policy (eg, change in balance of funding sources, such asfunding the Motor Vehicle Account from petrol as opposed to licences etc)2
• the nature of major risks (eg, underwriting, investment performance, liabilityvaluation risks) – who bears these risks and options for managing them• the constraints on achieving value for money and a steady-state financialposition (for example administrative factors or legislation)• the potential for, and cost effectiveness of, introducing experience rating orrisk-sharing.Note that background information will be made available from ACC on financialforecasts for each Account covering 2008/09 and subsequent financial years, andtrends in funding (levies and appropriations) if no change is made to policysettings. ACC will also make available its own analysis and Account funding plans,and information on claims duration and case management practice.16 In addition, work will be undertaken on:• Monitoring of ACC’s performance: including the performance of the monitoringagency and the usefulness of existing performance indicators. The results ofthe Treasury-led government-wide review of monitoring of Crown agencies willbe made available to the Stocktake steering group. The Stocktake will alsoconsider the performance information available, whether the existingperformance indicators will provide the information needed for robustmonitoring, and proposals for different or better performance indicators asappropriate• current employer programmes, and the incentives needed to encourage morebusinesses to focus on health and safety in return for levy discounts• how injuries sustained outside the workplace by workers can be efficientlymanaged by employers to promote rehabilitation• who is best placed to provide effective rehabilitation services• key changes in legislation over time and their impact on claimant entitlements.• a review of ACC’s $10 billion investment portfolio (see below)17 There will be flexibility for the steering group to raise with the Minister for ACCareas of additional work it considers are necessary, for example internationalbenchmarking.Investment strategy review18 The overarching goal for the investment strategy review should be examining itscontribution to the goals of scheme sustainability and levy stability.19 ACC has itself commissioned an external review of the investment function. TheBoard’s report will be made available to the steering group.20 The steering group will also comment, and as necessary make recommendations,on how the reserves are being managed (in a quality of processes sense) and theappropriateness of the current level and form of scrutiny of this function from theACC Board;Consultation21 The steering group will ensure that there is opportunity for key stakeholders suchas Business NZ and the Council of Trade Unions to have input at appropriatejunctures of the Stocktake process, such as following receipt of the initial reportsfrom external consultants and before formal advice is provided to the Minister forACC.3
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Stocktake of ACC accounts: proposed terms of reference

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