ComSuper

[12:12]

CHAIR: Welcome. Would you like to make an opening statement?

Mr Yarra : No.

Senator CORMANN: First up, I want to welcome Mr Yarra. Congratulations on being appointed to acting CEO. When did the former CEO, Mr Cormack, actually resign from his position?

Mr Yarra : His last day was 13 April. My first day was 16 April.

Senator CORMANN: Mr Cormack was appointed in July 2010, so he had been there for less than two years. What was the reason for his departure?

Senator Wong: We do not usually talk about the reasons people leave.

Mr Tune : Mr Cormack resigned for personal reasons.

Senator CORMANN: That was not communicated. I am not meaning to be inappropriate, but there have been communications in the past when people came and when they left. When the appointment of Mr Cormack was announced in July 2010, there was also an announcement of the departure of his predecessor after successful completion of his eight-year term. This time around there was no announcement whatsoever on the face of it. I was interested as to what the reasons were for that. But if you tell me it was for personal reasons, that is fine.

In last year's budget, it was stated that ComSuper would lose around 80 staff in 2011-12. At budget estimates last year, we were informed that 56 of those staff losses would be as a result of outsourcing. Has this actually happened now?

Mr Yarra : The outturn for last year was 471. The PBS is now saying 425 for 2012-13. They are average figures.

Senator CORMANN: Does that mean you are 31 short still of where you see—

Mr Yarra : Yes. We had a year that saw the outsourcing progress later than we expected, so the staff savings were not there. They will stream through during 2012-13. We have made other efficiencies, but certainly our thoughts for the outturn for 30 June 2012—our expectations were not met.

Senator CORMANN: You are due to lose another 46 staff in this coming financial year, based on figures in this year's budget. That is about 10 per cent of your staff. How will this impact on your operations in 2012-13?

Mr Yarra : That 46 is an average. We are moving from an average to 30 June 2012 of 471 to an expected figure in 12 months time of 425.

Senator CORMANN: When you say 'an average', what do you mean?

Mr Yarra : It means that these are FTEs, for a start. Half of a person is half of an FTE. The average is the FTEs who are actually paid per month divided by 12.

Senator CORMANN: But what you mean by 'on average'? I really do not understand that. Either you have 425 FTEs at the end of the financial year or you do not. There is no average there.

Mr Yarra : But they are averages for the year. Across the full 2012-13 year, we will consume 425 FTEs. That is what we are projecting.

Senator CORMANN: So it constantly goes up and down, does it?

Mr Yarra : That is correct. We will have project teams coming on board to deliver projects and we will have people leaving through natural attrition. We will end up with an average FTE per pay, throughout 2012-13. We are projecting that for the full year the average arithmetic average will be 425.

Senator CORMANN: You have fallen 31 short of the staff reduction target for this financial year. How confident are you that you are going to meet the staff reduction target of 46—on average—for this next financial year?

Mr Yarra : It is an estimate. It is an aspiration, to a certain degree, based on the number of assumptions about things that will be happening in 2012-13, including an assumption about the completion of a number of projects to upgrade our platforms and allow FTE savings to flow through. So that number is dependent on a number of things happening during 2012-13. I think that is a tough number. We have tried to estimate as realistically as possible, but it is a tough number. I am reasonably confident at this stage.

Senator CORMANN: How is the planned outsourcing of the administration of the PSSap progressing? Has it now been concluded

Mr Yarra : I will make a number of remarks on that. Services began to be delivered on 29 February. The contract was signed in May last year. A lot of time was spent after contract signature getting ready for the commencement of services. I think, in previous hearings, that it was an October or November date. Services started on 29 February in this the end. In my experience, outsourcing is a complex business. In my experience, the contract is not bad—and I have done some big IT outsourcing contracts.

Senator CORMANN: The contract is not bad. Thank God for that.

Mr Yarra : It is a good contract. Contracts can be quite bad in my experience. This contract is not bad. It augurs well for the service over the three-year life of the contract. The pricing arrangements to me are viable and not bad. The firm selected for the role is a very solid provider. We have, two or three months into this service delivery phase, a growing, strong relationship with Pillar as the service provider. They are having to dig deep, because this is a bigger thing to take on than they have taken on before. I am heartened by how it is going at the moment, although transition to Pillar is a complex thing.

Senator CORMANN: Any glitches or hassles?

Mr Yarra : We have our share of data issues—a massive amount of data was transferred across into Pillar's systems. From one system to a foreign system, a massive amount of data was transferred across. A number of accounts could not be reconciled back to the original data. That was a low hit rate—about four per cent of accounts—which surprised me. I thought it would be a lot higher than that. They are proving tricky to resolve, but we are working hard with Pillar every day to resolve them. It has meant that we have kept a few more staff within ComSuper focused on Pillar things, who were scheduled to move off to other things and effect the reductions in staffing. So my overall sense of things, with outsourcings that I have seen over the years, is that this is not bad. And to get the long-term relationship happening, the platform is good. The relationship is good.

Senator CORMANN: At the last budget estimates, the figure that was put to us was that a targeted saving for fund members was around $5.3 million. Is that assessment of the likely savings from the outsourcing still an accurate estimate?

Mr Yarra : Correct. We have organised our affairs so that we are actually paying that $5.3 million back to the budget.

Senator CORMANN: So that is structurally locked into the budget?

Mr Yarra : It is not directly attributable to Pillar per se but attributable to a bunch of issues that we are undertaking to pay back to the budget pre-agreed amounts per year.

Senator CORMANN: So how do you then cover the increased costs that come from reducing your staff more slowly than expected?

Mr Yarra : We are making other efficiencies.

Senator CORMANN: Where do you find those?

Mr Yarra : We grind away. It is hard work.

Senator CORMANN: You grind away to find other efficiencies to make up the cost of 31 staff more than you thought you would have. That is a lot of grinding away. What is your total budget?

Mr Yarra : We will spend around $72 million. We are in the process now of doing our budget for 2012-13.

Senator CORMANN: So you are saying that, despite being 31 staff behind target in terms of the savings you had anticipated, you still stand by the $5.3 million and that is locked into member funds, effectively?

Mr Yarra : Correct.

Mr Helgeby : The savings for ComSuper in aggregate have been locked in across the forward estimates for a number of years. There was always provision to allow some adjustment of the timing of those amounts to take into account changed timings around the outsourcing arrangement that has occurred in this case so that ComSuper has, if you like, been funded for some of the costs that they have incurred as a result of the delay. So they have not been, if you like, held to a number which they could not achieve because the outsourcing did not occur at the scheduled time.

Mr Yarra : It has been pointed out to me that the 31 is not a big up-front hit that we are absorbing. It has been progressing. This is this averaging thing again. So it has been a progressive absorption by us over time.

Senator CORMANN: Thank you to ComSuper.

CHAIR: Thank you.