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The Victorian public sector performs a wide variety of functions, including direct provision of services to the community, policy advice, the collection and administration of public money, regulation, funding and contracting private and non-government organisations for service delivery. These services are delivered through the public service (departments, administrative offices and the State Services Authority) and through public entities operating in the wider public sector.

Adopting appropriate legal forms and governance arrangements for the functions and activities being undertaken by public entities is critical for high quality performance. Well considered and fit for purpose forms and arrangements provide a foundation for effective and efficient governance and management of public sector bodies with high standards of accountability, responsibility and credibility. In contrast, poor alignment between functions, forms and governance arrangements can impede high performance, create unnecessary costs, or inhibit the delivery of suitable levels of public accountability and transparency.

These guidelines propose a process for determining the most appropriate legal form and governance arrangements when establishing a public entity. The process involves identifying the functions to be undertaken, considering the most appropriate legal form and governance arrangements, and consulting and seeking approval for the entity. It is assumed that in creating a public entity, the government has decided to undertake a particular function and that this function is best performed by a public entity rather than a public service body (a department or administrative office). These guidelines are not intended to be prescriptive; rather they provide a basis for informed decision making and the exercise of judgement by policy practitioners.

It is important to note that the intention of these guidelines is to inform decision makers considering the establishment of a new public entity or undertaking a review of an existing entity. The intention of the document is to assist with forward looking analysis, not to critique existing arrangements which were the product of earlier policy environments. However, in discussing various types of entities reference is made to existing examples to illustrate the discussion.

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