Treasury boss John Fraser rejects auditor-general’s view of corporate planning rules

By Stephen Easton

Thursday April 26, 2018

Commonwealth entities are now several years into PGPA implementation, but it’s only now that a departmental head has pushed back at some of its prescriptive expectations. But to win this battle, the Treasury boss will need to convince the two independent reviewers set to re-write PGPA rules for agencies.

Auditor-general Grant Hehir finds federal agencies are not quite complying with new financial accountability legislation and recommends they do so, but Treasury boss John Fraser disagrees.

Fraser’s department rejects three of four recommendations and the findings they are based on, but Hehir feels federal agencies have been too lethargic about putting corporate plans in place.

John Fraser

All federal bodies are expected to make the mandatory plans their “primary planning document” to provide a benchmark for performance monitoring and comparison with the actual figures they put in annual reports.

Primary disagreement

Looking at four entities, the audit finds the Commonwealth Ombudsman’s office and AUSTRAC have done this, but CSIRO has not and Treasury still needs to “fully establish” the plan as its main planning piece.

Scott Morrison’s department rejects this view, arguing its corporate plan is already its “primary planning document” because it is based on input from all organisational groups and approved by the executive committee, which is then accountable for its outcomes. Its response explains:

“Managers are empowered to tailor their approach to business planning according to their business needs, reflecting the varied nature of work the Treasury delivers and the requirement to rapidly respond to emerging priorities.

“This approach continues to prove effective for the Treasury and achieves consistent or stronger outcomes to the broader APS, while avoiding an administratively burdensome business planning processes.”

Fraser asserts he will continue to determine the most appropriate method of “developing and embedding” the corporate plan, in a letter to Hehir complementing more formal responses published throughout the report.

With multiple ministers to serve and rapidly changing priorities, he argues the document can never be an “operational manual” for the year and exclaims: “Oh, that life would be that simple!”

Fraser said he often sought feedback from counterparts in other jurisdictions, and New Zealand Treasury staff had complimented the simplicity of his department’s plan. “Adding additional and repetitive content may compromise this approach and favours form over substance,” he told Hehir.

He also pointedly notes that the Public Governance, Performance and Accountability Act is under “independent review” by Medibank Private chair Elizabeth Alexander and CSIRO chair David Thodey, who also signed off on CSIRO’s response to the audit.

The transition from the previous financial management and accountability system for the federal public sector has necessarily been a gradual process, led by Finance and overseen by the Australian National Audit Office, with the parliamentary audit committee looking on through public inquiries. Clearly there is still a way to go before everyone is on the same page.

Mandatory content warning

Hehir says Treasury needs to do more to fully comply with the PGPA Act “by ensuring that each of the four mandatory sections of the plan specifically address the four [financial years] covered by the plan” but Scott Morrison’s department disagrees strongly.

AUSTRAC and the Ombudsman’s office both agree this recommendation applies to them, and CSIRO ticked all the basic compliance boxes. Treasury says it goes its own way and does not intend to change:

“Treasury’s corporate plan in its entirety applies to the forward four years and is refreshed annually – this is stated clearly in the Secretary’s introduction.

“Setting out the performance measures in the way suggested by the ANAO is challenging and may mislead users rather than provide the desired transparency.”

The central agency also rejected the auditor-general’s finding that its corporate plans did not provide “a meaningful summary of risk management and oversight systems” as required.

It seems the agencies tended to focus on the word “summary” while “meaningful” was the key for Hehir, who found that “purely descriptive information” about risk oversight and management systems is not enough to meet the PGPA Act’s objective to “provide meaningful information to the Parliament and the public” via corporate plans.

In this case, the Ombudsman Michael Manthorpe and AUSTRAC chief Nicole Rose are on Fraser’s side. All three agencies dispute the finding that they did not do what they legislation asks in this regard, but only AUSTRAC and Treasury rejected the related recommendation. Manthorpe is happy to make improvements in future plans.

Rose argues the goalposts have shifted since AUSTRAC’s 2017-18 plan was published last August, “in accordance with the guidance available at that time” about legal requirements for describing risk management and oversight systems. In its explanation for this, the agency states:

“Feedback from Department of Finance supports this view describing AUSTRAC’s risk section as strong and an appropriate narrative detailing the risk management approach, strategic risks, controls and integration within the organisation.

“To clarify inconsistencies in interpretation, AUSTRAC requests that further and specific guidance be developed to clarify the manner in which non-corporate Commonwealth entities should describe their systems of risk management and oversight.”

Perhaps she need not have worried so much; this finding was aimed mainly at the Ombudsman’s office and Treasury, which also asks for further guidance but goes further and again contests Hehir’s understanding of the PGPA Act:

“The [ANAO] report suggests that, to be meaningful, a summary could include a discussion of how all nine elements of the Commonwealth Risk Policy are implemented. Analysis of this nature is disproportionate to the remaining sections of the plan and would unnecessarily replicate the Treasury Risk Policy and Framework.

“The intent of the corporate plan is to provide confidence to the reader appropriate systems of risk management and oversight are in place, not to detail those systems. The suggestion that the Treasury corporate plan does not achieve this is disputed.”

In fact, Treasury only agreed with one recommendation for how it could improve future plans. Namely, that:

  • the Ombudsman and Treasury identify in their corporate plan key risks and how their approach to managing risk will support the achievement of their purposes; and
  • the selected entities review the reliability and completeness of performance indicators as a basis for providing a meaningful performance story in their performance statements.

Consider the audience

As evidence that his approach is working, Fraser cites Treasury’s 2017 APS Census results showing 87% of staff are clear on how their team contributes to overall strategic direction (only two points higher than the APS average).

Treasury also cited the fact that 82% of its staff agreed with the statement: “My SES manager ensures that work effort contributes to the strategic direction of the agency and the APS” compared to an average of 62% for the whole public service.

Grant Hehir

However, as Hehir notes, corporate plans are not just an internal document for public servants; they are also supposed to provide “meaningful” information to parliamentarians and anyone else who is interested. And the auditor-general found all agencies could improve the quality of the content.

“There is … scope for the selected entities to review the reliability and completeness of the performance indicators included in their corporate plans, as a basis for providing a meaningful performance story in their performance statements,” the report states.

The audit found Treasury needs to be clearer about its purposes, intended outcomes and their beneficiaries, while CSIRO was mainly deficient in the two latter areas.

All except for AUSTRAC could improve the content of their plans in two other specific ways, in the auditor-general’s view.

First, “by better outlining the main factors that are both in control and beyond the control of the entity that are expected to impact the achievement of its purposes and linking this with the capability and risk sections of the corporate plan to provide details of the entity’s operating context”.

Secondly, “by clearly addressing how capability impacts the achievement of purpose, how capability requirements might change over time and integrating this into its broader discussion of operating context”.

Slow progress

Hehir’s report concludes that “greater progress in implementation … could have been expected” given it is ANAO’s third look at how well selected agencies are progressing with the new requirement.

All four agencies have processes to develop the plan and monitor achievements against it, with AUSTRAC and the Ombudsman’s office the most mature: “The corporate plan has been integrated in their broader planning frameworks and they are using the corporate plan to support their decision making and manage the business.”

Despite failing to use its mandatory plan for actual planning, CSIRO was the clear leader in legislative compliance. It was the only one of the four that met all the minimum legal requirements for the contents of the document.

With a few years of experience, two previous audit reports and lots of help along the way from the Department of Finance, Hehir concludes that agencies should have done more to really embrace the change.

“Entities should have moved beyond simple compliance with the minimum requirements set out in the PGPA Rule and established mature systems and processes to support the development and monitoring of the corporate plan—to ensure it provides a firm basis for reporting on entity performance in the annual performance statement to Parliament.

“They should also have embedded the corporate plan as the entity’s primary planning document, and progressed the development of meaningful risk management summaries and performance indicators.”

The report recommends “a more structured approach” for Treasury and CSIRO to improve their planning process, although the former appears unlikley to pay much attention:

  • fully integrating the corporate plan into the entities’ broader planning framework in a way that clearly positions it as the primary planning document and in a way that it is actively used to drive business decision making;
  • clearly defining roles, responsibilities and accountabilities and ensuring they operate as intended;
  • developing strategies for more systematic engagement of internal and external stakeholders; and
  • earlier and more systematic involvement of Executive management in the corporate planning process to direct the development process.

The section on “key learnings” for all agencies in the report turns the expectations around corporate planning into a clear checklist. The Department of Finance supports the auditor-general’s findings, even if its budgetary counterpart does not.

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