Chapter 9: Agency governance

Abbreviations

A list of the abbreviations used in this report is available in the Glossary

Governance developments in 2005-06

The increased attention to public governance internationally has mirrored developments in Australia. The release of ANAO discussion papers on governance in Budget funded agencies (1997) and in Commonwealth authorities and companies (1999) and the 2003 Better Practice Guide on public sector governance has placed governance on the APS reform agenda for the past decade.¹³ Events such as the examination of the governance structures of the private company, AWB International, have kept the focus on this issue more broadly.

There have been two key direct influences on governance in the APS in more recent times. The first wide-ranging influence has been the Uhrig report and subsequent reviews of Australian Government agencies. The second is the impact of the Palmer ¹⁴ and Comrie ¹⁵ reviews of immigration cases in DIMIA.

Although the Palmer and Comrie reviews were specific to DIMIA, they nevertheless raised issues whichgo to the heart of ANAO's definition of governance including issues of authority, accountability, leadership, and control, as well as issues of underpinning culture, and the way an organisation deals with its various stakeholders.

Uhrig Reviews

The Review of the Corporate Governance of Statutory Authorities and Office Holders (the Uhrig Review),¹⁶ presented in 2003, called for a more rational and consistent approach to determining the financial and governance frameworks that should apply to Commonwealth Government entities, and clarifying the relationships between entities, Minsters and departments of state. In its August 2004 response, the Government accepted most of the key recommendations of the Uhrig review and endorsed the two templates identified in its report designed to ensure good governance exists.

Finance, in its publication Governance Arrangements for Australian Government Bodies (August 2005), outlined the principles for determining appropriate structures and governance arrangements for Australian Government bodies, underpinned by the policy preference to curb the unnecessary proliferation of these bodies. The publication also reinforced the approach advocated by the Australian Public Service Commissioner that there be a greater alignment of the employment and financial frameworks for statutory bodies which, as a general rule, would see the Financial Management and Accountability Act 1997 and the Public Service Act 1999 (the Act) applying to the majority of Commonwealth bodies performing core APS functions such as programme management, service delivery, policy advising or regulatory activities.

The implementation of the Uhrig Review consists of three distinct but interrelated phases. The first phase was a ministerially-led assessment of governance arrangements of 162 Commonwealth statutory authorities and office holders. The second phase focuses on implementing the outcomes of those phase one assessments. The third phase seeks to establish the Uhrig Review governance principles and templates as a fundamental feature of future APS decision-making, especially when considering the creation of new Commonwealth entities.

As at August 2006, 148 of the 162 phase one assessments had been provided to the Minister for Finance and Administration. This equates to a 91% completion rate. Of the remaining assessments, some have been rolled into wider review processes to achieve more effective outcomes for the agencies involved.¹⁷

Responsible Ministers are announcing assessment and implementation outcomes on a continuous basis. A sample of achieved outcomes as at August 2006, include:

Centrelink-retirement of board and introduction of executive management from 1 October 2005
Medicare Australia-retirement of former HIC board and its conversion from the CAC Act to the FMA Act from 1 October 2005 and staff coverage was also transferred to the Public Service Act 1999
Austrade and AIFS-boards retired and converted from the Commonwealth Authorities and Companies Act 1997 to the Financial Management and Accountability Act 1997 from 1 July 2006; Austrade staff coverage was also transferred to the Public Service Act 1999
Australian Research Council-board retired and converted to executive management from 1 July 2006
National Health and Medical Research Council-converted to executive management and agency status under the Financial Management and Accountability Act 1997 from 1 July 2006
Commonwealth Superannuation Scheme and Public Sector Superannuation Scheme-boards merged to form the Australian Reward Investment Alliance from 1 July 2006.¹⁸

The Uhrig Review also posited that, in order for statutory authorities to meet Government, Parliament and the public's expectations, a clear understanding of their purpose is essential. It recommended that the responsible Minister issue a Statement of Expectations that, inter alia, articulates the statutory authority's purpose and functions and communicates the objectives and priorities of government that require incorporation into the authority's administrative responsibilities. Conversely, the statutory authority is responsible for formally committing to ministerial expectations by providing the Minister with a Statement of Intent. This statement needs to explain how the authority will meet all expectations and priorities and must clearly link the Statement of Expectations with the authority's ability to deliver by articulating measurable and verifiable Key Performance Indicators (KPIs).¹⁹

Statements of Expectations and Intent are generally published to allow external scrutiny, although independent bodies, GBEs and agencies closely linked to departments will be exempted from this reporting requirement. As at August 2006, Statements have been published for at least 11 entities, six of which are APS agencies.²⁰ There is ministerial agreement that the Statements for the remaining non-exempt entities will also be published.²¹

Response to Palmer and Comrie

Another influence on governance in the APS has been the inquiries into the handling of immigration cases at DIMIA. In discussing the Palmer and Comrie inquiries, the State of the Service Report 2004-05 focused on findings that relate to the authority, accountability and leadership aspects of ANAO's definition of governance, including concern over the integrity of systems and processes, and issues related to decision- making processes in the application of regulations and following the discovery of errors.

In 2005, DIMIA revised its internal governance structures and released an implementation plan to advance a comprehensive series of reforms aimed at addressing the process and structural deficiencies highlighted in the Palmer and Comrie reports. Overall, 56 projects identified in the implementation plan have been completed. The Department, now DIMA, has publicly recognised that the acceptance of the recommendations of the Palmer and Comrie reports committed the department to a process of continued improvement across a broad spectrum of its governance arrangements.²²

It would be a mistake to quarantine the lessons of Palmer and Comrie to a single agency; all APS agencies and employees can learn from the reports. DIMA's comprehensive overhaul of its governance processes is a model which other APS agencies may wish to examine.

ANAO, Applying Principles and Practices of Corporate Governance in Budget Funded Agencies, Discussion Paper, July 1997, <http://www.anao.gov.au>; ANAO, Corporate governance in Commonwealth authorities and companies, Discussion Paper, May 1999, <http://www.anao.gov.au>; ANAO, Public Sector Governance Vol 1, Better Practice Guide, July 2003, <http://www.anao.gov.au>
M. J. Palmer, Inquiry into the Circumstances of the Immigration Detention of Cornelia Rau: Report, July 2005, <http://www.minister.immi.gov.au>
Commonwealth Ombudsman, Inquiry into the Circumstances of the Vivian Alvarez Matter, Report by the Commonwealth Ombudsman of an inquiry undertaken by Mr Neil Comrie, September 2005, <http://www.ombudsman.gov.au>
J. Uhrig, Review of the Corporate Governance of Statutory Authorities and Office Holders, June 2003, <http://www.finance.gov.au/ governancestructures/docs/The_Uhrig_Report_July_2003.pdf>
T. Ioannou, ‘The Governance of Australian Government Bodies—Ensuring Better Practice in the Post-Uhrig Environment’, speech presented at the CPA Public Sector Finance and Management conference, 17 August 2006, <http://www.cpaaustralia.com.au>
Ibid. Staff coverage transfers to Public Service Act 1999 also occurred at the Australian Sports Anti-Doping Authority (ASADA) and for former Australian National Training Authority (ANTA) staff who are now part of DEST.
J. Uhrig, Review of the Corporate Governance of Statutory Authorities and Office Holders, June 2003, <http://www.finance.gov.au/ governancestructures/docs/The_Uhrig_Report_July_2003.pdf> pp. 91–93.
APS agencies include: Centrelink, Medicare Australia, MRT RRT, NOPSA, the Social Security Appeals Tribunal, and the Office of Parliamentary Counsel.
T. Ioannou, ‘The Governance of Australian Government Bodies—Ensuring Better Practice in the Post-Uhrig Environment’.
DIMA 2006, 12 Months after Palmer: On the Move to Improve, <http://www.immi.gov.au/media/publications/department/_pdf/palmerprogress-a5-booklet-web.pdf>