Targeted razer-gangs replacing broad-brush efficiency dividends

Lean agencies will be spared from cutting beyond the bone as the government plans to wind back its ruthless uniform efficiency dividend.

The blunt instrument of public sector savings that is the federal government’s efficiency dividend will drop back to a base rate of 1%, but not until July 2017.

Agencies will have responsibility for administering approximately $434.5 billion in expenses this budget, and the government still wants to ensure its gets value for the outlay.

Introducing this year’s agency resourcing figures, Finance Minister Mathias Cormann writes in the 2015-16 federal budget papers that in his quest for savings he is increasingly looking at “known areas of inefficiency in specific agencies” and moving away from demanding large, uniform efficiency dividends across the board.

Cuts to communications resources in last year’s budget are to be followed this financial year with savings from shared services, according to Cormann, particularly from standardising the hundreds of different enterprise resource planning systems across the Australian Public Service. The minister explains:

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  • The winding back of the one-size-fits-all efficiency
    dividend is a positive step for better resource management across the
    Commonwealth. Strategically focused reviews enable a much more effective assessment
    of both services and programmes and an entity structure. There are a number of
    other initiatives that will contribute to the effectiveness of these reviews.

    The refreshed Commonwealth Resource Management Framework,
    implemented under the Public Governance, Performance and Accountability Act
    2013, will provide useful tools for Commonwealth entities to prepare for these
    strategic reviews. A new focus on defining entities purposes will focus on just
    what it is that each entity is attempting to achieve. Linked with the updated
    focus on outcomes and key performance indicators (KPIs) we will be able to
    better demonstrate the successful achievements of some programmes, identify improvements
    in design and delivery of others, and conclude that other programmes need to be
    abandoned or re-built from the ground up.

    The Commonwealth’s Risk Management Policy will arm entities
    with a more robust approach to considering risks from an entity perspective,
    and enable entities to demonstrate how they are developing a positive risk
    culture, and seeking to innovate and improve the design of programmes that
    contribute to better outcomes in a more efficient manner. Clearly communicating
    the entity’s risk appetite with Ministers – and how these risks will be
    monitored and managed – provides an opportunity for delivering services in new and
    innovative ways.

    Process reviews, and implementing the new Regulatory
    Framework, provide entities with the incentives to re-design how work is done
    and remove the red-tape that can often slow down or impede service delivery.
    Knowledge-based and service organisations have the disadvantage that wasted
    effort is typically represented by people’s time, rather than the physical
    manifestation of waste we might find in manufacturing, or on a construction
    site. Re-handling and re-drafting documents or re-processing an application in
    poorly designed processes is wasted effort.

    With demands for quality public services growing and
    resources shrinking, thoughtfully and deliberatively re-designing work
    processes, positively engaging with risk and honesty assessing, and then
    improving performance will all contribute to better use of scarce resources by
    Commonwealth entities.

    Kevin Riley FCA FCPA
    Independent Financial Management
    Consultant and IPAA National Treasurer