Reinvigorating the traditions of Westminster government

examines progress towards maintaining the independence and accountability of the APS. It includes the following chapters:

7. Ethics and integrity

8. Interactions with Ministers and the Parliament

9. Agency governance

Chapter 9: Agency governance

The Australian National Audit Office (ANAO) and PM&C define governance as:

… the set of responsibilities and practices, policies and procedures, exercised by an agency’s executive, to provide strategic direction, ensure objectives are achieved, manage risks and use resources responsibly and with accountability.1

While there is no ‘one size fits all’ approach to governance, it is important to realise that effective governance will contain the following building blocks:

These building blocks were identified in the Commission’s 2007 publication, Building Better Governance,2 a guidance document for those establishing or reviewing governance arrangements.

Each building block is important in itself, and each agency needs to develop a governance framework that suits its respective role with the building blocks reinforcing each other to enable the best outcomes. The framework also needs to be readily understood and consistent with legislation and government policies. It is important that an agency’s governance framework has a strategic outlook, and is self-evaluating in its approach to enable implementation.

Governance is an issue that has been extensively researched, and guidance has been developed to assist agencies, with publications available from the Commission, ANAO, Finance and PM&C. Independent reviews, such as the recent Equine Influenza Inquiry, also provide lessons for all public servants.

In a speech at the Public Sector Governance Forum on 4 September 2008, Ian McPhee, Auditor-General for Australia, pointed out that ‘Through sound corporate governance, agencies effectively enhance their likelihood of success, and reduce the likelihood of failure.’3

This chapter looks at issues relevant to governance in the APS against six building blocks of effective governance. Issues around the seventh building block—working effectively across organisational boundaries—are examined in detail in Chapter 10.

Key governance developments in 2007–08

The year 2007–08 has seen a number of governance developments in the APS. These developments have ranged from government initiatives on the recruitment and performance of Secretaries and agency heads; re-examination of the Freedom of Information Act 1982 (the FOI Act); a review by the Australian Law Review Commission of the Privacy Act 1988; and reform of the financial reporting and procurement systems of the APS.

The Government’s strong commitment to engaging with the states and territories, communities and the not-for-profit sector to progress its reform agenda, has also resulted in agencies having to consider how they can respond flexibly to incorporate these working arrangements. The proposed development of a Compact between the Government and the third sector, for example, is likely to impact on what measures are used to assess good governance in future years. In addition, there have been specific reviews around governance in particular agencies. The need to embed good governance and to establish a process for continuous improvement of government arrangements, is highlighted once again for APS agencies by the issues identified in the Equine Influenza Inquiry report.

Equine influenza outbreak

On 17 and 20 August 2007, two horses at the Eastern Creek Quarantine Station (NSW) displayed symptoms consistent with equine influenza. All horses residing at Eastern Creek and Spotswood (VIC) Quarantine Stations were tested and it was revealed that a number of the horses housed at both quarantine stations were infected with the virus.

On 22 August, two horses at the Centennial Parklands Equestrian Centre, in the eastern suburbs of Sydney, were identified as having equine influenza. Around the same time a number of other cases were reported throughout NSW and in the outskirts of Brisbane in Queensland. It is believed that a contaminated person or piece of equipment left the Eastwood Quarantine Station enabling the virus to escape.

A national response, involving the Australian Government, State and Territory Governments, and a number of industry organisations, was launched to contain and eradicate the virus.

The outbreak that eventuated was the most serious emergency animal disease Australia has experienced in recent history. At its peak, over 47,000 horses were infected, impacting both horse owners and the supporting industry.

The campaign to eradicate the disease was the largest of its type ever undertaken in Australia, using the latest laboratory, vaccine, surveillance, mapping and communications and information technologies.

On 30 June 2008, Australia was declared to be free of equine influenza, although disease surveillance activities will continue until December 2008 to meet the requirements of the world animal health organisation (Office Internationale des Epizooties) and it is confirmed that Australia is completely clear of equine influenza.

In September 2007, the Australian Government appointed a retired High Court judge, the Hon. Ian Callinan AC to conduct an independent inquiry into the outbreak of equine influenza in Australia. The Equine Influenza Inquiry Report identified a number of matters involving the Australian Quarantine and Inspection Service (AQIS) and the horse industry which may have contributed to the outbreak.

The major areas identified by the report included: the formulation, implementation and monitoring of biosecurity measures; the documentation of, and adherence to, procedures; the roles and responsibilities of employees; the suitability of current quarantine stations; and the effectiveness of AQIS in communicating core requirements.

The Equine Influenza Inquiry Report and the Government’s response to it were released on 12 June 2008. The Government agreed to all 38 of the report’s recommendations, which it intends to implement within two years. A copy of the report and the Government’s response can be found at: <http://www.daff.gov.au/about/publications/eiinquiry>

Governance policies, procedures and structures

Effective governance policies, procedures and structures are essential to the operation of the APS, as they provide the framework within which agencies achieve their business goals. They can also affect public confidence in the capability and integrity of the APS, the ability of agencies to attract high-quality staff, and overall levels of employee satisfaction.

The questions in the employee survey that relate to an agency’s governance have been combined in such a way as to provide a summary assessment of employee views of their agency’s governance structures, procedures and policies. This summary measure, the ‘Governance and Integrity Factor’ achieved an overall satisfaction rating of 68%. This is identical to last year’s figure and generally comparable since most of the questions that go to make up the factor are common to both years.

Nonetheless, satisfaction levels varied across the APS and within particular employment sub-groups. Satisfaction levels ranged from 36% to 84% among agencies with individual agency-specific results. The best performing agencies included Treasury, RET and ATO. Poorer performing agencies on this measure included DHS, DCC and the Federal Court.

Other variation occurs among classifications––SES employees were much more likely to be satisfied with governance (85%), than were APS 1–6 employees (67%). Younger employees (aged under 25 years) were also far more satisfied than other age groups. Interestingly, agency size and employee location (whether inside or outside the ACT) have little effect on employees’ satisfaction with this factor. In terms of the type of work, human resources (HR) employees were most satisfied (77%) and researchers were least so (62%).

Building block 1—Leadership, culture and communication

Strong and effective leadership is a key building block in enhancing agencies’ governance capability. Leaders within the organisation play a critical role in setting the right tone and shaping a culture whereby employees understand their governance responsibilities, and are able to contribute to better governance practices in the agency. Strong and effective linkages between senior and middle managers, coupled with the effective management of poor performance and leaders who are open to ideas and dissenting views are also important in building good governance.

An effective agency culture is also an essential underpinning for good governance. Agency culture is difficult to define, but can be said to be what people experience when they deal with an organisation or work in it—‘the way things are done around here’. Agency culture relates to shared assumptions, beliefs, values, norms and actions. These collective beliefs shape behaviour.

There is still considerable room for improvement in many of these areas across the APS. Employees’ perceptions of their senior leaders continue to be stable at lower than desirable levels, for example, although 57% of employees agreed that the senior managers in their agency lead by example in ethical behaviour, only 35% agreed that their senior leaders are receptive to ideas put forward by other employees. There also continues to be a disconnect between EL 2s and their SES which needs to be addressed (see Chapter 5 for further discussion of leadership issues). Employee satisfaction with the way underperformance is handled has also remained stable at low levels (24% of employees agreed that their agency deals with underperformance effectively). Although these aggregate results suggest that there is a need for service-wide improvements, the wide variation in agency-specific results in many of these areas also suggests that some agencies have made considerably more progress than others.

In addition to these results, the factor analysis of satisfaction with a range of issues related to employee engagement includes a summary of employees’ views about agency culture.4 The overall rate of satisfaction or agreement with Agency Culture was the lowest of all the factors at 27%.5

Employee satisfaction with the Agency Culture factor varied for different segments of the workforce. Employees in small agencies were more satisfied with Agency Culture than those in larger agencies, as were SES employees (45%) compared to around 25% for EL and APS 1–6 employees. Employees working in policy and administrative support or clerical roles were most likely to be satisfied, and those working in legal and programme design and/or management least satisfied. The wide variation in the results for agencies with individual agency-specific results, 14% to 52%, suggests that it is possible for many agencies to improve their culture and that some agencies have a problem in need of immediate attention.

In his speech at the Public Sector Governance Forum, Ian McPhee, Auditor-General for Australia, said:

… through organisational leadership and investing in staff development, we are able to positively influence the culture of the organisations we work in so that there is a close match between the image we convey in our corporate documents and the reality of the way we work on a daily basis. And we need to monitor the effectiveness of our arrangements over time. In this context, I expect we will see Audit Committees taking a stronger interest in the well-being of agencies’ governance arrangements; that is, they are working as expected, and improvements are being made in the light of agency, APS or private sector experience.6

To this end, agencies’ Audit Committees should review their agency culture results. Frequent and consistent communication with all employees about their objectives and responsibilities is the final component of the first building block of effective governance. Agencies continue to report high levels of communication of governance issues to employees. Almost all agencies indicated that they have policies and procedures in place to ensure all staff are kept informed about updates, changes or revisions that relate to financial and other delegations, and that Chief Executive Instructions (CEIs) are available to all staff. Most agencies (92%) also had policies and procedures in place to ensure all staff have access to information that outlines the agency’s decision-making processes and/or relevant committee structures. The likelihood of having these policies and procedures in place was similar across agency size bands, and was consistent with previous years’ results.

Given the continued high levels of communication reported by agencies, it is surprising that employees’ awareness of such policies and processes is not higher. Seven out of 10 employees agreed that their agency provided them with information about updates, changes or revisions that relate to financial and other delegations, and almost six out of 10 agreed that this was the case for agency decision-making processes. These results are consistent with those from last year and like agency responses, employees’ agreement levels were similar across agency size bands.

Although these results suggest fairly high levels of awareness among staff of important governance issues, there is still room for improvement and existing approaches to communication should be examined. One key area where communication may be enhanced is through more effective communication between senior leaders and other employees. Only one-third (35%) of employees agreed that communication is effective between senior leaders and other staff, with a further 35% disagreeing that this is the case.

Building block 2—Appropriate governance committee structures

The second building block of effective governance is the establishment of appropriate governance committee structures. All agencies use committees to support the agency head in decision-making and governance arrangements. Some committees are mandatory (such as those for audit and occupational health and safety) while others are discretionary and agency-specific, reflecting the particular governance needs of agencies. The appropriate committee structure for an agency depends on its size, its functions, the complexity of its responsibilities, its geographic dispersion and its risk profile.

Responses to last year’s agency survey showed that agencies had a number of different governance committees in place. Almost all agencies utilised audit, occupational health and safety, and senior management committees as part of their governance systems while over two-thirds used workplace consultation/relations committees. The likelihood of using more specialised committees generally increased with agency size.

It is good practice for agencies to establish and retain only those committees that contribute to the effective and efficient running of the organisation. Each committee should have a clear purpose and a clear sense of its strategic obligations. Where committees are established for specific purposes or projects, their viability should be reconsidered when projects are completed or after a predetermined interval.

Agencies were asked whether they had reviewed their governance structures during 2007–08. Seventy-six per cent of agencies reported that they had done so (up from 73% last year).

Agencies were also asked about their reasons for conducting reviews. The review was part of a regular process for almost 60% of agencies, a similar result to last year. DIAC, for example, reported in the agency survey that it:

… reviews its key governance committee structures and membership each year. The structure of the key governance committees was modified on 1 July 2007 as a result of a departmentally commissioned independent review of its governance arrangements that occurred in 2006–07. That review found that substantial improvements have been made to the department’s governance systems, processes and structures, indicating that the importance placed on cultural reform, behaviours and standards, accountability and stakeholder engagement in the department has been beneficial. Further improvement in … governance arrangements were progressively implemented during 2007–08 following recommendations from that review, including better education of staff on governance, clearer lines of accountability and a more strategic focus on departmental priorities.

Other reasons nominated for reviewing governance structures included examining ways of improving the governance capability of staff (44%), and responding to problems identified with existing frameworks (25%).

A number of agencies also reviewed their governance structures in light of machinery of government changes brought about by the change in government, and the need to address new priorities. DEEWR, for example, reported fundamental changes to its predecessor department’s governance, including:

Reprioritisation of resources and functions to implement new policy initiatives as a result of election commitments; changes to practices as part of continual improvement and as a result of regular internal and external review processes; review of structures, functions and processes to reflect machinery of government changes and, [subsequently, of the] Outcomes/ Output structure.

Several agencies also reported reviewing governance due to transitions from the Commonwealth Authorities and Companies Act 1997 to the Financial Management and Accountability Act 1997 coverage following the Review of the Corporate Governance of Statutory Authorities and Office Holders (Uhrig Review) (2003).

Agencies also reported making a range of specific changes as a result of reviewing their governance arrangements. The Child Support Agency (CSA), for example, reported that it:

… implemented a new range of governance committees to assist and improve agency decision-making and governance … updated its strategic risk review and improved its risk management framework ... commenced the development of a new fraud control plan … participated in DHS reorganisation that generated further adjustments to the governance structure to meet the Secretary’s needs.

As a result of the inquiry into the Equine Influenza outbreak, AQIS has established two new committees:

A Horse Industry Consultative Committee has been established to advise AQIS on horse import and export issues. The committee, comprising major horse importers and airport representatives, also has members from the:

The second new committee, an Expert Group, chaired by the Commonwealth Chief Veterinary Officer and comprising representatives from the Animal Health Committee, the Australian Health Laboratory and the Equine Veterinarians’ Association, has been appointed to advise on biosecurity containment and animal health and safety issues at Sydney and Melbourne airports, as well as transfer arrangements to and from facilities at the Eastern Creek (NSW) and Spotswood (VIC) animal quarantine stations.

Further consultation between government and industry has also occurred through the recent National Equine Influenza Summit, held on 25 September 2008.

Case study: Governance structures in AusAID

The Australian Agency for International Development (AusAID) is the agency responsible for planning, coordinating and managing Australia’s overseas aid programme. The agency is undergoing a major transformation, which is being driven by two significant developments in its operating environment: a focus on improving the effectiveness of aid, particularly through how it is delivered; and a significantly increasing aid budget, which the Government has committed to raising from its current level of 0.3% of Gross National Income (GNI) to 0.5% of GNI by 2015.

To deliver aid more effectively, the agency is moving away from ‘traditional’ projects managed by contractors to a model based on partnering arrangements. As well as working more closely with other donors to ensure better harmonisation of aid activities, it is making greater use of sector-wide approaches, which involve working jointly with partner governments and other donors in a particular sector. These approaches are rather more complex than the traditional model and it is more difficult to measure the direct impact of Australian support. At the same time, the proposed increases in the aid budget require ‘scaling up’ of programmes, which is likely to attract increased scrutiny and further pressure to demonstrate results and effectiveness.

To support this new way of working, AusAID needed to ensure it had a strong governance framework in place including, crucially, a forward looking strategy for managing change. It also needed to improve its capacity to measure performance in a more complex operating environment and to establish a strong corporate spine to support the delivery of an effective aid programme.

The agency embarked upon a staged restructuring process, which recognised the need for a strong centre in Canberra to set strategic directions, support the aid delivery function and manage the risks posed by the shift to a predominantly offshore operating state, with an expanded role for country offices and an increased number of people located overseas. To strengthen the aid programme’s access to sectoral expertise, a range of technical or thematic groups (e.g. health, economic, gender, education, rural development, infrastructure, governance, environment) were established. In addition to providing technical support, the groups play a critical role in ensuring the contestability of programme design and review.

An Office of Development Effectiveness (ODE) was also established within AusAID to monitor programme quality and effectiveness and provide robust assessment and review processes. ODE reports directly to the Director-General and is oversighted by a Development Effectiveness Steering Committee comprising the Deputy Secretaries of key departments.7 ODE prepares an Annual Review of Development Effectiveness report which assesses the effectiveness of all Australian overseas development assistance. The report is publicly available and is an important mechanism for demonstrating to Australian tax-payers the transparency and accountability of the aid programme.

As well as setting up the Development Effectiveness Steering Committee, the agency reviewed its existing internal management committee structure to ensure that existing committees had the right membership and appropriate terms of reference for the new environment, and that new committees were created in relation to knowledge management and resourcing.

AusAID’s corporate functions were strengthened to support the increased overseas presence, for example, by establishing a dedicated corporate enabling division to strengthen operations in Canberra, and internationally by creating designated corporate positions for all large overseas offices.

AusAID is also mapping its core business processes. Rigid quality assurance, peer review and user-testing methodologies are being applied to produce a standardised, quality controlled set of simple instructions with mandatory steps that apply to all staff in all locations. These processes, which are being progressively released, will manage risk, assure quality, increase efficiency and meet the needs of a mixed workforce in several global localities with cultural and language diversity.

Building block 3—Clear accountability mechanisms

One of the key areas of failure identified in the Equine Influenza Inquiry report was the lack of clear internal accountability structures for adherence to policies and procedures within AQIS. Managers and staff assumed that instructions were being followed and that systems and processes were being adhered to, but failed to undertake the appropriate checks. This extended from the front line operation of the quarantine station to regional senior management being unaware of their responsibility to ensure that key operating instructions were being carried out.

Procedures relating to the quarantine of horses, for example, required farriers, grooms and other visitors to quarantine stations to change and shower before leaving the facility, but did not explicitly state that staff were required to enforce this process, and as a result no one was made to wear protective clothing or shower. Nor was anyone in the regional office clearly responsible for identifying and reporting to the central office that instructions and procedures were being implemented in the region.

In response to the failure of existing accountability structures, Standard Operating Procedures within AQIS are being amended, and additional documentation developed to make it clear what actions are required, and who is responsible for enforcing and reporting compliance. Greater training and more supporting information are also being provided to staff. An SES officer within DAFF has also been given responsibility for the importation of horses into Australia to ensure senior management ownership of the process.

Financial budget reform

In addition to internal accountability structures, agencies also operate within a comprehensive budget accountability framework. In 2007, work was undertaken to improve the financial management and reporting systems of the Government in order to improve the Budget accountability arrangements for all agencies. Portfolio Budget reports have been redesigned to increase transparency and, through the Council of Australian Governments (COAG), the financial arrangements with the states and territories are being overhauled with the focus on measuring performance and achieving outcomes.

Operation Sunlight was implemented to enhance the transparency, accountability and operation of the Budget, and resulted in changes in the 2008–09 Budget. The objectives of Operation Sunlight include: improving the readability and usefulness of Budget papers; improving the transparency of estimates; improving intergovernmental reporting; and tightening the current outcomes and outputs framework.

Budget Paper 1 (Budget Strategy and Outlook) introduced additional information on major programmes and a single set of financial statements. Budget Paper 4 (Agency Resourcing) provided summary level information on Special Appropriations and their estimates, as well as a register of the Special Accounts of agencies. Portfolio Budget Statements were redesigned, to enhance the focus on the planned performance of agencies, and include for the first time an Agency Resource Statement to provide Parliament with information on the resources available to an agency, regardless of the source.

The Government also asked then Senator Andrew Murray (former Senator for WA), to undertake a broad review of budget transparency, including Operation Sunlight.8 Mr Murray’s report is being considered by the Government.

Finance continued the Gateway Review Process (Gateway) for agencies covered by the Financial Management and Accountability Act 1997 to ensure successful delivery of high-risk projects. Twenty-two reviews over 19 projects were conducted in 2007–08 and 54 reviews have been completed since Gateway commenced in July 2006.

A ‘Two Pass’ Budget review process for major non-Defence proposals also commenced in June 2008. It applies to new programme and policy proposals with high risks in terms of technical complexity, skilled ICT workforce supply requirements or schedules, and where the project includes an ICT cost of $10 million or more. The information from the ‘Two Pass’ process will form the basis of an ICT investment database (for tracking activity and identifying agency ICT investment intentions).

A key area of attention in Budget arrangements in recent years has been the effective management of whole of government initiatives, including the availability of cross-agency reporting against government priorities. This issue is dealt with in Chapter 10 of the report.

Commonwealth-State financial relations

A new framework for Commonwealth-State Financial Relations was agreed at the 2008 March COAG meeting and will commence on 1 January 2009 (the new national healthcare agreement will commence on 1 July 2009). All aspects of the new framework will be underpinned by a new Intergovernmental Agreement.

Under the new framework, the Commonwealth will reduce significantly the number of payments for specific purposes, without reducing the overall quantum of payments. The states will continue to receive general revenue assistance, including all GST revenue, but payments for specific purposes (which currently number more than 90) will be rationalised into a much smaller number (five or six). These new specific purpose payments (SPPs), which are to be supported by new national agreements, cover healthcare, early childhood development and schools, vocational education and training, disability services, and affordable housing. National Partnership payments will also be introduced to support the delivery of specified projects by the states and to facilitate or reward reforms of national importance.

The COAG Reform Council will also have an expanded role in relation to performance reporting and the assessment of whether predetermined performance benchmarks have been achieved before National Partnership reward payments are made.

Reforms in procurement

Procurement is one of the tangible ways the public service deals with non-government organisations (NGOs). A well-structured, well-governed, process provides clarity for providers dealing with the APS (regardless of APS agency). This also promotes accountability, the achievement of value for money in procurement decisions, and continual improvement from previous lessons learned.

It is one of the Government’s priorities to ensure it gets value from the expenditure of public monies, not only in terms of price, but also with regard to quality and service. For this to occur, it is important that the public service has the capability to centrally coordinate procurement where aggregated purchasing makes sense, and to manage big ticket procurements—from purchase to implementation to service delivery.

On 10 October 2008, the Government released the revised Commonwealth Procurement Guidelines (CPGs) which take effect from 1 December 2008. The CPGs represent the policy framework under which agencies govern and undertake their own procurement, and inform departments and agencies about the new Coordinated Procurement Contracting Arrangements. The revised CPGs can be found at: <http://www.finance.gov.au/publications/ fmg-series/procurement-guidelines/index.html>.

The framework will apply to Australian Government departments and agencies that are subject to the Financial Management and Accountability Act 1997. Agencies subject to the Commonwealth Authorities and Companies Act 1997 will be able to access coordinated contracts where appropriate. Where they are established, use of coordinated contracts will be mandated for Financial Management and Accountability Act 1997 agencies.

Finance has begun by initiating a number of scoping studies on procurement for both ICT and non-ICT goods and services. The scoping studies themselves will further define the exact goods and services that will be subject to coordinated arrangements.

Apart from ICT, other key areas being examined include:

Innovation and procurement

On 9 September 2008, the National Innovation System Review Panel submitted its report on Australia’s innovation system, Venturousaustralia: Building Strength in Innovation.9 The report is designed to prepare the ground for a partnership— between industry, the research sector and government—dedicated to creating a pervasive culture of innovation.

One of the recommendations of the report focused on improving government procurement practices by:

  • actively managing its ability to enable and demand innovation in procured services and products given its significant presence as a major purchaser
  • being more open to risk sharing in relation to innovation
  • pursuing forward purchasing commitments as a means of fostering more innovative approaches to government procurement
  • working with the States and Territories to implement a pilot small business innovation contracting programme, based on similar programmes in the USA, in order to strengthen the growth of highly innovative firms in Australia. If an advocate for government innovation is created (as recommended separately in the report) it would be envisaged that the position would operate as a source of expertise and provide seed funding for resourcing such approaches to procurement.

AusTender redevelopment

A major upgrade to AusTender, the Australian Government’s web-based procurement information facility, was launched on 1 September 2007 and represents the culmination of more than two years of system development and business process adjustment in collaboration with Australian Government agencies.

AusTender allows agencies to comply more easily with their procurement reporting obligations, and improves access to information about awarded contracts and the transparency of procurement processes in general. As the central source of Australian Government procurement information, AusTender is now positioned to support the planned rationalisation of procurement reporting regimes, consistent with the requirements of the Parliament.

Recordkeeping

Effective recordkeeping is essential in enabling agencies to meet their accountability obligations to the Government, Parliament and the Australian public. The maintenance of effective recordkeeping systems allows agencies to demonstrate that due process has been followed in their actions and decisions. It allows the Government to keep track of what it has done, so that future activities can be examined on the basis of comprehensive and accurate knowledge of what has occurred and what has been decided in the past. It should be a fundamental function of all APS agencies.

The need for effective recordkeeping has been highlighted by ANAO which has, in recent years, undertaken a number of audits to assess the effectiveness of APS recordkeeping practices and by the Management Advisory Committee (MAC) in its 2007 report, Note for File: A Report on Recordkeeping in the Australian Public Service.10 In response to the MAC report’s finding that the Designing and Implementing a Recordkeeping System (DIRKS) process was a barrier to effective recordkeeping in the APS, the National Archives of Australia (NAA) developed a new, more efficient one-step approach to obtaining a records authority. Since the development of this new approach, NAA has assisted 26 agencies to transition from the previous process.

The first project solely to use the new approach, with the Office of the Commonwealth Ombudsman (the Ombudsman), was completed in September 2008. The project confirmed that a single step submission focusing on higher-level core business was quicker and more practical for both the agency and NAA. The new approach, which complies with the Australian and International Standard for Records Management, allows agencies the flexibility to target the categories of records of greatest concern.

This year’s agency and employee surveys continue to monitor the range of measures used to improve recordkeeping based on the recommendations of the most recent ANAO report11 and the views of employees. In 2007–08, almost all agencies (98%) had at least one measure in place to improve recordkeeping with 86% reporting that they had four or more measures in place. Figure 9.1 provides a summary of the recordkeeping measures used by agencies in

2007–08 compared to those used in the previous year. The most common measures were: policies and/or guidance to assist employees understand the information that needs to be created, received and maintained in agency recordkeeping systems (78% of agencies); specific training to assist record creators and users to meet their recordkeeping responsibilities (74%); and contingency arrangements aimed to ensure in a disaster that vital records are available to enable the agency to resume business (73%). Most progress had been made in agencies identifying vital records (electronic and paper) as part of business continuity planning processes (56%, up from 42% in 2006–07).

Although the number of agencies using a recordkeeping strategy that identifies the agency’s needs over the next three to five years had increased (36%, up from 30% in 2006–07), it was still the least common measure.

Figure 9.1: Recordkeeping measures used by agencies, 2006–07 and 2007–08

Chart

(a) One medium agency that did not provide a response to this question is included in the denominator.

Source: Agency survey

In general, large agencies are most likely, and small agencies are least likely, to have a recordkeeping measure in place. In particular, large agencies are much more likely than other agencies to have compliance assessments (i.e. audits) (83% compared to 48% for other agencies); a strategy that addresses current agency-wide recordkeeping responsibilities (83% compared to 52% for other agencies); and a commitment to recordkeeping that has been included in the agency’s high-level strategic documents (e.g. corporate plan) (79% compared to 55% for other agencies). Agencies were also asked about the processes used to store corporate emails, that are useful or important records,12 as the official corporate record in the agency. The responses show that agencies continue to rely on traditional practices designed for paper records with most agencies (90%) printing and filing into registered paper correspondence files. However, there is also recognition that an increasing proportion of records are being created electronically and this can be seen in the continuing growth of saving into a corporate Electronic Document and Records Management (EDRM) system (46% of agencies, up from 40% in 2006–07).

While the use of electronic systems has improved many aspects of work in the APS, it has also made it easy for agencies to adopt more ad hoc or substandard recordkeeping practices. Records stored in hard drives, personal email folders or the shared folders of individual public servants or workgroups is not uncommon. Of concern is that in 2007–08, a high proportion of agencies still store corporate emails that are useful or important records in personal email folders (60%), in shared drives (56%) and in personal drives (32%) (see Figure 9.2). Smaller agencies were particularly prone to this, perhaps reflecting the greater cost of developing more formal recordkeeping systems for small agencies.

Figure 9.2: Agency recordkeeping practices to store corporate emails, 2005–06 to 2007–08

Chart

Source: Agency survey

Consistent with the relatively high number of recordkeeping measures used by agencies to improve recordkeeping, most employees (87%) continue to consider good recordkeeping practices to be very important. Employee views about the support provided by their agency were similar to last year’s with most employees agreeing that their agency provides adequate equipment, facilities and/or storage to enable them to meet their recordkeeping responsibilities (72%), and that they receive appropriate training and/or have access to information that enables them to meet their recordkeeping responsibilities (69%).

On the other hand, although agreement levels were still quite high, employees were slightly less likely to agree that they understand their responsibility in relation to creating and maintaining records (86%, down from 89% in 2006–07) and think that an important aspect of their job is meeting their recordkeeping responsibilities (77%, down from 80% in 2006–07).

Views of employees regarding the time available for recordkeeping are even more negative this year with only 54% agreeing that, given their work demands, they have enough time to meet their recordkeeping responsibilities (down from 58% in 2006–07). Also of concern is the decrease in the proportion of employees who agree with the statement that in the last 12 months, recordkeeping practices in their agency have generally improved (44%, down from 48% in 2006–07). This suggests that even though agencies have been active in adopting measures to improve recordkeeping, their practical implementation may not be so successful.

Views on whether agency recordkeeping practices had improved over the last 12 months varied widely within agencies, with individual agency-specific results ranging from 14% to 66%. Employees’ views also varied between groups. Employees from small agencies tended to be less positive (38%) than those from medium (43%) or large (44%) agencies as were EL and SES employee views compared to those of APS 1–6 employees (38% compared to 46%), and employees in the ACT compared to those outside the ACT (40% compared to 46%).

It seems that, in spite of the high priority agencies have given to recordkeeping and the fact that employees themselves generally recognise the importance of recordkeeping, employees still don’t have enough time to perform these functions adequately nor do they feel that recordkeeping in the agency has improved. Unlike other employee views of recordkeeping, the issue of having enough time to perform this task is consistent across all agency sizes. It may be that employees’ views will improve as more efficient and effective electronic systems are introduced to relieve the burden. Agencies, however, cannot rely solely on this but must continue to provide support and commitment from senior management in order to ensure that recordkeeping becomes an integral part of an agency’s governance processes.

Freedom of InformatIon

It is worth noting in the context of accountability the reforms that the Government will be making to the FOI Act. The Government plans to release an exposure draft of FOI reform legislation for consultation early in 2009. It will include the establishment of an FOI Commissioner and other measures to improve and streamline the FOI Act. As a first step, however, legislation will be introduced in 2008 to abolish conclusive certificates. This will remove the power of Ministers to use such certificates to refuse access to documents despite a decision by the Administrative Appeals Tribunal (AAT) that the documents should be released.

As FOI access is improved, APS agencies will need to take care not to stifle creative and innovative policy debate within the APS. Public servants should not become reluctant to provide frank advice, particularly in writing, to their Minister in case it becomes publicly available or to reduce their recordkeeping standards.

Lobbying Code of Conduct

Recently, a new measure was introduced to manage APS relationships with lobbyists. The Government’s Lobbying Code of Conduct came into operation on 1 July 2008, and is intended to ensure that lobbying activities are carried out ethically and transparently and that Government representatives who are approached by lobbyists are aware of the interests they represent. The Lobbying Code applies only to ‘third party’ lobbyists, that is, those who lobby professionally on behalf of others. It does not apply to people who are directly employed by a particular firm or organisation, nor does it apply to NGOs and charities, for example. The Lobbying Code’s definition of Government representatives covers APS employees and Australian Defence Force (ADF) personnel as well as Ministers and their advisers, so it will apply to all contact APS employees have with lobbyists.

Lobbyists also need to join the new Register of Lobbyists, an online facility that will provide details of the clients and interests the lobbyists represent. Lobbyists will be required to inform the Government representatives they approach that they are lobbyists, that they are registered, the name(s) of their clients and the issues they wish to raise. Failure to comply with the Lobbying Code could mean removal from the Register.

Agencies will need to develop frameworks and processes to manage contracts with lobbyists that ensure the Lobbying Code has been observed. Agency staff will need to be made aware of the Lobbying Code, and their obligations in dealing with lobbyists; they will also need to know about the Register of Lobbyists and how they may access it. Where breaches occur, a process should also be in place for a report to be made to the Secretary of PM&C.

Building block 4—Comprehensive risk management, compliance and assurance systems

Risk management is fundamental to any organisation’s approach to achieving its objectives and improving performance. It involves agencies being aware of the risks that could be potentially harmful to their business, implementing strategies to effectively monitor and deal with these risks, and also identifying and seizing potential opportunities that emerge through risk management activities.

Over the last three years there has been a gradual increase in the proportion of agencies with policies and procedures in place to ensure that appropriate assessments of risk are made. In 2007–08, almost all agencies (97%) had such policies and procedures in place. However, awareness among employees remained consistent with levels in previous years (this year, 71% of employees agreed that their agencies had such policies and procedures in place). A slightly lower proportion of employees (67%) agreed that generally employees in their agency assess risk appropriately—this represents an improvement on the 62% of employees who agreed last year that this was the case.

Comcover’s Risk Management Better Practice Guide

Comcover, which is administered by a branch of the Department of Finance and Deregulation, is the Australian Government’s general insurer. Comcover provides insurance and risk management services to all General Government Sector agencies and the High Court of Australia. A key objective of Comcover is to promote best practice risk management in order to improve policy formulation and the delivery of government programmes and services. To this end, Comcover delivers a range of education and assessment programmes.

In June 2008, Comcover released its Better Practice Guide: Risk Management.13 The Guide provides advice to agencies on the key principles and concepts to be considered when developing and implementing an enterprise-wide approach to the management of risk. The Guide emphasises the importance of developing a culture of positive risk management as well as providing a summary of the key requirements and obligations relating to the management of risk, as contained within the Australian Government financial management framework, including legislation, policy and other related guidance material.

The Better Practice Guide: Risk Management identifies five key elements which underpin an effective framework for managing risk in an agency. It outlines why each element is important and provides practical tips on implementation. The five key elements are:

  • risk management policy and objectives
  • accountability and responsibility
  • integration
  • review and evaluation
  • positive risk culture.

To support the concepts discussed in the Guide, Comcover will continue to develop and release a range of better practice guidance material. This will include case studies and fact sheets providing further practical examples that illustrate and promote good risk management practice within the APS.

The importance for effective compliance and assurance systems was highlighted in the Equine Influenza Inquiry report, which found that operational manuals covering horse quarantine had not been finalised and that staff in key positions were unaware or had not read core operational instructions. The report also found that, while management used the intranet as the key channel for disseminating instructions and procedures, none of the operational staff regarded the intranet as a useful or authoritative source.

As the report’s author, Hon. Ian Callinan stated, ‘the existing systems … including business plans, business plan reviews and any requirements for audit—did not bring to the attention of senior management the fact that nationally promulgated and documented work instructions for the quarantine of horses were not being implemented.’14

DAFF developed an Equine Influenza Inquiry Response Plan to implement the Government’s response to the Equine Influenza Inquiry report. DAFF has adopted a project management approach with the recommendations of the report being translated into a number of project deliverables. By focusing on deliverables rather than recommendations DAFF is better able to track and assess progress with implementation, especially where one body of work addresses multiple recommendations.

The implementation plan articulates clearly who is responsible for achieving each deliverable, and also contains a detailed communication plan for ensuring that the management of animals in quarantine is improved. The full implementation report can be found at: <http://www.daff.gov.au/aqis/about/eiimplementation>

Progress has been made in implementing the Equine Influenza Inquiry Response Plan, including:

As recommended in the Equine Influenza Inquiry report, an independent expert, Professor Peter Shergold AC, has been engaged to oversee the process of implementing the recommendations in the Commissioner’s report and to provide regular external assessments on progress to June 2010. In addition, an external independent audit will be undertaken two years after implementation of the response.

In response to one of the recommendations in the Equine Influenza Inquiry report the Government has instigated a separate review into Australia’s quarantine and biosecurity systems, which is chaired by Roger Beale AO, and is underway.

Conflict of interest

As public servants, it is critical that APS employees are aware of and manage conflict of interest issues. It is also important for agencies to have effective measures in place that help employees achieve this objective. Failure on the part of agencies or employees to manage conflicts of interest is both a real and a reputational risk for the APS.

The agency survey asks agencies to report on the number, type and outcome of Code of Conduct investigations they have undertaken during the previous financial year. One type of investigation is into suspected breaches of Clause 7 of the Code: An APS employee must disclose, and take reasonable steps to avoid, any conflict of interest (real or apparent) in connection with APS employment. Breaches as a proportion of the total number of APS employees remain extremely low (less than 0.05%), suggesting that agencies’ communication of the need for employees to act in accordance with the Code and some high-profile initiatives, such as Centrelink’s 2005–06 clampdown, have been successful in getting the message across to employees.

This outcome may be a result also of agencies’ greater use of measures to ensure compliance with requirements to disclose and avoid conflict of interest. Figure 9.3 below shows that this increasing trend in the use of such measures has been maintained in 2007–08 and in some areas accelerated. This may in part be due to the policy of the current government to revitalise the Westminster tradition and some of the initiatives arising out of it. The large increase in agencies reporting a policy on employment after leaving the APS (62%, compared to an average of around 50% for previous years) may reflect aspects of the new Lobbying Code of Conduct which contains provisions regarding post-separation employment.

Figure 9.3: Measures used by agencies to raise employee awareness of conflict of   interest obligations, 2003–04 to 2007–08

Chart

Source: Agency survey

Almost three-quarters of agencies have four or more measures in place. All large agencies have five or more measures and only one of the smallest agencies reports having no measures at all.

The high level of activity in this area is reflected in employee awareness of these measures. In 2007–08, 74% of employees reported that their agencies had policies and procedures in place to assist employees to manage conflicts of interest.

Building block 5—Strategic planning, performance monitoring and evaluation

All governments seek to have the most effective public service possible to help them meet the challenges of today’s complex policy and service delivery environments. In responding to these challenges, public service agencies need to be agile—to be able to respond quickly to changing agendas and to the fast-moving pace of the operating environment—while operating within the legislative and governance framework.

The APS has a number of processes for examining governance in an agency:

No single benchmark has yet been developed to measure the performance and capabilities of different agencies, and thereby provide the Government with a considered and fair comparative picture of actual and relative agency performance, ideally followed by the establishment of a process for monitoring improvement.

Lessons from ANAO audits

In his speech at the Public Sector Governance Forum on 4 September, Ian McPhee, Auditor-General for Australia had some messages for public sector managers arising from audits undertaken by ANAO:

  • good process delivers good outcomes
  • investment upfront is more cost-effective than ‘recovery action’
  • sound risk management (at the enterprise, divisional and project levels) is no longer discretionary
  • project methodologies are designed to facilitate risk management
  • regular reporting and monitoring allows for performance expectations to be confirmed or adjustments to be made where required
  • in contracting out, ensure the incentives for the private sector are appropriately aligned to the programme or project objectives
  • be alert to cost-shifting in other jurisdictions where federal programmes complement state or local government programmes.15

In October, 2007, the Commission released the ‘Contemporary Government Challenges’ series to draw attention to and stimulate debate about key issues impacting on a sustainable and high-performing APS, and to provide practical ideas and guidance. One of these papers was on agency health.16 The paper outlined that high levels of corporate health are directly linked to high levels of overall performance, which in turn allows agencies to deliver the outcomes required by government.

Case studies were used to identify key indicators of corporate health, and a checklist was developed to assist in identifying early warning signs before organisational performance has been affected. The checklist focused on several matters, including organisational direction, leadership, organisational capability, corporate governance processes, relationships and integrity, and agency culture.

The focus on agency health was reinforced by presentations by Commission staff to the Comcare National Customer Seminar Series which were attended by over 1,000 delegates across Australia. Presentations covered key messages on agency health and relevant findings from the State of the Service report.

UK Capability Reviews Programme

In late 2005, the UK Civil Service launched the Capability Reviews programme as part of the wider reform of the civil service in the UK. The programme is administered from within the Cabinet Office by the Civil Service Capability Group, and consists of all agencies being reviewed every two years by a team of public servants and experienced people from outside government. The programme is designed to assess how well-equipped departments are to meet their delivery challenges and provide targeted support to make any improvements required in three key areas—leadership, strategy and delivery.

Interim reports indicate that most departments have welcomed this process as an opportunity to improve their capabilities. Corporate leadership is an area against which there has been the most progress with senior civil servants being held accountable by the Cabinet Office which, in turn, offers central leadership and support through performance management initiatives benefiting new directors. In an attempt to address gaps in people skills and capabilities, departments have enhanced their human resources sections and introduced new appraisal systems and skills audits. In addition, the Cabinet Office launched a new Skills Strategy for Government in April 2008 to raise skills.

In the area of delivery and performance, while departments are taking a more strategic approach to priorities and relationship management, an understanding of current delivery models is needed to inform policy decisions that involve organisational change. To date, all agencies have been reviewed once and, when the second rounds of agency reviews are undertaken, performance against the initial review findings will be incorporated into the reports, and Secretaries held to account for performance improvements.

An evaluation of the programme in 2007 found that the reviews had provided a catalyst for change, with capability issues being discussed more widely and openly.

Building block 6—Flexible and evolving principles-based systems

CEIs and other such ‘rules’, guidelines and processes that guide the way decisions are made and the way employees go about their work are core parts of any agency’s governance framework. However, an agency that is strictly bound by rules may not be able to respond appropriately to unusual, complex or new circumstances. Unnecessarily detailed rules, instructions and processes can also hinder agency efficiency and effectiveness as outlined in the MAC 2007 report, Reducing Red Tape in the Australian Public Service.17

It is of particular concern that 53% of all SES and EL 2 employees in the APS are of the view that ‘more streamlined administrative processes within my agency’ is the single most important action that would assist their agency to achieve greater efficiency and effectiveness. They rate it as more important than recruiting high-quality staff (47%) and improved ICT (29%)—two of the more generally accepted means of driving higher performance. This means that agencies appear to have scope to achieve considerable gains by reviewing their internal rules, guidelines and processes, that is, their governance processes. Regular reviews of such processes need to be built into governance systems to ensure that they support, rather than hinder, the requirements of the agency and its staff. In addition, the more flexibly they can be expressed, clearly identifying the principles underlying the reason for having such processes, the less frequently they will need to be adjusted.

A number of agencies indicated that they have reviewed their governance structures as a result of machinery of government changes and/or the new government’s reform agenda following the federal election of 2007. Such reviews are made easier within flexible and principles-based governance systems.

Agency governance reviews

Comcare—the restructured organisation is based on creating better information flows and the new business model. The review of governance arrangements is an ongoing activity.

Infrastructure—following the change of government and consequential organisational restructure a review of the delegations framework and membership of the governance committees was undertaken.

Prime Minister and Cabinet—the Department’s structure was revised to better manage the Government’s formal agenda. The financial delegations were amended and the CEIs are under review. Business plans have been reviewed to reflect the changing work environment for PM&C.

Key chapter findings

It is essential for all public servants, regardless of level, to ‘make time available’ to implement effective governance measures, such as recordkeeping, recognising that such core activities can be forgotten, given the many other demands on their time.

Corporate governance is not static and needs to be refined in light of the developments in the environment, and developments directly affecting agencies. Public sector agencies commonly have significant responsibilities for programme delivery and policy advice and, while these responsibilities are interconnected, the span of control can be very broad, underlining the importance of sound governance arrangements.

With the recent reforms being undertaken within the public service there are opportunities for agencies to improve their reporting, both individually and en masse, to better meet the needs of stakeholders, and to facilitate comparative analysis between agencies. Operation Sunlight and the drive to simplify Budget reporting should assist in better specifying outcomes, and in developing performance indicators to enable agencies to identify and measure their contribution to the achievement of outcomes and the efficiency of outputs.

 

1 ANAO and PM&C 2006, Implementation of Programme and Policy Initiatives: Making Implementation Matter, Better Practice Guide, Commonwealth of Australia, Canberra, p. 13, <http://www.anao.gov.au>

2 Australian Public Service Commission 2007, Building Better Governance, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au>

3 I. McPhee (Auditor-General for Australia), Speech to the Australian Institute of Company Directors and The Institute of Internal Auditors—Australia, Canberra, 4 September 2008, p. 2, <http://www.anao.gov.au>

4 Full details of the factor analysis, including details of the methodology and questions used, are set out in Appendix 3.

5 The 12 factors in order of agreement/satisfaction were: Personal Innovation and Flexibility, Understanding Current Role, Current Job, Work Group, Governance and Integrity, Immediate Manager, Work-Life Balance, Learning and Development, Merit and Career Progression, Innovation Culture, Senior Leaders and Agency Culture.

6 I. McPhee (Auditor-General for Australia), Speech to the Australian Institute of Company Directors and The Institute of Internal Auditors—Australia, Canberra, 4 September 2008, p. 8, <http://www.anao.gov.au>

7 PM&C, DFAT, Treasury and Finance.

8 Hon. Lindsay Tanner MP, ‘Address to the CEDA Conference, 2008 State of the Nation’, Canberra, 5 June 2008, p. 4, <http://www.financeminister.gov.au/speeches>

9 Review of the National Innovation System, Venturousaustralia: Building Strength in Innovation (Chair: Dr T. Cutler) (September 2008), <http://www.innovation.gov.au>

10 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>

11 ANAO 2006, Recordkeeping including the Management of Electronic Records, Performance Audit Report No. 6, 2006–07, Commonwealth of Australia, Canberra, <http://www.anao.gov.au>

12 Useful records help the organisation do its business; important records assist the organisation to meet its obligations. Electronic messages sent or received in the performance of an agency’s business are corporate records.

13 For additional information on the Better Practice Guide: Risk Management and other better practice guidance material, see < http://www.finance.gov.au/comcover/better-practice-guide.html>

14 Hon. Ian Callinan 2008, Equine Influenza Inquiry Report, Commonwealth of Australia, Canberra, p. xxii, <http://www.equineinfluenzainquiry.gov.au>

15 I. McPhee (Auditor-General for Australia), Speech to the Australian Institute of Company Directors and The Institute of Internal Auditors—Australia, Canberra, 4 September 2008, <http://www.anao.gov.au>

16 Australian Public Service Commission 2007, Agency Health: Monitoring Agency Health and Improving Performance, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au/publications07/agencyhealth.htm>

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

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