How much do machinery of government changes really cost?

By Stephen Easton

Thursday September 1, 2016

A new audit report suggests machinery of government changes after the 2013 federal election caused minimal disruption to service delivery and saved significantly more money than they cost.

The extensive round of public service restructuring involved 14 out of 18 federal departments, with 11 managing more than one transfer of staff and responsibilities at the same time.

The first set of changes saw two massive mergers, three departments abolished and the portfolios of education and employment separated, shifting 12,000 public servants around. The second lot of changes covered by the audit, announced at the end of 2014, affected only 900 staff.

Based mainly on an online survey of the 14 departments, the Commonwealth auditor-general concludes there were no major hiccups to services or payments and that “transitional risks and associated costs” were managed well. The report adds:

“There is, however, scope to improve the timely transfer of financial appropriations and staff resources for large scale MoG changes such as those announced in 2013.”

The audit office was told the big changes came with big savings: $397 million from merging AusAID into the Department of Foreign Affairs and Trade, plus $534 million over five years from moving the whole indigenous affairs line area into the Department of the Prime Minister and Cabinet (PM&C).

MoG changes also come at a cost, which comes out of the individual operating budgets of the agencies concerned, but detailed accounting is rarely seen. Only nine of the 14 departments could provide the audit office with estimates of what it cost them.

For the more complex changes in 2013, the average was $14.5 million between those nine entities, compared to $200,000 for the additional adjustments made at the end of 2014. The main costs came from redundancies, integrating IT systems or purchasing new hardware and equipment, and office accommodation.

The complexity of various 2013-14 MoG changes
The size and complexity of various 2013-14 MoG changes

The audit report provides a table showing these costs vary widely; the most one department spent on redundancies topped $28 million, although the auditors caution that not all were necessarily a result of MoG changes.

Estimated office refurbishment and fit-out costs reached as high as $14 million in one case, about the same level as the biggest ICT purchasing spend. The most expensive “integration of ICT systems and platforms” — a separate line item — cost over $17 million.

mog costs

Lessons learned from the restructuring round led the APS Secretaries Board to agree in 2015 that the Department of Finance and Australian Public Service Commission should take a more active role in MoG changes, setting timeframes and monitoring progress.

Finance and the APSC both agreed with the audit’s sole recommendation: each large-scale MoG change should be followed by a post-implementation review. These reviews will be delivered to the Secretaries Board and “disseminated more widely” — but just how widely isn’t specified.

It wasn’t all smooth sailing; there were “difficulties in reaching agreement on the staff and appropriations to be transferred” that led to long delays. In the case of PM&C and the Department of Social Services, it took just over a year for agreement to be reached, partly because theirs depended other transfers to go through.

10 departments reported “significant disagreement” with another in the process, with the average dispute taking five weeks to resolve. Finance sorted out all but one, which had to be escalated to the Secretaries Board.

There was also some criticism of the support provided by the APSC and Finance, which have already published updated guidance on MoG changes including a new dispute resolution protocol, based on feedback from agencies on the massive 2013-14 changes.

“A number of departments reported dissatisfaction with the support received from Finance, primarily related to the uncertainty they experienced over the transfer of appropriations, which was effected through the Budget and Additional Estimates processes rather than the more conventional process of making determinations under the financial management legislation.”

One department suggested Finance take an “account manager approach” and the central department has since changed arrangements to make contacting it easier.

The audit report also notes MoG changes happen regularly and “often with little or no notice” in the APS. There have been over 200 in the past 20 years.

Mog changes since 93-94

The 2013-14 changes that followed the election of the Coalition government, then led by Tony Abbott, were the most extensive since 1998-99.

PM&C, which has a co-ordinating role in MoG changes as well as being involved in the one of the biggest, said the minimal disruption was due in part to the “goodwill” of agencies.

The department also told the auditors there was “minimal business disruption” in its own domain as it relocated more than 2000 new staff from across Australia and its property portfolio increased from one site to over 230.

The audit identified three examples of ways that APS leaders minimised the risks and costs of MoG changes:

  • DSS let its new aged care staff stay in the Department of Health’s Woden office through a sub-leasing arrangement.
  • PM&C tried to avoid new Commonwealth leases by keeping staff in existing buildings or co-locating them with other departments where possible.
  • The Attorney-General’s Department consolidated ICT service provider arrangements for the Arts function, which had become fragmented after successive MoG changes, to make any future MoG change smoother.

The growth of shared corporate services — particularly the shared services centre established jointly by the Employment and Education departments after they were split apart — has also contributed to making the regular changes smoother and cheaper. And, according to the audit, so have other new developments in the APS:

“For example, a web-based Parliamentary Workflow System now used by more than 50 APS entities, provides a single system for a range of interactions with ministers and Parliament, including ministerial correspondence and briefings. The Secretaries Committee on Transformation is also examining opportunities for increasing the common use of operating systems within the public sector.”

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