Public sector resourcing and transformation | Annual Report 2017-18

Achieved

The Public Sector Modernisation Fund is a $500 million investment in the sustainability and transformation of public sector entities over 2017–18 to 2019–20. Responsibility for delivery of Public Service Modernisation Fund projects lies with entities that were appropriated funding to deliver specific projects. Finance has received funding to deliver some projects. Finance also has a stewardship role in monitoring Modernisation Fund project progress through quarterly project updates. This includes providing advice and reporting to the Secretaries Committee on APS Reform and the Minister for Finance on project performance. Status reports indicate that 36 projects are on track, four projects have identified delays, one project did not commence due to an organisational restructure. Owners of projects with delays have advised that mitigations are in place and delays will not impact on final outcomes.

Through the projects being delivered under the Modernisation Fund, there is a strong focus on developing APS-wide data analytics capability and identifying effective practices to place Commonwealth entity operations on a more sustainable basis.

This criterion contributes to driving public sector transformation and delivering efficient, cost-effective services to, and for, government. It includes oversight, coordination and analysis of Public Service Modernisation Fund project reporting.

Fund projects report strong progress to 30 June 2018, with evidence of improved quality of policy advice, policy outcomes and efficiency of operations emerging.

Achieved
As at 30 June 2018, the six shared services hubs were providing one or more services to 35 agencies across the Australian Public Service (APS), including five corporate entities that have opted into the program. This exceeds the target of 24 agencies for 2017–18 identified in Finance's Corporate Plan 2017–18 with 60 agencies to be achieved by 30 June 2020.

Finance has policy and program responsibility for the whole-of-government Shared Services Program. This performance criterion demonstrates the implementation status of the program by tracking the number of agencies that are receiving some of their corporate service functions through a shared services provider hub arrangement.

During 2017–18, a significant program of work was undertaken to inform the future direction and architecture of the program, with particular focus on:

• developing a fit-for-purpose small agency solution
• coordinating investment in underlying platforms and software with a view to move towards reducing the instances of platforms and/or hubs.

Achieved
As at 30 June 2018, 86 per cent of existing grant programs are on a grants hub or scheduled to transition to a grants hub by 30 June 2019, exceeding the target of 74 per cent identified in Finance‘s 2017–18 Corporate Plan.

Finance has program responsibility for the whole-of-government grants administration arrangements through the Streamlining Government Grants Administration Program. This performance criterion demonstrates the transition of in-scope granting activities to grants administration hubs.

During 2017–18, a significant program of work was undertaken to inform the future direction and architecture of the program, with particular focus on:

During 2017–18, work has focused on building the required scale of the grants administration hubs to prepare for contestability, including:

• expedited consolidation of granting activities to the hubs through the assistance provided by the Public Service Modernisation Fund
• expansion of the program to include in-scope granting activities from the Department of Home Affairs.

Achieved
Finance established a Government Business Analytical Unit, which commenced two projects focused on APS workforce analysis and studying drivers of productivity in the public sector. Finance is also delivering the Secure Information Sharing Capability as a data asset that will allow sharing, integration, analysis and reporting of government data between Commonwealth entities in a protected environment.

Achieved

The annual Chief Financial Officer Survey for 2017 was sent to chief financial officers on 4 December 2017. Twenty-six Commonwealth entities and companies responded, and no significant issues were identified. In addition, under a new process, the Secretary of Finance wrote to 13 new accountable authorities to advise of their duties and responsibilities under the PGPA Act. Where requested by new accountable authorities, six face-to-face briefings occurred. Guidance on these duties is also available on the Finance website (Resource Management Guide No. 200).

The Chief Financial Officer Survey is used as a proxy measure to inform Finance on how well Commonwealth entities and companies understand their obligations under the PGPA Act and are supported by Finance to meet these obligations. In 2017–18, the survey results indicated no significant issues in operating under the PGPA Act. The operation of the PGPA Act underpins Finance’s purpose by supporting proper and sustainable use of public resources and a coherent system of governance accountability for Commonwealth entities and companies. The general duties of accountable authorities are set out in sections 15 to 26 of the Act. The general duties include three fundamental duties:

• to promote the proper use and management of public resources for which the entity is responsible
• to promote the achievement of the purposes of the entity
• to promote the financial sustainability of the entity.

Finance’s engagement with new accountable authorities is a measure of the broader support we provide to Commonwealth entities to build and strengthen governance and accountability by ensuring new accountable authorities are well supported and equipped to understand their duties in governing their entity.

Achieved

As at 30 June 2018, there were no Australian National Audit Office (ANAO) reports identifying adverse findings on the PGPA Act and associated rules. The ANAO tabled two performance audit reports on the performance framework in 2017–18: Report No. 36 – Corporate Planning in the Australian Public Sector 2017–18 and Report No. 33 – Implementation of the Annual Performance Statements Requirements 2016–17. These, and the Joint Committee of Public Accounts and Audit’s subsequent Report 469: Commonwealth Performance Framework, tabled on 6 June 2018, contained no adverse findings. Report 469 did, however, make recommendations that included:

• entities adopting a more mature approach to risk management and the reporting of key entity risk
• continuing the development of Commonwealth capacity for non-financial reporting and evaluation
• ensuring audit committees have the skills and support to assess the appropriateness of performance reporting
• the development of a yearly report that provides information on the health of the Commonwealth performance framework.

Finance has provided a response to the recommendations. Finance’s analysis of 2017–18 corporate plans and 2016–17 annual performance statements identified an overall improvement in quality of performance reporting. The 2017–18 Corporate Plans – Lessons Learned paper was published in December 2017. The 2016–17 Annual Performance Statements – Lessons Learned paper was published in April 2018.

This performance criterion uses ANAO audit reports and Joint Committee of Public Accounts and Audit (JCPAA) inquiry reports as a proxy measure of Finance’s performance in implementing and maintaining the Commonwealth performance framework. It is a measure of how effective the various products and services that Finance provides are in ensuring Commonwealth entities meet the reporting requirements of the PGPA Act, and improve the quality of performance reporting. As an example, an adverse ANAO finding might indicate that there is an issue with guidance or advice provided, providing Finance with the opportunity to identify the issue and take remedial action. In the case of this reporting period, there were no adverse findings. However, the recommendations of the JCPAA‘s Report 469 provide areas of focus for Finance to improve and enhance the guidance and services provided to Commonwealth entities

Substantially achieved

An independent statutory review of the PGPA Act and Rule was undertaken as required by section 112 of the Act. The Minister for Finance appointed Mr David Thodey and Ms Elizabeth Alexander to conduct the review.

Sixty-nine submissions were received and numerous consultations were held across the government and other sectors to inform the development of a draft report. This draft was released on 30 May 2018 for public comment, with a further 58 submissions received in response. As at 30 June 2018, the final report was still being developed.

In their draft report, the reviewers found that the PGPA Act and Rule have established a coherent, principles-based system of governance, accountability and performance reporting for the Commonwealth. The review makes recommendations to reinforce and improve a range of matters. Key themes include the role of leadership, performance and annual reporting, risk, audit committees and improving how the Commonwealth joins up in delivering on its goals.

The independent review into the operation of the PGPA Act and Rule was completed on 19 September 2018 with the tabling of the final review report, including 52 recommendations, in the parliament.

The implementation of the recommendations will follow consideration of the report by the government and parliament.

Finance supported the review by providing a dedicated secretariat.

Achieved

The Future Fund Management Agency has advised that the benchmark rate of return for the Future Fund, the Medical Research Future Fund, the DisabilityCare Australia Fund, the Building Australia Fund and the Education Investment Fund were met for the year to 30 June 2018.

Finance also provided advice on policy relating to the government’s investment funds and governance matters.

Finance supports the government by maintaining a policy, regulatory and legislative framework that allows the Future Fund Board of Guardians to meet its responsibilities and achieve its investment targets within the agreed level of risk.

Finance provides advice to the government on investment mandates and governance arrangements for the government’s various investment funds. This includes advice on amounts credited to the funds and payments debited from the funds, which comprise the:

The implementation of the recommendations will follow consideration of the report by the government and parliament.

• • Future Fund, which seeks to assist the government to meet unfunded superannuation liabilities
  • Medical Research Future Fund, which seeks to provide grants of financial assistance to support medical research and medical innovation
  • DisabilityCare Australia Fund, which seeks to enhance the Commonwealth‘s ability to reimburse state and territory governments, and the Commonwealth Government, for expenditure relating to the National Disability Insurance Scheme
  • Building Australia Fund
  • Education Investment Fund

The government announced, in the 2016–17 Mid-Year Economic and Fiscal Outlook, that the Building Australia Fund and the Education Investment Fund will be closed. At 30 June 2018, legislation to effect closure had not been passed by parliament.

Finance provided advice to the government on the establishment of the proposed Aboriginal and Torres Strait Islander Land and Sea Future Fund. At 30 June 2018, legislation had been introduced to the parliament.

Achieved

Finance works proactively with Commonwealth entities and external stakeholders to improve procurement practices.

Finance develops, implements and maintains systems and policies to manage sustainable public sector resourcing; deliver effective government services; and support a fair, efficient and transparent procurement framework for the Australian Government and its suppliers.

Procurement is strategically important to all government agencies because it supports the efficient delivery of government policies, programs and services. Poor procurement processes can lead to suboptimal outcomes, such as delays or additional costs to redress problems.

In 2017–18, Finance’s management of the procurement framework included:

• managing AusTender, the Australian Government’s centralised procurement information and e-tendering system, which also includes Dynamic Sourcing for Panels to support cross-entity use and access to standing offer panel arrangements
• providing advice to government entities and the private sector about procurement policy and administration through:
  • the ‘procurement agency advice’ email address
  • the AusTender help desk
  • regular engagement with the Senior Procurement Officials Reference Group and agency central procurement teams
  • monthly procurement bulletins, which are distributed to approximately 2,500 government officials
  • consulting with policy entities on new and existing policy proposals
  • engaging with key industry and government stakeholders through the Procurement Consultative Roundtable
  • public consultation on draft whole-of-government tender documentation and dissemination of topical procurement information using the Finance blog
• engaging with stakeholders from state, territory and overseas governments; industry peak bodies; domestic and international procurement associations; and key non-government organisations in order to share knowledge and keep up to date on procurement best practice, including meeting during the year with:
  • government representatives from Bangladesh, the European Union and New Zealand to discuss procurement matters
  • all states and territories on the development of supplier complaints mechanisms
  • the Queensland and South Australian governments on their contracting practices
• providing technical advice on government procurement to support free trade negotiations, including:
  • the World Trade Organization Agreement on Government Procurement
  • the Regional Comprehensive Economic Partnership Agreement
  • an agreement between Australia and the Pacific Alliance
  • the Peru–Australia Free Trade Agreement
  • the Australia–Hong Kong Free Trade Agreement
• developing and maintaining intuitive and user-friendly self-service procurement tools for entities engaging in simple, lower-risk procurements, including the BuyRight procurement self-service tool and the Commonwealth Contracting Suite, which has over 6,000 registered users.

Achieved

Whole-of-Australian-Government procurement arrangements continue to deliver savings through discounted pricing, and administrative efficiencies through centralised procurement and contract management.

During 2017–18, Finance approached the market for:

• a new whole-of-Australian-Government arrangement for master media agency services
• a new arrangement for enterprise resource planning (software as a service) that offers an alternative to the traditional method of acquiring these services.

Replacement contracts for both travel accommodation and stationery office supplies were put in place in 2017–18. Both deliver increased efficiency and ongoing savings through improved pricing, conditions and fee structures.

Achieved

The results from the 2016–17 Australian Government Property Data Collection were released in May 2018. The results showed that, since 2014, the number of tenancies meeting the office occupational density target has doubled to 25 per cent. Over the same period, the Commonwealth’s overall footprint has reduced by nearly 10 per cent. The coordinated procurement arrangements for leasing and property services were established in September 2017 and the first entities transitioned on 1 January 2018. As at 30 June 2018, 13 entities had transitioned to the new arrangements. These arrangements will, where feasible, facilitate the ongoing absorption of entities into existing vacant space (Operation Tetris). The divestment program is ongoing. Since 2014, there have been over 115 sales returning in excess of $173 million. An additional 36 properties are being prepared for sale.

Finance is responsible for the:

• policies and legislation that form the Commonwealth’s Property Management Framework, which establishes the principles for the efficient, effective, economical and ethical use of property resources and applies to property leased and owned by non-corporate Commonwealth entities
• management of whole-of-government purchasing arrangements for property services
• the Lands Acquisition Act 1989, and for providing advice to entities on the Public Works Committee Act 1969. Through its Property Management Framework responsibilities, Finance develops and implements policies, advises the Minister on the exercise of his statutory powers, and advises entities on policy interpretation and obligations
• management of the Australian Government’s domestic non-Defence property portfolio and also the construction and delivery of selected domestic non-Defence major capital works projects.

Finance is demonstrating its contribution to the purpose of ‘public sector resourcing and transformation’ through reforming and transforming the management and operations of Commonwealth property assets and interests through the National Property Efficiency Program and the National Property Divestment Program.

The National Property Efficiency Program aims to capitalise on the Commonwealth’s position as a major purchaser of leases and facilities management services in the Australian property market through:

• absorbing entities’ lease requirements, where feasible, into existing vacant office accommodation (Operation Tetris and the whole-of-government leasing strategy)
• ensuring that leases and other property services are delivered through a coordinated procurement arrangement that maximises the Commonwealth’s purchasing power
• administering the Commonwealth Property Disposal Policy and ensuring it is supported through transparent and accessible provision of information on government landholdings.

Since 2014, Finance has been reducing Commonwealth property holdings and therefore ongoing maintenance costs, through the non-Defence National Property Divestment Program. Properties that are surplus to requirements are divested in accordance with the Commonwealth Property Disposal Policy, which requires consideration that public land serves the community and is divested to support government policy priorities.

A commitment to genuine engagement with our external stakeholders, through both formal governance and informal arrangements, has provided an open channel of communication to support the delivery of these programs in particular.

This close collaboration has helped to establish valuable linkages of benefit to both Finance and entities as we deliver these and other Commonwealth property-related initiatives.

Achieved

Finance, in collaboration with the relevant shareholder departments, has implemented governance arrangements to facilitate the government’s key infrastructure and defence projects. These arrangements include updated governance documentation, statements of expectations and regular meetings between shareholder departments, the relevant GBE and other key stakeholders. Emerging issues and key risks for each of the projects are monitored and reported on at the regular governance meetings and escalated as required. Shareholder departments provide regular briefings to shareholder ministers and updates to the government on Western Sydney Airport, inland rail and naval shipbuilding.

Finance provides advice to the Australian Government relating to its GBEs and other commercial entities. A government business enterprise is a Commonwealth entity or Commonwealth company that is prescribed by the rules (section 8 of the PGPA Act). Section 5 of the Public Governance, Performance and Accountability Rule 2014 prescribes nine GBEs: two corporate Commonwealth entities, and seven Commonwealth companies.

Three of these GBEs—WSA Co Limited, Australian Rail Track Corporation Limited and Australian Naval Infrastructure Pty Ltd—are delivering key infrastructure priorities such as Western Sydney Airport, inland rail and naval shipbuilding.

Finance’s primary tasks in relation to GBEs are to:

• provide sound strategic and analytical advice to the government, in particular by engaging with the GBEs, analysing their operations and their environment, and consulting with stakeholders
• action the government’s decisions, including communicating objectives
• ensure that there is a robust and sound governance framework in place by initiating change and contributing to policy development.

Finance regards its effectiveness in facilitating and monitoring GBE delivery of the government’s key infrastructure priorities as a valuable contribution to the public sector resourcing and transformation element of Finance’s purpose.

Achieved

Finance continues to provide advice to Commonwealth GBEs with respect to corporate planning, financial and operational performance and other significant programs of work. Advice is provided on a regular basis to shareholder ministers on the compliance and performance of the GBEs, based on information provided in corporate plans, quarterly reports and annual reports, as well as regular interactions with the GBEs. Corporate plans provided by GBEs complied with the PGPA Act and the Commonwealth Government Business Enterprises—Governance and Oversight Guidelines (the GBE Guidelines). Shareholder departments work closely with all GBEs to effect amendments to their corporate plans to ensure final versions are compliant with the PGPA Act and GBE Guidelines.

Finance aims to ensure that GBE governance frameworks are fit for purpose for delivering desired outcomes, and that GBEs operate efficiently and are focused on financial sustainability.

A review of the GBE Guidelines was conducted and revised guidelines were published on Finance’s website in January 2018. Finance is continually looking to ensure best practice, both in the oversight of GBEs and in the consistency and quality of analysis and briefing. The first GBE Company Secretaries Forum was held on 14 June 2018. It is anticipated that the forum will be held annually and aims to bring company secretaries and shareholder departments together to facilitate shared learnings, experiences and discussions on best practice approaches.

This performance criterion uses a range of indicators to measure Finance’s performance in encouraging Commonwealth GBE efficiency and financial sustainability, including:

• the provision of advice to shareholder ministers on the performance of the GBEs
• the compliance of GBE corporate plans with the PGPA Act and GBE Guidelines
• delivery of activities to support GBE efficiency and financial sustainability, such as the GBE Company Secretaries Forum.

These measures demonstrate Finance’s activities to encourage the ongoing efficiency and financial stability of GBEs.