There are 4 requirements that must be addressed in the corporate plan of Commonwealth companies (outlined in subsection 16E(2) of the PGPA Rule).
These are:
In addition, Commonwealth companies are also required (subsection 27A(3) of the PGPA Rule) to include a summary of:
- how the company will achieve its purposes; and
- how the company’s performance in achieving the company’s purposes will be measured and assessed, including any performance measures and any targets that will be used in the measurement and assessment.
There is no set way to set out these matters in the corporate plan. Corporate plan requirements are designed to allow a company to present information in a way that best informs its audience of how it intends to achieve its purposes. Companies also have discretion to include any additional information that assists in demonstrating how the company intends to achieve its purposes.
In doing this a balance between conciseness and providing sufficient information needs to be struck.
Introduction (statement of preparation and period of coverage)
The corporate plan must include an introductory statement that:
- states that the plan has been prepared for paragraph 95(1)(b) of the PGPA Act. The statement may also refer to any other legislation applicable to the preparation of the plan;
- specifies the reporting period for which the plan is prepared (this would usually be the first reporting period of the minimum 4 year period covered by the plan); and
- specifies the reporting periods covered by the plan (this would usually be the minimum 4 year period covered by the plan; for example, 2024-25 to 2027-28).
An example statement of preparation for Commonwealth companies is set out below.
Example Introduction
I/We, the directors of [company name], present the [year for which the plan is prepared] [company name] corporate plan, which covers the periods of [minimum four-year period], as required under subsection
95(1)(b) of the Public Governance, Performance and Accountability Act 2013 and [reference to sections of other applicable legislation].
Purposes
The corporate plan must include the purpose(s) of the company. The purposes of a company include the objectives, functions or role of the company. For example, the purposes of a company may be the strategic objectives that the company intends to pursue, or make a significant contribution to achieving, over the reporting period.
When constructing purpose statements, companies are encouraged to consider a variety of sources, such as:
Purpose statements are most informative when they are clear and succinct, clearly labelled as the company’s purposes, and stated upfront in the corporate plan. In this way, a company’s purposes can be used as the anchor point for the structure of its plan.
Well-expressed purpose statements make it clear why the company exists, who benefits from a company's key activities and how they benefit.
The purpose statement should be relevant for the medium to long term rather than reflect a number of short-term goals.
A vision and/or mission statement can be included to support the purpose statement, in recognition that the corporate plan will often be a document that ‘speaks’ to both internal and external stakeholders. Vision and/or mission statements should not be included as a substitute for a clear statement of a company’s purposes.
Key activities
The corporate plan must identify the key activities that a company will undertake during the entire period of the corporate plan in order to achieve the purposes of the company.
A key activity is a distinct, significant program or area of work undertaken by a company to assist in achieving the company’s purposes.
The corporate plan does not need to describe everything a company does to deliver its purposes. The focus of the corporate plan is on those activities that make a significant contribution to achieving the purposes of the company.
Companies may consider outlining their strategies for achieving the intended results for each key activity.
Companies could also indicate the timeframe for achievement of the objectives of its key activities and its intended results, many of which in government have longer-term timeframes. Companies may also wish to include details of actual and planned progress to demonstrate how the objective is being implemented.
The corporate plan could include information on key activities and milestones that the company intends to achieve in meeting its purposes over the life of the plan. It is good practice for a company’s internal reporting arrangements to involve periodic reporting on the achievement against such key activities and milestones.
Key priorities and objectives of the Australian Government
If the Australian Government publishes a statement setting out its key priorities and objectives under section 34 of the PGPA Act, the directors of a company are required to consider if these relate to the purposes of the company (section 95(3) of the PGPA Act). If there is a relationship, the directors must set out in the corporate plan how the activities of the company contribute to achieving the priorities and objectives.
It is noted that to date, governments have not published a statement of priorities and objectives under section 34 of the PGPA Act.
Operating context
Key activities are undertaken to achieve a company's purposes within an operating context.
There are 5 elements that must be included in the discussion of a company’s operating context:
Corporate plans must include a discussion of these 5 elements covering the entire period of the plan. This enables companies to recognise the potential for change in the operating context over the period of the plan, and provide a forward-looking discussion of these elements.
The 5 elements of the operating context should provide the reader with a clear understanding of how, individually and collectively, these elements contribute to a company achieving its purposes.
The corporate plan must include a discussion of the environment in which the company will operate over the period covered by the plan.
In addressing this requirement, companies should include a discussion of the nature and characteristics of the environment in which the company operates that may impact on the achievement of the company’s purposes. This could include a discussion of various factors, such as:
- macroeconomic and microeconomic factors (such as global and regional economic conditions);
- the regulatory landscape (such as legislative factors, policy factors, or changes in regulatory regimes);
- technological factors (such as technological advances and automation);
- social factors (such as changes in the expectations and demographics of the population); or
- geographical considerations including remoteness and climatic conditions.
In discussing the environmental factors impacting the achievement of a company’s purposes, companies could outline the main factors that are both in the control and beyond the control of the company and the way the company proposes to respond to these factors. In this way, a reader is better informed about the environmental factors that may impact the company’s operations and performance.
The corporate plan must address the capability the company requires to undertake key activities to achieve its purposes. This includes the strategies and plans the company will implement over the period of the plan to attract, maintain and grow its capability.
The discussion of capability would normally include, (but is not limited to):
- workforce requirements
- infrastructure requirements
- ICT requirements.
Workforce capability
A discussion of workforce capability could address issues such as:
- high-level trends and developments that are affecting or may affect a company's workforce;
- workforce capability requirements and gaps;
- anticipated future workforce capability requirements; and
- strategies and plans to address key workforce capability needs.
Infrastructure capability
A discussion of a company’s infrastructure capability could cover:
- significant investments that are expected to be made over the period of the plan; and
- how these are expected to assist the company in achieving its purposes.
ICT capability
A discussion of a company’s ICT capability could briefly outline the technology strategy to support future business requirements. This may include key objectives and focus areas for development in ICT capability over the short, medium and long terms and consideration of the drivers for change.
Good practice capability sections go beyond identifying these strategies and plans and take an integrated approach to outlining how the company will develop capability according to its purposes, key activities and evolving operating context.
The corporate plan must include a summary of the risk oversight and management systems of the company, the key risks that the company will manage and how those risks will be managed.
Companies should discuss their systems of risk oversight and management and any plans the company may have to improve these systems. Sufficient details should be provided to enable a reader to understand and be confident that a company has established, and has arrangements for maintaining, an appropriate system of risk oversight and management that will support a company achieving its purpose.
In addition to describing the company’s risk oversight and management systems, companies must also identify the company’s key risks and how those risks will be managed.
For example, key risks may include:
- loss of skills and capability required for specific key activities;
- equipment failure/damage that impacts service delivery;
- service delivery outages that could significantly impact customer confidence and a company’s reputation;
- damage to systems or infrastructure caused by external parties; and/or
- visibility of legislative or policy changes that may impact a company's operating context.
Companies can meet the requirement to report how key risks are managed by outlining the general mitigation strategies and controls they have in place, or the strategies and controls in place for each of the company’s key risks. Companies could also discuss any risks that could emerge over the period of the plan and the company’s approach to monitoring these emerging risks.
Corporate plans must include a discussion of any organisations or bodies with which the company cooperates that make a significant contribution to achieving the company's purposes.
Cooperation across the Commonwealth, across jurisdictions, internationally and with the non-government sector takes many forms and can be described in a number of ways, such as partnering, relationships and collaborating.
It is not necessary or intended that a company would detail all of its cooperative relationships in the corporate plan. Companies should focus on the cooperation that makes a significant or substantial contribution to achieving the company's purposes.
Possible indicators that a relationship with another organisation or body is significant in nature includes where:
- a cross-organisational agreement is in place (such as a Memorandum of Understanding or Service Delivery Obligations) to outline the roles, responsibilities and deliverables of each party;
- international agreements or conventions are in place;
- there is a high frequency of interaction;
- the organisation or body has a significant degree of influence on the performance of the company in achieving its purposes; or
- the relationship is long-standing and key deliverables are reviewed.
The discussion on cooperation is not intended to include details of commercial arrangements that companies have with service providers or other organisations to assist in the delivery of services or assist in achieving their key activities or purposes. The requirement also does not encompass arrangements that can be broadly characterised as customer or client relationships that involve the provision of services or funding to organisations or individuals.
A company’s discussion of cooperation could also refer to the group of organisations or bodies that the company cooperates with, where the cooperation that assists in achieving the company's purposes is best characterised as being collective in nature. This may be appropriate, for instance, where a company cooperates with state and territory, and local governments, or a number of similar stakeholders within a particular industry.
If a company has subsidiaries, the company's corporate plan must cover both the company and its subsidiaries.
The corporate plan should provide sufficient information to enable a reader to understand how the subsidiaries are expected to contribute to the achievement of the company's purposes (for example, through linking the functions of the subsidiaries to the purposes of the company).
There are some cases where a subsidiary no longer contributes to the achievement of the company's purposes, for example where a subsidiary is dormant. In such cases this should be explained in the corporate plan.
The PGPA Act provides a definition of subsidiary that incorporates the concepts of control outlined in AASB 10 Consolidated Financial Statements and the Corporations Act 2001. To check if a company has subsidiaries refer to the Australian Government Organisation Register (AGOR) and reference the 'Other boards and structures' section for the company.
Performance
The corporate plan must include a summary of:
The corporate plan must include performance information, including any performance measures and targets, for each reporting period covered by the plan. For example, for a corporate plan covering 4 reporting periods, the corporate plan must explicitly outline the performance information, including any performance measures and targets, which relate to each of the 4 reporting periods.
Companies should develop performance measures to measure and assess their performance in achieving their purposes.
Companies are not required to comply with the requirements in section 16EA of the PGPA Rule (which sets out the requirements for performance measures for Commonwealth entities). However, in developing performance measures, companies may wish to consider the principles discussed in RMG -131 Developing performance measures as a matter of good practice.
The performance measures included in the corporate plan and Portfolio Budget Statements, as appropriate, should also be reported in a company's annual report at the end of the reporting period. As such, it is important that the performance measures across the documents are consistent and work together to enable a coherent set of performance results to be included in the annual report (that is, enable a 'clear read').
Performance information is more informative if performance can be compared qualitatively or quantitatively against particular performance levels. Therefore, companies are encouraged to provide targets for each performance measure where reasonably practicable.
Where possible, targets for performance measures should be specific, measurable, time-bound and reportable. They should also be challenging but achievable.
Circumstances where it may not be practicable to set a target could be where a baseline is being developed or where methodology for measuring performance is yet to be finalised. Where targets are not provided, the corporate plan should include an explanation of why.
Companies may use a combination of methods to establish targets for performance measures, such as:
- current performance;
- current performance plus/minus a percentage improvement change;
- averaged performance; and/or
- quality specifications or benchmarks.
Companies should take care to ensure that targets do not promote adverse results, such as where a company focuses on improving efficiency to a point where the quality of goods and services is substantially decreased. To ensure that targets are not unrealistic or create perverse incentives:
- targets should be set through company planning processes;
- proposed targets should be trialled in parallel to existing targets;
- targets should be presented in the context of the service being delivered.
Where targets are included, companies should include a description of a company’s rationale for setting particular targets. Companies are encouraged to consider how incremental improvement could be demonstrated over time. Where a target has historically been exceeded, or is static for a period of time, companies should review the target or explain why the target has been maintained at a certain level.
Structure of Corporate Plans
Companies have the flexibility to structure their corporate plan in a way that provides the best approach to communicating the company's purposes and how it proposes to achieve these over the period of the plan.
Some companies structure their corporate plans in a way that addresses these requirements under key activities or themes. This structure can assist a reader to understand how these elements, collectively, help in achieving the company’s purposes. Others base the structure of the corporate plan on the order of the required elements in the PGPA Rule.
Companies are encouraged to make a clear use of headings throughout their corporate plan. The use of headings can assist a reader to navigate from one element to another, particularly when one or more elements of the plan are discussed in multiple places throughout the plan. The use of headings can also assist in demonstrating adherence with the requirements of the PGPA Rule.
