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Part 4: More detailed assessment of agency capability

This section provides an assessment framed by the leadership-strategy-delivery structure of the capability review model.

Assessments were made according to the assessment criteria set out in Figure 4.

Figure 4 - Rating descriptions
Assessment rating Rating image Rating description
Strong
  • Outstanding approach for future delivery in line with the model of capability
  • Clear approach to monitoring and sustaining future capability with supporting evidence and metrics
  • Evidence of learning and benchmarking against peers and other comparators
Well placed
  • Capability gaps are identified and defined
  • Is already making improvements in capability for current and future delivery, and is well placed to do so
  • Is expected to improve further in the short term through practical actions that are planned or already underway
Development area
  • Has weaknesses in capability for current and future delivery and/or has not identified all weaknesses and has no clear mechanism for doing so
  • More action is required to close current capability gaps and deliver improvement over the medium term
Serious concerns
  • Significant weaknesses in capability for current and future delivery that require urgent action
  • Not well placed to address weaknesses in the short or medium term and needs additional action and support to secure effective delivery

The review team's assessment of the Australian Taxation Office's (ATO's) capability is outlined in the tables below.


ATO

 Capability Review - Leadership
Capability Assessment rating Rating image
Set direction Well placed
Motivate people Well placed
Develop people Development Area

ATO

Capability Review - Strategy
Capability Assessment rating Rating image
Outcome-focused strategy Development area
Evidence-based choices Well placed
Collaborate and build common purpose Well placed

ATO

 Capability Review - Delivery
Capability Assessment rating Rating image
Innovative delivery Development area
Plan, resource and prioritise Well placed
Shared commitment and sound delivery models Development area
Manage performance Well placed

4.1 Leadership summary

Set direction

  • The corporate vision is succinct, powerful, understood and supported by employees at all levels.
  • The executive has recognised the need to elaborate where the ATO needs to be in the future and is beginning to position the ATO accordingly. This will require consistent, top-down direction about the ATO's future priorities.
  • While a collegiate culture exists among the senior executive cohort, the leadership needs to further consolidate behaviour in support of 'one ATO'.
  • Changes introduced in recent years have been incremental and driven by operational or business needs, but successful communication about change has not always occurred across the ATO, and implementation has sometimes been inconsistent. Transformational change will depend upon all leaders' and managers'
    ability to articulate the future direction and take the workforce along.

Motivate people

  • Employees have a strong commitment to the ATO's corporate vision. Most report that they enjoy their work and believe it to be of genuine worth to the community. The agency culture is predominantly one of professionalism, technical accuracy and integrity of process.
  • However, there are mixed signals in relation to staff engagement and the management of change.
  • Employees report they are not sufficiently empowered to make appropriate decisions.

Develop people

  • The ATO faces an increasing requirement for specialised technical skills with an ongoing need for technical expertise in ICT systems and sophisticated law and audit skills to enable it to succeed in delivering its core business.
  • The ATO needs to develop greater capability in the area of tax policy advice to ensure better policy outcomes and quality advice to government, and in external communications and the management of sensitive issues.
  • Tension exists between the value placed on highly specialist technical skills and on other people capabilities, including leadership and management. An increased share of learning and development (L&D) resources needs to be directed to 'softer' people capabilities.
  • Succession planning and talent management is mixed across the agency.
  • The performance appraisal system is robust, but the management of under-performance in particular can be problematic.

Comments and ratings against the components of the 'leadership' dimension follow.

Set direction

Guidance Questions
  • Is there a clear, compelling and coherent vision for the future of the organisation? Is this communicated to the whole organisation on a regular basis?
  • Does the leadership work effectively in a culture of teamwork, including working across internal boundaries, seeking out internal expertise, skills and experience?
  • Does the leadership take tough decisions, see these through and show commitment to continuous improvement of delivery outcomes?
  • Does the leadership lead and manage change effectively, addressing and overcoming resistance when it occurs?
Rating

Well placed


From vision to reality

The ATO corporate vision, that 'Australians value their tax and superannuation systems as community assets, where willing participation is recognised as good citizenship', is powerful, succinct and compelling. It describes what the ATO is striving to deliver to the community into the future. Employees
at all levels know the vision, support its intent and understand how it relates to their everyday work. In the 2012 State of the Service employee census, 84 per cent of ATO respondents agreed they have a clear understanding of how their work contributes to the work of the ATO.

The vision is supported by five strategic themes: Encourage, Support, Protect, Enhance, and Champion. These describe the ways in which the ATO will achieve its vision. The challenge for the ATO's executive is to provide greater direction on how these strategic themes will deliver the vision, with greater
focus on how the ATO will operate and engage with customers in the longer term.

Site leadership has successfully contributed to communicating and generating commitment to the corporate vision and promoting cohesion across regions. While the program is at different stages of maturity across the various sites, it needs to continue to evolve from creating a more unified social culture
to establishing greater focus on business cohesion and productivity outcomes. The ATO may wish to consider giving site leadership more authority to drive business performance and assume a greater leadership role for teams located away from their functional leaders.

Many internal communications channels are used to promote corporate messages and these have been very successful in transmitting the vision and strategic themes. However, in some business lines some staff still report that they are unclear on the rationale for and implications of change.
The challenge is for all leaders and managers is to ensure that messages about change are effectively cascaded to all levels of staff.

A move to rationalise the amount of information going to the executive and provide more useful analysis is underway. The executive is positioning itself to make better use of the expertise in the agency, and in this way be better placed to make difficult, enterprise-wide decisions. They need to uniformly
support and communicate the decisions they take, and all leaders should be held to account for implementation.

Leading transformational change

Over the last few years, change in the ATO has been predominantly incremental and driven from the bottom up, in response to operational or business needs. The ATO has a deserved reputation for responding quickly and effectively to externally driven change demanded by the Australian Government. However,
transformational change, initiated by the ATO itself, has been inhibited by a number of factors. These include change fatigue following the implementation of the major Change Program, pressure from other externally driven demands, a culture of risk aversion, a perceived shortage of resources and a search
for consensus. Lack of insistence on timely implementation of decisions has in some instances limited internally driven change. The lesson is that the achievement of transformational change in future will require strong and cohesive messages from executive leadership to drive the innovation required
by the ATO vision.

It is a generally held view by ATO employees and external stakeholders that the current executive has recognised the nature of the changes needed, and that the leadership has an appetite for these changes and the capacity to drive them. To be successful, the executive needs to collaborate effectively
and actively mobilise change. Successful change management will also need the active and positive support of the powerful Band 2 group, which represents a cohort that is very knowledgeable and well respected, with very long tenure; however, this cohort can manifest the ATO tendency to be risk averse
and over process issues, slowing decisions. The Band 2 cohort, sub-plans and business lines should be required through their future plans to support enterprise–wide innovation and take an integrated, outcomes focused approach to supplement top-down initiatives from the ATO Executive and from the
strategic plan.

The tendency to use particular individuals as change agents to manage and deploy change in the organisation reflects the need to invest more broadly in leadership and change management skills.

ATO workplaces are changing, in particular resulting from the impact of technology on service delivery. The results being achieved by leading overseas revenue collection agencies suggest that arguably these changes in the ATO should be more extensive and happening faster. This will require management
initiatives in place to communicate and manage this change, and a number of workplaces have recently taken such initiatives. In particular, the Operations sub-plan has put in place an effective consultation and communication strategy to keep staff informed of predicted changes resulting from upcoming
innovation in delivery.

The 2012 State of the Service employee census shows that only 31 per cent of ATO staff respond positively to the way change is managed in the agency. While this is consistent with the overall APS result (32 per cent) it remains an issue of concern for the ATO.

Motivate people

Guidance Questions
  • Does the leadership create and sustain a unifying culture and set of values and behaviours which promote energy, enthusiasm and pride in the organisation and its vision?
  • Are the leadership visible, outward-looking role models communicating effectively and inspiring the respect, trust, loyalty and confidence of staff and stakeholders?
  • Does the leadership display integrity, confidence and self-awareness in its engagement with staff and stakeholders, actively encouraging, listening to and acting on feedback?
  • Does the leadership display a desire for achieving ambitious results for customers, focusing on impact and outcomes, celebrating achievement and challenging the organisation to improve?
Rating

Well placed


Getting the best from a committed workforce

A committed workforce is as an organisational strength for the ATO. Employees embrace the corporate vision and are proud of the work they do for the community. Site leadership is actively contributing to the development of a positive and unified culture.

The 2011 ATO Staff Engagement Survey shows a strong level of positive staff engagement, reported at 79 per cent. However, there is some evidence that levels of engagement for APS level 1-4 staff are a little lower in comparison to levels for staff at higher classifications.[6] The ATO People business line is engaged in a program of work looking to understand the reasons for these results with a view to improving the way in which staff engage with their workplace.

The ATO also has a relatively high rate of unplanned leave.[7] ATO People is currently undertaking an extensive project on managing unscheduled absences in an effort to more fully understand if this is a reflection of staff engagement, and take measures to
address the problem.

The challenge for the senior executive in influencing the culture in such a large and geographically dispersed organisation is to communicate a single, positive message about the agency's future direction to all employees. All leaders must support and model the behaviours required to effect change
and achieve the agency vision.

Empowering people

An internal ATO survey of some 165 frontline managers and leaders across seven sites reported 'an overwhelming feeling of disempowerment', associated with 'elevated decision making (devaluing of roles) and a culture of blame and risk aversion. A trend indicating people are not feeling trusted and their
expertise is not being recognised was evident.'[8]

Further, it was widely reported by employees at interview that they experience a defensive and risk averse culture where decision making has been escalated upwards, leaving them feeling de-motivated by their inability to progress certain initiatives. Some perceive that employees get little support
if decisions made within their delegation and with diligence exposes the agency to criticism or risk.

The ATO has a reputation among some external stakeholders of having a culture that is risk averse and defensive. Stakeholders consider that ATO decisions are delayed as a result of excessive process and the inability of individuals to commit to an agency view. This can have a negative impact on effective
engagement and relationship building.

To maintain effective people capability, employees need to be trusted to make decisions appropriate to their roles and responsibilities, and equipped to do so through training and development (in addition to formal delegation). Furthermore, employees need to believe they are supported by the ATO for
properly made decisions, through frameworks for risk and issues management.

Guiding people through change

ATO workplaces, especially processing areas and areas providing legal advice, are experiencing significant change. A number of these workplaces have management initiatives in place to maintain a positive workplace environment where employees report being kept informed about change and being able to
continue to contribute to organisational performance. The challenge remains to communicate effectively with all employees affected by change. In the ATO, the majority of staff at the APS 6 level and above hold leadership roles. A L&D strategy for building capability in change management for team
leaders and other leaders will assist in this process.

Develop people

Guidance Questions
  • Are there people with the right skills and leadership across the organisation to deliver your vision and strategy? Does the organisation demonstrate commitment to diversity and equality?
  • Is individuals' performance managed transparently and consistently, rewarding good performance and tackling poor performance? Are individuals' performance objectives aligned with the strategic priorities of the organisation?
  • Does the organisation identify and nurture leadership and management talent in individuals and teams to get the best from everyone? How do you plan effectively for succession in key positions?
  • How do you plan to fill key capability gaps in the organisation and in the delivery system?
Rating

Development area


Building the ATO workforce of the future

Foundation blocks are in place for the ongoing development of the ATO's people capability, including its People Strategy 2012–2015, the L&D Strategic Plan 2012–2013, high-level workforce plans, including at sub-plan level, and recent work on job profiling and capability mapping.

The challenge for the ATO is to build on this work and go on to implement agency-wide workforce planning and integrated L&D strategies that focus on future delivery and have a direct line of sight to the vision. The skills required to enable transformational change, achieve the vision and meet
future community expectations need to be identified. An agency-wide plan then needs to be developed to fill predicted gaps.

Succession planning is conducted for the most part at the business line and team level and its focus and efficacy is mixed. Future people capability will depend on a more proactive, agency- wide approach, particularly for critical positions. Graduates are frequently referred to as a talent pool for
the future, including in the context of succession planning into SES roles. Even though the graduate retention rate is high (over the last six years, 1331 of 1540 graduate recruits have remained with the agency), the graduate program cannot be the only solution for delivering future leadership. Other
talented people should be identified and provided with similar opportunities for career development through planned rotation.[9]

The ATO is facing significant challenges in building its workforce. There will be increased reliance on higher level skills with many of the least skilled jobs disappearing because of automation. In addition, the ATO workforce is ageing, and succession planning will become even more important. It is
critical that the agency has the right skills in strategic human resources to give effect to the necessary changes, and that management practices support the recruitment, development and management of the workforce required.

The skills needed

Technical expertise in ICT systems as well as sophisticated law and audit skills are all critical to the ongoing success of the ATO in delivering its core business.

The recently announced, new integrated tax design business line will require skills in policy advising and the capacity to effectively communicate the ATO's view to the Treasury, the wider APS and government. The machinery-of-government change that moved the policy design function to the Treasury some
10 years ago saw a decline in the capacity of the ATO to influence tax design. ATO employees would also benefit from having access to development opportunities providing a broader, whole-of-government perspective, to improve the ATO's capacity to share information, inform its own strategic direction
and influence whole-of-government initiatives.

Increased mobility, including secondments to government agencies, companies and industry groups would provide a broader level of understanding and interaction between the ATO and its larger stakeholders. The general view, particularly from external stakeholders, is that ATO employees are insulated
from government and industry and would benefit from exposure to an 'other than ATO' perspective.

The ATO needs to improve how it identifies, communicates and manages sensitive issues, including those that are politically sensitive. There have been incidents where a proactive approach to advising the Minister or considering a media or stakeholder response to a particular issue would have seen sensitive
matters handled in a more considered way, with better outcomes achieved, particularly in terms of public perceptions and trust.

A flexible workforce

Given that the ATO is facing considerable change, it will need to increase the share of the L&D budget devoted to the development of a flexible workforce that can adapt to meet future delivery needs. To enable agility in the organisation and progress change, value should be placed on more general
capabilities, such as the ability to think strategically, communicate effectively and build relationships.

The successful management of change in the ATO will also require an increased share of the L&D budget for development of management and leadership capabilities. At present, employees can be appointed to a position for their technical skills, without sufficient account being taken of their management
skills or the need to develop these skills. As a consequence, managers may lack the necessary skills to manage both people and organisational change. Noting that the ATO has management roles across classification levels, there is a particular need to provide development and support strategies for team
leaders.

Maximising the impact of learning and development

The centralisation of the L&D function has enabled an enterprise approach to improving performance and resource allocation. However, reviews from business areas are mixed as to the availability of L&D to suit their needs, and the relevance and efficacy of courses offered. The L&D Strategic
Plan 2012–2013 reflects that the ATO is beginning to more actively engage with business areas to identify their L&D needs.

At the same time, more top-down direction is required so training and development is better aligned with the vision. The development of an overall ATO strategy should help by addressing future workforce needs. The workforce plan would then be positioned to actively develop the ATO workforce in accordance
with that assessment of current and future skills and capability needs. In effect, this requires a more strategic approach from L&D, and requires sub-plans and business lines to consider and integrate their longer-term strategic workforce plan when working in partnership with L&D to identify
capability development requirements.

Managing individual performance

Managing individual performance, including poor performance, is not done consistently well. The ATO's performance management framework makes it clear that corporate plans right down to team plans should be cascaded throughout the organisation to inform expectations for individual performance. However,
the effectiveness of the framework depends on the skills and commitment of individual managers. Some areas have a 'tick and flick' approach to performance appraisal. In some instances employees work in different locations to their direct supervisor which creates particular problems in giving feedback
and mentoring
advice. The risk is that the agency is missing an opportunity to improve performance, and some employees are not seeing positive benefits for their job satisfaction or career development.

Performance management should also identify circumstances in which staff may need to be re- skilled so they can continue to contribute to organisational performance in accordance with the ATO's strategic needs.

The 2012 State of the Service employee census found that only 22 per cent of ATO respondents agreed that the ATO dealt with underperformance effectively. In circumstances of underperformance, managers report that the level of support from the ATO People business line is inconsistent and depends on
the individual case manager. Managers find that the time and effort required to address poor performance is prohibitive. The agency allows processes to stall, taking a risk-avoidance approach which fails to adequately consider that the inability to resolve underperformance can have enormous costs in
time, money, and lost productivity, including through a negative impact on fellow workers and agency culture.

Improving performance management is a critical aspect of leadership and management development and support strategies, and for ensuring appropriate management processes.

4.2 Strategy summary

Outcome-focused strategy

  • The ATO has a strategic statement which outlines the vision, values and strategic themes. However, it serves largely as a high level statement of corporate aspiration, rather than a strategic plan that directs and integrates all other frameworks and processes.
  • The ATO does not yet have a strategic plan articulating at an enterprise level how it will achieve its vision and what its future capability should look like. The executive needs to drive the development of a longer-term, enterprise-wide strategy, that focuses on business- as-usual and on shifts needed
    for the future. To achieve the vision, this strategy needs to articulate direction, priorities, timelines, targets, measures of success and accountabilities.
  • To design what its future service to the community will look like, the ATO should benchmark itself against other leading tax administrations and accelerate whole-of- government approaches to service delivery.
  • The ATO has a set of indicators and service standards that cover outputs across its business. It is possible to map these across its Portfolio Budget Statement and business planning documents. Recently the ATO has been reviewing these indicators through the Embedding ATO Effectiveness Steering Committee
    to embed effectiveness measurement across the ATO. Notwithstanding this work, the ATO, including through its effectiveness measures project, has not with sufficient vigour attended to the challenge of serious monitoring of outcomes.

Evidence-based choices

  • The ATO has strong analytical capabilities and is an APS leader in this field. The expertise of analytics professionals in the Office of the Chief Knowledge Officer is utilised to analyse the wealth of collected data and develop analytical models to improve processes.
  • The ATO has potential to further leverage this capability at a business line and enterprise level to improve business performance by using analytical models.
  • There is a need to improve capability in management reporting to provide the executive with a higher order analysis of available data to inform strategy development.
  • The organisation seeks to deliver against community expectations and there are examples illustrating a level of responsiveness to feedback. In situations where this is not the case, external stakeholders emphasised the need for greater transparency. The ATO needs to consider whether a more targeted
    approach is needed to more effectively understand community expectations and analyse and respond to feedback.

Collaborate and build common purpose

  • The ATO works collaboratively with other government departments and tax administrations. It needs to continue to improve policy advising capability and, in particular, how it works with the Treasury to ensure a greater contribution to better policy outcomes.
  • The ATO has a strong commitment to the principles of consultation, collaboration and co-design. For example, the ATO utilises a first-class simulation centre to test products with clients and re-shape them based on community feedback. However, ATO consultative structures are overly extensive (currently
    more than 60). The ATO has recognised the need to review and streamline these arrangements to ensure they are effective and offer an appropriate return on investment.
  • Stakeholders generally reported a strong relationship between the ATO and the small business sector and that the ATO has taken significant steps to differentiate responses to tax administration for large business (for example, the risk differentiation framework). Whilst recognising the need to defend
    against aggressive tax positions, stakeholders encouraged the ATO to continue to work with large business to improve timely advice and a deeper understanding the commercial environment.

Comments and ratings against the components of the 'strategy' dimension follow.

Outcome focused strategy

Guidance Questions
  • Does the organisation have a clear, coherent and achievable strategy with a single, overarching set of challenging outcomes, aims, objectives and measures of success?
  • Is the strategy clear about what success looks like and focused on improving the overall quality of life for customers and benefiting the nation?
  • Is the strategy kept up to date, seizing opportunities when circumstances change?
  • Does the organisation work with political leadership to develop strategy and ensure appropriate trade-offs between priority outcomes?
Rating

Development area


Developing a strategy to deliver against the vision into the future

Whilst the vision is clear and embraced by staff, the ATO does not yet have a strategic plan that articulates how it will achieve its vision. While the strategic statement contains five strategic themes, these are high level and not, of themselves, a strategy. As its highest priority in terms of positioning
the organisation for the future, the executive needs to drive the development of a challenging top-down, longer-term, enterprise-wide strategy including targets and milestones, that focuses not only on business-as-usual, but also on the capability shifts needed. The absence of a strong statement of enterprise
direction, priorities and performance expectations presents the risk that staff interpret the vision from an individual or business area perspective, which may not deliver the alignment and capability the organisation needs. Enterprise strategy should be informed by an integrated view of the organisation
from a risk and intelligence perspective and then, in turn, drive planning frameworks.

The ATO has recognised the importance of integrating its governance mechanisms, including risk, intelligence, planning, measurement and reporting processes to achieve strategic outcomes, and is moving to do so. However, without clear direction from a more detailed, longer-termstrategic plan for the
ATO as a whole, planning documents covering workforce development, ICT investment and risk planning do not have a clear line of sight to agency wide objectives that will achieve the vision, and are not sufficiently well integrated with other planning documents. Similarly, in the absence of an enterprise
strategic plan, the business lines and subplans are currently at different stages of maturity in their development of an approach for the future. The sub-plan overviews should link directly to the enterprise strategy and address how specified outcomes at least three years ahead will be achieved, rather
than being limited to a list of tasks for the next year.

Some examples of lower-level strategies developed at sub-plan or business line level are broadly aligned with the vision. For example, the tailored approach to debt collection during the global financial crisis aligned with the strategic theme of encouraging high levels of willing community participation
in the system by taking taxpayer circumstances into account. However, some staff have indicated that the annual planning process for business areas largely involves retrofitting existing strategies to the vision rather than having the vision shape the way the organisation approaches its work.

The ATO was previously considered to be at the forefront of tax administration globally, but according to OECD data, appears to be falling behind other leading tax administrators in some areas. It needs to focus on continuous improvement and transformative change to achieve its vision of a system where
Australians value their tax and superannuation systems as community assets and where willing participation is recognised as good citizenship. Given continuing advancements in technology, globalisation and increasing complexity of taxpayers' arrangements, it is imperative that the ATO continues to invest
in innovative capability. Failing to do so will effectively see the ATO go backwards in terms of effective tax administration, particularly its ability to manage compliance risk in an increasingly global and complex tax environment.

A greater focus on leveraging 'natural systems' already in place in taxpayers' business and personal lives has the potential make the tax system easier for taxpayers to navigate and comply whilst achieving significant compliance dividends for the ATO. For example, leveraging the 'natural system' that
businesses use to meet their payroll obligations to receive information and payment in regards to taxation obligations has the benefit of convenience for the taxpayer and the benefit of automatic compliance for the ATO. Future capability should also respond to whole-of-government directions including
a single point of access for the community to connect with government lectronically. In progressing this, it should be possible to further leverage the existing capability of Standard Business Reporting, which provides a single point of access through which businesses may interact with participating
government agencies.

A well-articulated strategy for business transformation should guide decisions about investment, innovation and performance expectations. The strategy should authorise innovation which is critical to the future state and success of the organisation. This requires the executive to articulate what future
success looks like in terms of the effectiveness, not just the efficiency, of the organisation. The ATO has a set of indicators and service standards that cover outputs across its business. It is possible to map these across its Portfolio Budget Statement and business planning documents. Recently the
ATO has been reviewing these indicators through the Embedding ATO Effectiveness Steering Committee. This is a useful activity, and revised indicators to be published shortly in the 2013 Portfolio Budget Statement will show the benefit of attention to issues of specificity and utility. Notwithstanding
this work the ATO, including through its effectiveness measures project, has not with sufficient vigour attended to the challenge of serious monitoring of outcomes. For example, monitoring program effectiveness against outcomes would allow much earlier identification of threats to revenue collection,
the core responsibility of the ATO.

The ATO is focussed on delivering against immediate priorities. This is reflected in its more detailed planning, which is undertaken on an annual cycle and largely concentrates on business- as-usual, with some small shifts to manage emerging or year-specific issues. The ATO has developed a draft three-year
plan as a working document and is currently seeking feedback on it from Band 2 SES. While the draft plan proposes a three-year outlook, it remains focused on incremental change to business-as-usual rather than on transformative change. Indeed, reported tasks differ little from one year to the next.

In summary, the executive needs to articulate what the ATO should look like in 2020 as well as how it will create capacity to make the changes needed to get there, including changes needed to the ICT strategy to create required capacity. The current incremental approach to strategy will inhibit the
ATO's ability to continue to meet the service expectations of the community and respond to increasing complexity in compliance risks. The organisation needs to balance current delivery with taking actions today that will make a difference tomorrow, and needs to align resources in a way that helps it
drive transformational change.

Evidence-based choices

Guidance Questions
  • Are policies and programs customer focused and developed with customer involvement and insight from the earliest stages? Does the organisation understand and respond to customers' needs and opinions?
  • Does the organisation ensure that vision and strategy are informed by sound use of timely evidence and analysis?
  • Does the organisation identify future trends, plan for them and choose among the range of options available?
  • Does the organisation evaluate and measure outcomes and ensure that lessons learned are fed back through the strategy process?
Rating

Well placed


Harnessing analytical capability

Given the fiscal restraints that will likely face all government agencies, it is becoming imperative to find more effective and efficient ways of working. In a self-assessment tax system that has in excess of 14.9 million taxpayers, it is crucial to use available information to identify efficient ways
of focusing the ATO's resources to administer the tax and superannuation systems.

The ATO's investment in analytics, including targeted recruitment of highly talented analytics professionals, has resulted in a strong capability in this field. This has helped the ATO develop sophisticated analytical models to better target compliance activities, reduce unnecessary impacts on taxpayers
and identify taxpayers who need assistance in complying with their obligations. The ATO's work in this field places it as a leader in the APS and, as a result, the ATO has been selected to lead a whole-of-government Data Analytics Centre of Excellence.

The application of the ATO's analytical expertise is best demonstrated in its analysis of the wealth of collected data and development of analytical models to refine business-as-usual processes, such as compliance and debt collection strategies. For example, the models that determine the likelihood
of payment allow collection activities to focus on debts more likely to remain unpaid in the absence of proactive collection activity. Other examples include the ATO's use of data matching that links information stored by various government agencies, call centre voice analytics to improve client-focused
delivery, and refined audit case selections to limit unnecessary disruptions to taxpayers.

Given its investment in analytics, there is potential to further leverage this ATO capability at a business line and enterprise level to improve business performance. For example, analytics may be useful in helping the ATO address issues of corporate performance, such as high unplanned leave rates,
and develop and report on measures of effectiveness. Further, analytics capability could be better harnessed to improve management reporting and the early identification of issues that have an impact on organisational performance.

Understanding and delivering against community expectations

Given the vision is one of a system where the community values the tax and superannuation systems as community assets, a level of alignment between the ATO's approach and community expectations will be critical in implementing a strategy to deliver the vision.

The vision and strategic themes are strongly community focused, with the emphasis now generally being on a tax system that the community values as an asset, rather than one focused purely on revenue collection. The ATO seeks to deliver against community expectations. This permeates through many strategies
adopted in administering the tax system. For example, the ATO has exercised a compassionate approach following natural disasters, providing priority refund processing and additional time to meet taxation obligations (including the lodgement of forms and payment of debts) so taxpayers can concentrate
on the more immediate and pressing issues that a natural disaster presents, and tend to tax affairs later. The ATO also assists taxpayers to reconstruct their records if these were destroyed in a natural disaster.

Stakeholder feedback indicates that a more targeted approach is needed to build organisational understanding of community expectations. For example, the ATO's ICT electronic service offering has fallen behind community expectations. Additionally, the ATO has been challenged by the corporate sector
at times about the time taken to provide advice on technical issues. While it is important to provide well-considered advice, timeliness is an integral part of the quality of advice. The organisation seems to have polarised views about measures of performance for timeliness and technical accuracy. Both
are important and so the ATO needs to work with the community to find better ways to deliver accurate, timely advice.

The ATO has undertaken research to better understand community expectations and in response will be implementing some new service standards from 1 July 2013. These changes will be positive, providing they are informed by comprehensive analysis of community expectations and implementation of the broader
change needed to more closely align the ATO's administration with community expectations.

Collaborate and build common purpose

Guidance Questions
  • Does the organisation work with others in government and beyond to develop strategy and policy collectively to address cross-cutting issues?
  • Does the organisation involve partners and stakeholders from the earliest stages of policy development and learn from their experience?
  • Does the organisation ensure the agency's strategies and policies are consistent with those of other agencies?
  • Does the organisation develop and generate common ownership of the strategy with political leadership, delivery partners and citizens?
Rating

Well placed


Connectedness across government

Given the ATO's community-facing role and its strong understanding of the operation of the taxation and superannuation systems, it is well placed to see the impacts of policy on the ground and, accordingly, to contribute to better tax policy outcomes. The ATO's established relationship with the Treasury
is articulated through a recently revised protocol seeking to ensure earlier ATO involvement in the policy development process. Stakeholders acknowledged that the ATO's policy relationship with Treasury is critical to effective tax design and implementation. Although there have been substantial improvements
in the last year or so, the ATO has recognised it needs to further increase its policy advising capability so it can fully engage with the Treasury on tax design.

Notwithstanding the independence of the ATO, the organisation also needs to be able to understand the policy and political environment in which tax law operates so it can improve the quality of advice to government and influence good tax design. The ATO needs to continue to build its capability to
identify potential or actual revenue leakage beyond policy intent, strengthen evidentiary support for raising such issues and communicate these issues in a more timely and effective way. While there are examples of the ATO identifying substantiated threats to the revenue base and communicating effectively
with government about these threats and possible solutions, this needs to become common practice. In response, the ATO is restructuring to co-locate tax design-related functions and staff to enable the Second Commissioner, Law to take a more strategic approach to influencing tax law design.

The ATO has effective relationships across government and with other tax administrations internationally. It makes a significant contribution to government, particularly where there is a joint project, mutual client base or mutual goal. Other agencies speak highly of the productive relationships they
have with the ATO.

Consultation and responding to feedback

The ATO is committed to the principles of collaboration, consultation and co-design. Consultation mechanisms include consultative forums, community surveys and a first- class simulation centre, which is used across government for user-testing products with the community. The ATO also has extensive
external scrutiny arrangements, including feedback from the Inspector-General of Taxation, Auditor-General, Commonwealth Ombudsman and the Joint Committee of Public Accounts and Audit. Other mechanisms, such as community surveys and complaints, provide the ATO with a strong source of intelligence.

While there are examples of genuine consultation and examples where consultative committees have given rise to innovative and collaborative approaches to issues, feedback from external stakeholders indicates there is scope to improve the way the ATO consults with the community. A number of external
stakeholders are represented on multiple consultative structures and while they welcome the opportunity to contribute, they believe there is merit in streamlining these arrangements. Accordingly, the ATO's review of consultative arrangements is timely as the number of committees, their structure and
mandates could be rationalised to improve effectiveness.

Views are mixed about the degree to which the ATO is responsive to feedback. As a positive example, in response to concerns that the community was unable to access the ATO's tax technical experts, the ATO moved technical experts to front line areas to provide opportunities for engagement with taxpayers
earlier. At a hearing before the Joint Committee of Public Accounts and Audit, the Commonwealth Ombudsman, Auditor-General and community representatives who appeared as witnesses advised of a high level of responsiveness to feedback. In contrast, in his submission to the Tax Forum, the Inspector-General
of Taxation noted that:

"… consultative forums only provide an input to ATO decision-making, allowing stakeholders to identify and raise problems and concerns. However, there is some dissatisfaction with the degree to which such input is reflected in the final outcome."

External stakeholders indicated that while the ATO is generally open and honest about its intended approach, and will consult on the way its approach will operate in practice, sometimes it comes to a consultation with a view already formed and it is challenging to refine the approach through genuine
consultation. Some scrutineers and members of consultative forums advised that the ATO can be dismissive of feedback, particularly where it conflicts with a strongly entrenched view that the ATO holds about its own performance or client expectations. This presents an opportunity to more consistently
consider and respond to community feedback and proactively manage emerging issues. Given the ATO's important role in ensuring the integrity of the tax system, there will be situations requiring it to act other than in accordance with community feedback. The ATO needs to clearly communicate when this
is the case so stakeholders understand why their feedback has not been reflected.

Strategically managing relationships with stakeholders

Stakeholder feedback indicated that the ATO has developed a strong relationship with the small business community. However, feedback was mixed about the extent to which the ATO was seen to understand and respond to the commercial realities of the large business community. The ATO has made significant
changes to the way it manages risk and engages with large business. Initiatives include Annual Compliance Arrangements, pre-assessment reviews, use of alternative dispute resolution, the establishment of independent appeals and the application of (and open conversations regarding) the risk differentiation
framework. In particular, external feedback indicates that Annual Compliance Arrangements have significantly improved the relationship between participating large businesses and the ATO. Formerly adversarial relationships are transforming into open and transparent ones with benefits for the ATO with
compliance and benefits for the large business with certainty of tax affairs.

4.3 Delivery summary

Innovative delivery

  • The ATO has an enterprise innovation framework in place to support innovation. While it references transformational change, it essentially facilitates bottom-up, continuous process improvement. Staff appreciate the opportunity to put ideas forward for consideration.
  • Once a highly innovative agency, the ATO's appetite for progressing transformational change has diminished. A number of factors have contributed to this, but a sense of the opportunity cost of the status quo is needed. It is not an option to stand still.
  • Greater top-down direction to guide innovative thinking and streamline idea assessment is needed. A cultural and process shift is also required to gain traction more quickly for new ideas that are consistent with this top-down direction.
  • Notwithstanding the above, many of the ATO's business areas are exploring innovative ways to re-engineer their business approaches to improve service outcomes and performance.

Plan, resource and prioritise

  • The ATO's vast, geographically dispersed workforce manages its core work very well, with the majority of revenue received on time, voluntarily and without complaint.
  • The agency is highly effective at delivering under pressure when problems and objectives are clearly defined, especially when an external challenge is imposed. It is less able to do this to achieve internally generated change.
  • Business planning is task focused and effective at supporting short-term delivery of business-as-usual, operational activities. While line-of-sight exists from business plans to strategic themes, plans are not sufficiently driven by the intent of these themes and could be improved by including clear
    implementation steps and measurement plans.
  • While the ability to move resources to address strategic shifts or work pressures exists internally in some sub-plans, the ATO is yet to achieve effective resource management at an enterprise level. The Resource Forum requires greater support and direction from the executive on ATO priorities to effectively
    manage the significant shifts of resources at an enterprise level that transformational change might well involve.
  • The ATO needs to get better at feeding back the opportunity costs of new policy ideas to government, to stabilise its operating environment and manage demand on its systems and people management.

Shared commitment and sound delivery models

  • The ATO will be at its best when it is clear in its identity as a service provider. This does not need to undermine its role as a regulator and tax administrator but it will provide a unifying set of standards to support professional dealings with taxpayers and efforts to improve the experience of
    the great majority of its clients.
  • The ATO has been central to whole-of-government approaches to increase the ease of citizens' engagement with government. Similarly, efforts to leverage natural systems to improve service offerings and reduce compliance burden can improve efficiency and effectiveness, as has been achieved to a significant
    extent in other jurisdictions. The organisation needs to commit resources and the executive needs to show leadership for a move in this direction if this is to be achieved.
  • The ATO is shifting towards an enterprise approach to many aspects of its business. This has seen a shift to a national business model as well as the implementation of central ICT systems, centralised corporate functions and reporting. This is positive and will be necessary for transformational change.
  • Site leadership has achieved considerable benefits for the ATO. This model needs to continue to evolve for greater focus on business cohesion and performance.
  • While ATO's governance arrangements structures are well embedded, streamlining is required to simplify the elaborate corporate management practice statements and instructions and replace them with a more principles-based approach to decision making which will allow staff to develop and exercise judgement.
    The number, effectiveness and mandate of internal committees also needs review.
  • ICT priority setting requires better management of demand and capacity, with a whole-of- system, whole-of-organisation approach needed to increase business-as-usual efficiency and deliver service efficiencies in line with better practice.

Manage performance

  • The ATO has strong financial management, internal audit and business continuity approaches.
  • The ATO has an extensive set of aligned and cascading performance measures in place, with a substantial body of reporting activities undertaken at all levels of the organisation.
  • There is a strong internal analytics capability in the Office of the Chief Knowledge Officer, including real-time access to data analysis for monitoring performance. However, this information is not utilised by the executive for this purpose.
  • The ATO is attempting to streamline, simplify and advance organisational reporting to support management decision making. To ensure that executive are provided with useful reports, this work must include the products of the Office of the Chief Knowledge Officer and an independent and objective assessment
    of the data this team has marshalled to strengthen performance management of day-to-day business and transformational change.
  • Staff and managers need to be better equipped to manage risk so as to improve efficiency and timeliness of decision making.

Comments and ratings against the components of the 'delivery' dimension follow.

Innovative delivery

Guidance Questions
  • Does the organisation have the structures, people capacity and enabling systems required to support appropriate innovation and manage it effectively?
  • Does the leadership empower and incentivise the organisation and its partners to innovate and learn from each other, and the front line, to improve delivery?
  • Is innovation explicitly linked to core business, underpinned by a coherent innovation strategy and an effective approach towards risk management?
  • Does the organisation evaluate the success and added value of innovation, using the results to make resource prioritisation decisions and inform future innovation?
Rating

Development area

Delivering innovative solutions

The ATO has previously implemented various innovative approaches, such as:

  • developing e-tax and pre-filling tax returns
  • developing the tax practitioners' portal
  • introducing the compliance model and risk differentiation framework to differentiate engagement with taxpayers based on an assessment of likelihood and consequences of non-compliance
  • implementing Annual Compliance Arrangements with large business to exchange information and provide practical certainty about tax outcomes that underpin commercial decisions.

Many areas in the ATO continue to identify and explore innovative ways to re-engineer their business approaches, to increase service outcomes, realise efficiencies and improve effectiveness. Current significant examples include leveraging natural systems, making greater use of analytics, increasingly
digitising service offerings, and working with other agencies towards a single point of access for dealing with government.

A significant number of internal and external interviewees suggested the ATO would benefit from a cultural paradigm shift to support greater innovation, especially top-down, executive- driven innovation. This should include ATO officers proactively discussing reforms with the Treasury, becoming more
forward and outward looking, streamlining internal and external consultation, embracing emerging technologies and encouraging fresh thinking. It should also involve greater mobility between the broader APS and private sector.

Internal and external interviewees also noted the importance for the ATO to continue to innovate in areas where it has previously held a comparative advantage, such as with electronic service offerings and consultative arrangements. This will help the ATO to be a world leader in these areas. Some OECD
publications, such as the forthcoming Tax Administration in Advanced and Emerging Economies: Comparative Information Series 2013, show that the ATO is starting to lag behind other revenue offices internationally.

Idea assessment

Substantial internal commentary noted that it can take years before a new idea or innovation gains sufficient traction and support within the ATO to be progressed beyond the idea stage. This is often due to the time it takes to gain cultural acceptance, identify and allocate resources, and define idea,
scoping and implementation responsibilities. This may be exacerbated when an idea is outside of existing ATO paradigms. The ATO's current approach is to progress senior approval for innovative activities through its Corporate Design Forum (a committee of SES Band 2 officers). Due to the large number
of people involved, however, this impedes fast decision making and is an example of over-consultation. The ATO would benefit from a more streamlined process for top-down innovation to accelerate decision making.

To streamline idea assessment, the ATO could consider greater top-down, or centralised, direction and decision making to identify key areas where it should explore major innovative business solutions, who is responsible for scoping and presenting ideas, and who is responsible for approving the transition
from idea to implementation. These ideas should flow from the long- term strategic plan and clear executive mandate for specific outcomes and reforms. The ATO's current process is often extended due to significant internal discussion, consultation in pursuit of internal consensus and the need for broad
support at senior levels before an idea can progress. While democratic, this approach hinders organisational agility and may be drawn out due to conflicting perspectives of organisational direction. The need for a streamlined approach to innovation is also highlighted when the ATO is compared to other
revenue offices. For example, the United Kingdom's Her Majesty's Revenue and Customs department recently implemented real-time tax reporting for employee-related obligations, while the ATO has been internally considering this idea for a number of years.

Business improvement

The ATO has a solid approach to bottom-up innovation with a formal enterprise innovation framework, an ICT innovation system through which staff can submit ideas, and business line campaigns designed to gather staff ideas on specific issues, such as unplanned leave and staff development needs. Many
staff below SES level commented that they appreciate the opportunity to contribute to this bottom-up approach to innovation. Substantial internal commentary also noted that a full ICT forward work program regularly hinders the ability to implement staff ideas, including recent ones that won ATO innovation
prizes for the significant benefits they could deliver to the agency.

Realising the benefits of innovation

Further streamlining the ATO's approach to innovation is especially important to ensure the organisation is well placed in key, rapidly evolving areas such as internal and external ICT, changing workforce needs, and global shifts towards increasingly digitised service delivery. In turn, faster implementation
of new ideas and solutions will support the ATO to become more agile, responsive and prepared for future and external challenges. These challenges include aligning with whole-of-government service delivery approaches, managing ageing workforce demographics, dealing with advanced approaches to tax avoidance,
delivering against increasing government expectations, examining the impact of increasing globalisation on business reporting and dealing with other challenges associated with a rapidly evolving world.

Plan, resource and prioritise

Guidance Questions
  • Do business planning processes effectively prioritise and sequence deliverables to focus on delivery of strategic outcomes? Are tough decisions made on trade-offs between priority outcomes when appropriate?
  • Are delivery plans robust, consistent and aligned with the strategy? Taken together will they effectively deliver all of the strategic outcomes?
  • Is effective control of the organisation's resources maintained? Do delivery plans include key drivers of cost, with financial implications clearly considered and suitable levels of financial flexibility within the organisation?
  • Are delivery plans and programs effectively managed and regularly reviewed?
Rating

Well placed


Business-as-usual

The ATO's vast, geographically dispersed workforce manages its core work well, with almost all revenue received on time, voluntarily and without complaint. Each year, the ATO successfully manages a significant influx of work at 'Tax Time'[10] with a high level of consistency and integrity. Its approach to planning supports its ability to manage business-as-usual and the peaks and troughs of work that occur each year. The ATO has
proven highly effective at tracking work and moving resources and work within sub-plans to meet demands. However corporate processes are less able to support this form of prioritisation and resource sharing between sub-plans.

There is internal and external praise for the ATO's ability to deliver the government's policy agenda, especially when under externally-imposed time pressures to deliver defined results. The prevailing view in the ATO is that this represents its ability to 'deliver in a crisis.' The ATO would do well
to use this approach to help build its capability to deliver internally-driven reforms and improve the processes that people seek to work around when managing a crisis. The ATO needs to shorten decision-making times and streamline processes between idea, decision and action.

Annual planning

Annual planning is task oriented and focused on delivering business-as-usual activities. While planned tasks are mapped to high-level strategic objectives, plans are not necessarily driven by these objectives, nor do they reflect their intent. In the absence of an enterprise-wide, long-term strategy,
it is difficult for the ATO's planning processes to identify and plan for new initiatives.

Annual planning is not universally recognised internally as part of the ATO's overarching planning framework. Many business lines conduct it as a stand-alone task and do not always align it with strategic intent. An improved planning framework should be driven by strategy and integrate risk, people,
financial and measurement considerations.

Project management

The ATO's strong project management framework has been broken into tiers based on size, cost, risk and complexity. Roles, responsibilities and governance structures are clearly defined and tailored to their particular tiers. The suite of templates and guidance materials is clear and well laid out.
While on the whole, management of project deliverables appears strong, more work is required in some areas to ensure change management and communication is an integral part of project management and to ensure internal and external stakeholders are appropriately consulted, informed and prepared for changes
that may result from a project's implementation.

Setting priorities

The ATO's first priority is to deliver its commitments to government. However, the ATO also needs to shift and address critical corporate capability requirements, which are crucial for its future. Some of these requirements have already fallen behind internal and external expectations (such as electronic
service offerings) and need to catch up.

The ATO's 'can do' culture can prevent it from stopping some tasks as new initiatives are added, even when these tasks may no longer be relevant to present priorities. The ATO may wish to consider conducting a review of the work of its business areas to ensure resources are focused on high-value activities.
Similarly the ATO needs to get better at feeding back the opportunity costs of new policy ideas to government, to stabilise its operating environment and manage demand on its system and people management sufficient to drive a greater proportion of internally generated and longer term strategic initiatives.

Historically, the ATO has been able to offset its budget pressures through additional external funding for increased revenue collection activities. Given that tight fiscal circumstances are expected to continue, the ATO may be better placed to mitigate risk in its internal budget through efficiencies,
rather than reliance on additional external funding. Where additional funding is accessed, greater return on investment would be gained by increasing expenditure on capability to support long-term delivery.

Decisions on shifts of resources are made through a Resource Forum. Evidence suggests, however, that the forum does not have sufficient authority to make strategic shifts. This is compounded by a lack of support from the sub-plans that are in place. In the past this has resulted in large stop—start
spending of the enterprise budget. Some improvements have been made to reallocate resources across the ATO, though processes for doing so could be made more agile.
Strong leadership will be important to give the Resource Forum direction, articulating ATO priorities and ensuring sub-plans operate with the 'one ATO' mind set.

Shared commitment and sound delivery models

Guidance Questions
  • Does the organisation have clear and well understood delivery models which will deliver the agency's strategic outcomes across boundaries?
  • Does the organisation identify and agree roles, responsibilities and accountabilities for delivery within those models including with third parties? Are they well understood and supported by appropriate rewards, incentives and governance arrangements?
  • Does the organisation engage, align and enthuse partners in other agencies and across the delivery model to work together to deliver? Is there shared commitment among them to remove obstacles to effective joint working?
  • Does the organisation ensure the effectiveness of delivery agents?
Rating

Development area


ATO's operating model

The ATO delivers its work through a national program management model and has started to take an enterprise approach to delivering corporate outcomes across its business lines (for example, risk management, reporting and L&D).

The Change Program was a large-scale business transformation intended to support the ATO's shift to an enterprise approach. A large component of this was the implementation of a central enterprise processing, case management and customer relationship management system (Siebel), which replaced more
than 180 stand-alone systems.

While the implementation of Siebel was a success (notwithstanding technical issues when it was released) the Change Program did not completely fulfil its intended outcome of transforming business. Interviewees have described instances of staff using the system as they would have used their old systems
(that is, business processes were not transformed), of areas continuing to use legacy systems replaced by Siebel and of people having to manually extrapolate and manipulate data to create bespoke reports because system-generated ones do not provide executive with the information they require. More work
is required in redesigning business processes, transforming people capability and better leveraging the reporting capabilities of Siebel.

Location strategy

As a geographically dispersed organisation with many functions, the ATO can offer its staff many different job opportunities and in various locations. However, lack of guidance on optimum staff location by function and business need has enabled staff location to be driven by personal preference. In
many instances, small numbers of staff are located away from their teams. These arrangements are not as effective as co-location is because they create additional cost implications and challenges for staff supervision, performance management and wellbeing and engagement. The ATO may benefit from greater
rationalisation of functions between sites, with a strategy on how the ATO can best leverage its geographically-dispersed locations to deliver business outcomes, with sufficient staff consultation and job matching.

Consistency versus client centric service delivery

The ATO has a plethora of defined processes, to support consistent delivery across a vast, geographically dispersed workforce. Its customer service areas are well scripted and this enables the ATO to deliver consistent advice and support to the community. It has, however, been suggested that the level
of prescription does not provide adequate flexibility for staff to exercise, or build the capability to, exercise judgement. This is especially important when ATO officers need to tailor service delivery to individual client circumstances.

The Debt business line has started a process to replace some prescriptive call-centre scripts with broader client service guidelines. This is intended to provide staff with the support they need to exercise judgement while catering service to individual client needs. Achieving this shift will require
support from leaders to empower and support staff to make decisions based more on principle and judgment. Other business areas may benefit from considering such an approach, though balance will be needed to ensure consistent approaches are followed.

This direction will require a less risk averse culture and, therefore, greater capacity for risk analysis and management by staff and middle management. The reported sense of disempowerment by staff and managers in parts of the ATO also speaks to this need. The ATO will require much greater risk management
skills if it is to respond to calls from some external interlocutors for more pragmatic moves in this direction.

Governance arrangements

The review team received feedback suggesting that the ATO has a high degree of inefficient internal bureaucracy, including overly prescribed processes and complicated governance structures. Corporate management practice statements and instructions are cumbersome and inflexible. Substantial efficiencies
could be realised by streamlining internal processes, systems and reporting to focus staff efforts on higher-value activities.

The overly prescribed approach to management has deskilled employee ability to exercise judgment and apply common sense. There is a view that staff lack support to step outside of process to make and commit to decisions. This is played out in the elevation of decision making and delay in responsiveness
to providing technical advice. Staff need to be better equipped and supported to exercise judgement and manage risk so they can improve timeliness of decision making and providing advice to the community.

The efficacy of internal committees is mixed. These committees have proliferated as a way of sharing information across disparate work areas. Feedback suggests, however, that the balance needs to shift from sharing information to discussing matters of strategy, and that greater direction and support
is required from the executive to ensure committees have, and are able to exercise, appropriate authority. The ATO may wish to consider reviewing and rationalising its internal committees so they:

  • deliver intended outcomes and achieve a suitable return on investment
  • have a strategic focus
  • are not used in place of more suitable information sharing mechanisms
  • are time-bound, for specific purposes.

ICT direction, prioritisation and agility

The ATO delivers a large ICT agenda with constant pressure to meet government imperatives and service delivery expectations. Previously considered to be at the forefront of technology in the Australian Government, the ATO has now fallen behind other agencies. Internal and external stakeholders expressed
frustration with ICT responsiveness and service offerings.

Internally, frustrations exist with the currency of some corporate systems and the latency in implementing incremental system changes (fixes and improvements). Examples of where the ATO is falling behind better practice include:

  • a cumbersome, hard-to-navigate and out-of-date intranet
  • the absence of an electronic records and document management system for ATO corporate records (noting that community tax records are carefully managed in central systems)
  • ageing desktop software.

While internal interlocutors recognise the need to improve these systems, they all form part of an ICT back-log which the ATO is struggling to overcome.

Externally there is praise for technology-based initiatives the ATO has delivered in the past, but this type of progress appears to have stalled. Overwhelmingly, external feedback has suggested that technology service offerings have fallen behind contemporary practice and are not aligning with community
expectations. These offerings range from the currency of the ATO website and ability to interact through portable devices through to a single point of access for the community. Comparisons have been made with international revenue collection agencies that have already achieved such advancements. The
ability to reduce physical interaction with the community—for instance through natural systems or integrated technologies —would create considerable savings and help increase voluntary compliance.

The ICT budget is, however, heavily committed, with only 4 per cent available for discretionary work (that is, process improvement, internal efficiency and new service offerings to the community). This balance of resource allocation is currently hampering the ATO's ability to move forward and presents
a risk that business will stall as service offerings fail to keep pace.

The ATO manages an active agenda of government-driven ICT work. Legislative imperatives are unlikely to diminish, so to find capacity to get ahead, the ATO must find efficiencies to improve the supply of ICT service. While the review is not positioned to comment on how to best identify efficiencies,
it has been suggested to the review that savings can be made by improving technologies, decommissioning legacy applications and quarantining work on systems that are set to be superseded.

Currently, internal demand is captured in a forward work program which is developed through a bottom-up planning process. In addition, no regulation of new work is being proposed. This sees the ATO managing large, potentially disparate wish lists (that are subject to change) in a first-in, best-dressed
fashion without consideration of overall business value. The review was provided with a report commissioned by the ATO that makes a number of recommendations on improvements that will help better manage internal demand.

The ATO has demonstrated commitment to improving ICT service delivery through the development of its ICT Strategy 2013–15 which aims to:

  • better manage demand through a re-engineered ICT management framework to prioritise work from a whole-of-agency perspective, and on greatest business benefit
  • improve supply by looking at the workforce it needs, major process redevelopment and breakthrough thinking to dramatically increase capacity, which supplies options such as new technologies and alternative ways of sourcing funding.

The ability to manage demand and increase supply must be accompanied by strong strategic ICT direction and leadership. ICT priorities must be clearly set and aligned with the ATO's longer-term strategy. Leadership must commit to ceasing work that will not provide benefit, and prioritise work that will
provide the greatest benefit to the tax system (ATO and the community). As the government's fiscal environment continues to provide challenges and community expectations become more ambitious, well thought out strategic ICT direction will be imperative for the ATO to achieve its transformational agenda
and once again be at the forefront of electronic service offerings.

Manage performance

Guidance Questions
  • Is the organisation delivering against performance targets to ensure achievement of outcomes set out in the strategy and business plans?
  • Does the organisation drive performance and strive for excellence across the organisation and delivery system in pursuit of strategic outcomes?
  • Does the organisation have high-quality, timely and well-understood performance information, supported by analytical capability, which allows you to track and manage performance and risk across the delivery system?
  • Does the organisation take action when not meeting (or not on target to meet) all of its key delivery objectives?
Rating

Well placed

Measures and reporting

The ATO has clearly aligned measures from its Portfolio Budget Statements to its annual report and business plans. Measures cascade from programs, to program outcomes, deliverables and key performance indicators. The ATO has 75 published measures, most of which focus on business- as-usual outputs,
with a handful targeted at supporting business transformation.

A plethora of reporting is undertaken at business level, often with the need for manual intervention by staff to create reports, or to include information outside system-generated reports. Rationalisation and automation of reporting processes would increase efficiency, support data accuracy and ensure
the organisation is focused on the analysis of priority measures.

A number of activities are aimed at streamlining organisational reporting, including:

  1. an effectiveness review of measures, being led by the Compliance sub-plan
  2. an executive performance report, requested by the executive
  3. a prototype dashboard to draw on real-time data from across the organisation, being led by the Office of the Chief Knowledge Officer
  4. a service standards dashboard is part of the service standards project, being led by the Corporate Relations business line.

As part of its effectiveness review, the ATO has produced a refined set of key performance indicators for the forthcoming Portfolio Budget Statement and plans to review its other organisational measures over time. The ATO's effectiveness work has not yet addressed some of the more challenging effectiveness
questions, such as how to identify early gaps in revenue. While the Office of the Chief Knowledge Officer has drawn on strong analytics capability to
develop its extensive prototype dashboard, more work is needed to develop the easily digestible features that would be expected of a mature dashboard. The service standards project underway has not yet progressed to a broader conversation on how the ATO could best leverage business data to provide
meaningful feedback on how it is performing and progressing as a service agency.

While work is underway to streamline and simplify organisation reporting to support management decision making, the ATO needs to bring to fruition the range of initiatives to improve reporting and monitoring of its delivery performance.

It may benefit from:

  • developing a single organisational view on reporting methodologies, potentially by bringing together the ATO's extensive capacity into, or to be led by, a single business area directly accountable to the executive
  • better integrating and rationalising intelligence, corporate governance, risk management, planning, measurement, and reporting processes.

The ATO may also benefit from improving how it presents analysis in reports, as the current approach provides the executive with a lot of data to analyse.

Risk management

The ATO uses two enterprise risk models, its Enterprise Risk Management Framework which identifies risks and assigns treatments, and its Health of the System Assessments which identifies and tracks risks by work type and trends and is fed into the enterprise planning process through the Corporate Design
Forum and Plenary Governance Forum. The ATO has also run Risk in Focus sessions with SES Band 2s to explore risk management issues in more detail and help embed greater concentration on risk management in the organisation's culture and support greater integration of risk management with business planning.
The ATO may consider how to combine its two enterprise risk models and more closely integrate them into business planning.

The ATO's culture supports staff to avoid, rather than mitigate, risks. This increases bureaucracy, decreases productivity and elevates decision making to senior officers. To ensure risk is appropriately managed, the ATO may benefit from more clearly identifying organisational risk tolerances and processes
that support the suitable devolution of decision making.

Many internal and external comments noted the high quality of the Compliance sub-plans' risk models. Some commentary suggested that while the ATO has become more transparent with its compliance risk analyses approach in recent years, the community continues to ask for more and there is still a reluctance
from the ATO to fully open up. Some perceptions are that, in respect of large businesses, the ATO's first response is to adopt an enforcement mentality and never admit to 'getting it wrong'. The organisation may need to do more to address these perceptions.

As already mentioned, for the ATO to improve its management of risk, significant priority is needed to build capacity in risk management among both staff and managers.

Business controls

Central agencies commented on the quality of the ATO's financial management. Internal comments noted the strength of the ATO's internal audit area and its proactive commitment to improving business performance. The ATO was also shortlisted for the 2011 and 2012 Business Continuity Institute's international
awards for the high quality of its business continuity approach.


[6] The 2011 ATO Staff Engagement Survey finds that results for APS level 1–4 staff are 3 to 5 points lower while results for EL and SES staff are 7 to 16 points higher.

[7] The 2012 State of the Service Report, the ATO has the highest rate of unscheduled absence in the APS, at 15.5 days (APS median rate is 11.1 days).

[8] Update on leadership and management project to ATO People Line Executive, 20 March 2013.

[9] For the past three years, the ATO Graduate Program was recognised in 'Best Graduate Program' in the individual career section in the Australian Graduate survey 2012.

[10] This is the peak lodgement season for individual tax returns. It runs from 1 July to 31 October each year.