Organisational governance

Governance developments in 2006–07

Key governance developments affecting the APS in 2006–07 have been the finalisation of the Uhrig assessment process, further regulatory reform and further work in identifying better practice in administration and governance. Governance issues were also raised in the report of the Defence Management Review Team.

Uhrig Reviews

The Review of the Corporate Governance of Statutory Authorities and Office Holders (the Uhrig Review) was presented to the Australian Government in 2003.⁵ It called for a more rational and consistent approach to determining the financial and governance frameworks that should apply to Commonwealth Government entities, and clarified the relationships between entities, Ministers and departments of state. In its August 2004 response to the Uhrig Review, the Government accepted most of Uhrig’s key recommendations and endorsed the two templates identified in the review aimed at ensuring that good governance exists.

The Uhrig assessment process of governance arrangements of Commonwealth statutory authorities and office holders has now concluded, with Ministers having implemented numerous improvements to date. In its response to the Uhrig Review, the Government outlined four broad objectives.

The Government’s first objective—greater consistency in organisational design—required that the functions and governance characteristics of a body be better aligned with its financial framework. The Government agreed that the Uhrig Review’s ‘board template’ and the Commonwealth Authorities and Companies Act 1997 (CAC Act) should generally apply to bodies which have been delegated ‘power to act’. The ‘executive management’ template and Financial Management and Accountability Act 1997 (FMA Act) should generally apply to specialised bodies such as regulators, service providers, research and advisory bodies.

The Government’s governance policy to be applied when new bodies, or changes to existing bodies, are proposed is set out in Governance Arrangements for Australian Government Bodies. This policy is administered by Finance.⁶ In addition to reinforcing the Uhrig principles, the publication supports the approach advocated by the Australian Public Service Commissioner that there be a greater alignment of the employment and financial frameworks for statutory bodies, with staff of FMA Act agencies to be employed under the Public Service Act 1999 (the Act), unless there is a persuasive case for a different staffing regime.

Some of the changes implemented as a result of Uhrig assessments include:

ASIC, the Australian Prudential Regulation Authority, the Corporations and Markets Advisory Committee, the Australian Pesticides and Veterinary Medicines Authority, the GBRMPA and the Private Health Insurance Ombudsman moved to coverage under the FMA Act. Employees of the Australian Pesticides and Veterinary Medicines Authority and the Private Health Insurance Ombudsman also transferred to Public Service Act coverage from 1 July 2007.
The Australian Research Council (ARC) and Centrelink moved to executive management and remained subject to the FMA Act.
AIFS, the Australian Sports Anti-Doping Authority (ASADA) (formerly the Australian Sports Drug Agency), the Australian Trade Commission (Austrade), and Medicare Australia (formerly the Health Insurance Commission) have moved to executive management and coverage under the FMA Act. Austrade, ASADA and Medicare Australia staff were also transferred to Public Service Act coverage.

The Government’s second broad objective was greater clarity and transparency of government expectations for statutory authorities. This involves responsible Ministers clarifying their expectations of statutory authorities by means of written Statements of Expectations (SOEs), with entities responding with written Statements of Intent (SOIs). Ministers have agreed to the introduction of these statements for over 120 bodies. These statements are also being made public, generally through publication on the bodies’ websites.

The Government’s third broad objective was to improve measures for parallel communication whereby portfolio entities provide relevant information to departmental Secretaries in parallel to that information being provided to Ministers. Measures such as SOEs, Memoranda of Understanding (MOUs) and formal communication protocols have been instituted for a range of bodies in order to clarify and strengthen the parallel communication requirements.

The Government’s fourth and final objective involved the application of better practice principles for governance boards. These principles include the removal of ex officio and other representative appointees from governance boards, and the amendment of board sizes.

Following the assessment process, Ministers have agreed that it would be appropriate to amend the size of boards, and remove public servants and other representative appointees from the boards of a range of bodies. Some of the changes include:

The Secretaries of Defence and DFAT have been removed from the Board of the Australian Strategic Policy Institute, and government members have been removed from the governance boards of the Australian Wine and Brandy Corporation and seven research and development corporations.
Adjustments have been made to the size of the governance boards of Tourism Australia, the Export Finance and Insurance Corporation and Defence Housing Australia (DHA).

Consideration is also being given to providing more guidance on governance arrangements for portfolio bodies to ensure they incorporate a proper understanding of the public sector framework in which they operate.

Regulatory reform

In the APS, and internationally, there has been increased focus on the regulatory framework affecting public service agencies, the private sector and the community. Debate has centred on the extent and complexity of regulation, the costs to the community and to public sector agencies of unnecessary or outdated regulation, and the need for scrutiny of regulatory practice. There has been a particular focus on looking at ways of ensuring that during their development, proposals for regulation involve adequate consideration of the purpose of the requirements and of their costs and benefits, and that procedures are established for reviewing requirements as the environment changes.

Implementing the response to the Australian Government Taskforce on Reducing Regulatory Burdens on Business

In October 2005, the Prime Minister announced the appointment of the Australian Government Taskforce on Reducing Regulatory Burdens on Business to identify practical options for alleviating the compliance burden on business from Government regulation. The taskforce examined and reported to government in April 2006 on areas where regulatory reform could provide significant immediate gains to business (the Banks report).⁷ In response to the taskforce’s report, the Government enhanced the framework for analysing regulatory proposals.

In order to provide guidance on the analysis and consultation now required when developing regulatory proposals, the Office of Best Practice Regulation (OBPR), located within the Productivity Commission, released the final version of its Best Practice Regulation Handbook in September 2007. The handbook sets out the Australian Government’s enhanced framework for analysing regulatory proposals and minimising the costs of regulation, including business compliance burdens. The requirements set out in the handbook are intended to ensure that regulation is only introduced after a rigorous examination of options and consequences. They apply to all government departments, agencies, boards and statutory authorities.

OBPR plays a central role in assisting agencies with the new requirements, as well as monitoring compliance over time. Where the Office considers the regulatory assessment to be inadequate, the proposal cannot proceed unless a special exemption is granted.

In responding to the Banks taskforce, the Government also signalled its expectation that regulators would review their current administrative strategies and implement changes to reduce the cost burden regulatory administration places on Australian business. To assist agencies in this task, ANAO released its Administering Regulation Better Practice Guide in March 2007.⁸ The Better Practice Guide provides a framework to assist Australian Government regulators in assessing the quality of their administrative practices and identifying necessary improvements in strategies, systems and processes. The guide has a particular emphasis on the sound governance arrangements that enable a regulator to meet its responsibilities, manage risk and performance, and be accountable for its decisions and actions.

Reducing Red Tape in the Australian Public Service

To complement the Government’s response to the Banks report, the APS has also placed an emphasis on reducing internal administrative requirements on APS agencies that are unnecessarily burdensome and prescriptive, and that increase the cost of doing business (red tape). Initially, portfolio secretaries commissioned a report that identified a range of initiatives aimed at reducing the administrative burden on agencies without undermining public accountability. However, there was a recognition that while such one-off exercises were valuable, there was a need for a strategic, principles-driven approach to achieving more sustained reductions in administrative requirements.

To provide a framework for such sustained reductions, MAC commissioned a report, Reducing Red Tape in the Australian Public Service, which was released in February 2007.⁹ The MAC report provides agencies with a principles-based framework that can be used to review existing regulatory and administrative requirements, as well as scrutinise future requirements. As part of this framework a Deputy Secretaries Group (the Red Tape DSG) has been established to consider proposals involving significant whole of government requirements, and to assist in an annual review programme agreed by portfolio secretaries.

Report of the Defence Management Review

In August 2006, the Minister for Defence established the Defence Management Review Team chaired by Ms Elizabeth Proust to examine and assess organisational efficiency and effectiveness in the Defence organisation and make recommendations on a number of governance related issues, including decision-making and business processes, and information management. The report of the Defence Management Review Team was released in April 2007.¹⁰

The report found that Defence had made significant progress over the last decade in a range of areas, but that the current range and nature of military operations was causing some stress. There was a lack of alignment between responsibility and accountability in key parts of the organisation, as well as deficiencies in information management and other key governance processes. The report made a number of recommendations related to improving governance processes in the areas of accountability and governance, support to Ministers and Government, people management and business system reform.

On releasing the report in April 2007, the Minister for Defence, the Hon Dr Brendan Nelson MP, stated that the Department had agreed to implement 50 of the reports recommendations in whole and two in part. It had not agreed to one recommendation, relating to the definition of roles of the Chief of the Defence Force and the Secretary of the Department of Defence.

Defence has established a dedicated implementation team to address the recommendations of the report. Actions, include ensuring accountabilities are clearly defined and devolved to the appropriate level, reforming top-level committees to make them more efficient and effective, improving the ability of the Defence workforce to support Ministers, strengthening its strategic HR function, reviewing business processes and systems, and driving a substantial information technology reform agenda.

Better practice in administration and governance

During 2006–07, the focus on governance improvement in the APS has been supported by the production of a number of better practice guides to assist agencies in improving the effectiveness and efficiency of agency operations. These include:

ANAO and PM&C’s Better Practice Guide, Implementation of Programme and Policy Initiatives: Making Implementation Matter,¹¹ which identifies better practice considerations when implementing a policy or programme initiative, with a particular emphasis on the governance principles that underpin successful policy and programme implementation
the Automated Assistance in Administrative Decision-Making Better Practice Guide¹² published by AGIMO, the Commonwealth Ombudsman, ANAO, and the Office of the Privacy Commissioner, which consolidates advice in three areas—administrative law, public administration and technological change
an update of ANAO’s Public Sector Internal Audit Better Practice Guide, which focuses on better practice considerations for an agency’s internal audit function in a contemporary public sector environment¹³
MAC’s report Note for File: A Report on Recordkeeping in the Australian Public Service,¹⁴ which provides practical advice on recordkeeping to a general APS audience
the Commission’s Building Better Governance guide, produced in consultation with Finance, which incorporates a number of case studies covering different governance issues.

These publications have been complemented by the production of a report by the Commonwealth Ombudsman entitled Lessons for Public Administration, which draws together ten lessons for agencies from the Ombudsman’s investigations into 247 immigration and detention decision cases.¹⁵ The report uses case studies to demonstrate how a departure from good governance practices can have adverse consequences for citizens. The main lessons drawn for good governance practices are the importance of:

maintaining accurate, comprehensive and accessible records
placing adequate controls on the exercise of coercive powers
actively managing unresolved and difficult cases
heeding the limitations of information technology systems
guarding against erroneous assumptions
controlling administrative drift, that is, unnecessary delay in making decisions
removing obstacles to prudent information exchange with other agencies and bodies
promoting effective communication within your own agency
managing complexity in decision-making, including by giving special attention to handling and supervising the resolution of difficult and complex cases
checking for warning signs of bigger problems.

In addition to these good governance practices, the Australian Public Service Commissioner also notes the importance of working within the APS Values (the Values) and the Code of Conduct (the Code).

The Ombudsman’s report concludes that agencies should not wait for an external crisis to focus attention on internal problems. Internal monitoring and quality control and effective use of complaints handling processes will assist agencies to identify problem areas and initiate remedial action. The Ombudsman’s emphasis on governance issues is consistent with work undertaken by the Commission on monitoring agency health and improving performance, which is discussed later in this chapter.

5 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>

6 Department of Finance and Administration 2005, Governance Arrangements for Australian Government Bodies, Commonwealth of Australia, Canberra, <http://www.finance.gov.au>

7 Regulation Taskforce 2006, Rethinking Regulation: Report of the Taskforce on Reducing Regulatory Burdens on Business, (Report to the Prime Minister and the Treasurer), Commonwealth of Australia, Canberra, <http://www.regulatorytaskforce.gov.au> The Taskforce was chaired by the Chairman of the Productivity Commission, Mr Gary Banks.

8 ANAO 2007, Administering Regulation, Better Practice Guide, Commonwealth of Australia, Canberra, <http://www.anao.gov.au>

9 Management Advisory Committee 2007, Reducing Red Tape in the Australian Public Service, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au/mac>

10 Department of Defence 2007, Report of the Defence Management Review, Commonwealth of Australia, Canberra, <http://www.defence.gov.au/dmr>

11 ANAO & PM&C 2006, Implementation of Programme and Policy Initiatives: Making Implementation Matter, Commonwealth of Australia, <http://www.anao.gov.au>

12 AGIMO, Commonwealth Ombudsman, ANAO, and the Office of the Privacy Commissioner 2007, Automated Assistance in Administrative Decision-Making, Better Practice Guide, Australian Government, Canberra, <http://www.agimo.gov.au/publications>

13 ANAO 2007, Public Sector Internal Audit: An Investment in Assurance and Business Improvement, Commonwealth of Australia, Canberra, <http://www.anao.gov.au>

14 Management Advisory Committee 2007, Note for File: A Report on Recordkeeping in the Australian Public Service, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au/mac> was launched in August 2007.