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Joint Committee of Public Accounts and Audit
Australian Public Service annual update

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GRANT, Mr» John, First Assistant Secretary, Procurement Division, Department of Finance and Deregulation

«HELGEBY» , «Mr» «Stein» , Deputy Secretary, Department of Finance and Deregulation

LEON, Ms Renee, Deputy Secretary, Governance, Department of the Prime Minister and Cabinet

McPHEE, «Mr» Ian, Auditor-General, Australian National Audit Office

SEDGWICK, «Mr» Stephen, Commissioner, Australian Public Service Commission

WATT, Dr Ian, Secretary, Department of the Prime Minister and Cabinet

Committee met at 11:31

CHAIR ( «Mr» Oakeshott ): I declare open today's public hearing during which we will discuss whole-of-government issues and trends with respect to the key agencies responsible for Public Sector governance and administration. Thank you all for coming in and making your time available. I welcome representatives from the Department of the Prime Minister and Cabinet, the Australian Public Service Commission, the Department of Finance and Deregulation and the Australian National Audit Office.

Although the committee does not require you to give evidence under oath, I advise you that these hearings are formal proceedings of the parliament and warrant the same respect as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege.

I now invite any of you to make a brief opening statement to the committee. I acknowledge we have time constraints, so I ask that opening statements be restricted to two or three minutes and, where possible, be tabled rather than verbal.

Dr Watt : I have an opening statement which I would like to table in the interests of the time. I must apologise that the Department of the Prime Minister and Cabinet in its infinite wisdom decided to entitle you the 'Joint Committee of Public Affairs and Audit' and not 'Public Accounts and Audit'. We do apologise for the error. If you will forgive us for that, we will table the statement.

CHAIR: That's fine. I am happy with that. Everyone else being happy with that, it is so accepted. There being no-one else who wants to make an opening statement, we are going to spend some time focusing on what we should focus on, but in our private hearing we also are making some decisions around the draft requirements on annual reports. We do need to give approval of this committee for that process. There are a couple of issues that may come in over the next week, if we could get a pretty quick turnaround on. Just as a flavour, Gai, you might want to raise a couple of questions in regard to that process and then we will move on to where we should be.

Ms BRODTMANN: This is a question you can take on notice. You did not agree with the need for agencies to report on late payments to small business. You made reference to the fact that that is reported in the Australian government payments to small business report from the industry and innovation department. That report does not address agency by agency performance. I put on notice that I have a concern about that and would like to know why it does not address agency by agency performance.

Also, anecdotal evidence around Canberra suggests that there are still late payments being made to small and medium enterprises. I know that the report suggests that about three per cent of payments are late. I have had questions raised with me. There is a requirement for small businesses to be paid within 30 days of receipt of the invoice. What is classified as 'receipt'? Is it when the invoice is received in the inbox and opened or is it when it gets to the person who is paying the bill? Anecdotal evidence would suggest that it is when it gets to the person who is paying the bill—that is when it is classified as 'receipt'. Those two questions are on notice. You do not need to answer them now. But you obviously feel—

Dr Watt : Our Finance colleagues might be able to help you. I want to make one further point, because this is often forgotten: it is receipt of a correct and complete invoice. There is not much point starting the clock if you do not have a correct and complete invoice.

Ms BRODTMANN: Absolutely.

Dr Watt : I remember from my days in Defence that a lot of them were incorrect and incomplete.

«Mr» Grant : Dr Watt has answered the part that I was going to answer. It is a correctly rendered invoice that starts the clock. The goods or services have to have been received and the invoice has to be in correct order. In terms of the first part, we will have to talk to the innovation department about their collection.

Ms BRODTMANN: I will put these on notice, because I am conscious of the time. But I will be following up on that correctly rendered invoice issue.

«Mr» Grant : A correctly rendered invoice; that is right.

CHAIR: There may be some questions come through in the next 24 hours. If we could get quick turnarounds on those so that we can approve what we need to approve to assist the process, that would be good. In regards to APS reform, I have three broad opening questions. The first is about the status of reform. I would hope that now we are getting down to the implementation stage. If you could provide us a bit of a snapshot of or progress report on implementation of the reform agenda, that would be good. The second is about capability reviews and how they plug into both the reform process and better outcomes from individual departments. There is one in particular which the Audit Office has been giving reports on over the last couple of years. This committee has got to the point of urging that a capability review be considered. I am very interested in how those capability reviews are going to unfold. The third question is on the efficiency dividend issues and the ins and outs of impacts across the APS. Is it too early to know what they are going to be or do you have some facts and figures for us on the true impact of the efficiency dividends?

«Mr» Sedgwick : On the status of reform, the document that was circulated to you is meant to be a quick snapshot of where we are up to with the major components of the reform agenda. The short course, from my point of view, is to say that just about everything is well underway. Things are either literally completed or they are in an advanced stage of implementation. From memory, the only thing that has not proceeded was the recommendation that there be citizen surveys conducted. That is not proceeding because of the cost of doing such things. Apart from that, we have quite an array of activity underway. I do not know how much detail you want me to go into. I can take you through some of that detail if you like. I am in your hands. I could talk under wet cement about this!

CHAIR: My only question on this was that plain English was floating around the edges at various points. Has it got lost, is there a different exercise or is it just not happening?

«Mr» Sedgwick : Plain language in government documentation?

CHAIR: The previous Commonwealth Ombudsman was starting to push on that issue. From memory, over 12 months ago there were some soundings that government was very aware that better language and better communication with citizens in all documentation was going to happen either in parallel or as part of this process. But I cannot see it anywhere.

«Mr» Sedgwick : The principal components of the blueprint for reform of recent times have had a focus around what we call the stewardship agenda of the Australian Public Service. This is a recognition that, as an institution, we need to develop deeper forward-looking capability and the capacity to have a view about what issues might be coming down the track and to develop capability within our organisations to be able to either deal with the things that we can expect or improve our resilience to cope with those that are unexpected. There has been a lot of activity, particularly at the senior levels of the service, around repositioning some of our culture and thought processes there. Our day job is to deliver on the agenda of the government of the day, but in the doing of that we also need to make sure that we build organisations that are fit for the future and not simply fit for the present. As I say, there is a lot of work around those things.

There has been a focus on the capability of organisations, not simply the capability of individuals or teams. We have had in recent times circumstances where departments have been ineffective in achieving an outcome—the home insulation scheme was one—because there were breakdowns in the whole system that surrounds the implementation of government programs. So we have done a lot of work looking at organisational systems, structures, governance arrangements and cultures that then link up with workforce planning and capabilities in order to be able to produce outcomes. Capability reviews are a component of that, which I will come to in a second.

There has been a strong focus on the reinvigoration of the leadership agenda. The importance of leadership has been an important component of every review of the Public Service since 1976, not necessarily because we are getting it wrong but because it is one of those things that needs to be continually refreshed. There has been a lot of work done to reinvent the way that we develop the leadership of the Public Service, and I am happy to talk you through some of that, if you like.

Then there were a number of issues of particular skills or particular initiatives to improve efficiency that kind of link in with some of those things. The development of analytical skill, some of the work that is done to improve the interface between the public sector and citizens, some of the reinvention of the service delivery models and some of the stuff that has been done in Finance and in other places to make it easier for citizens to comply with various parts of the law have all been part of that.

The plain English thing is kind of a component of the outreach to citizens. It has not had a particular focus in this blueprint agenda, but I am quite conscious that there are a number of agencies that are always looking to improve the clarity and the quality of their communications with individuals; it is just not part of this agenda per se.

CHAIR: Before getting onto efficiency dividends and capability reviews, would you take that on notice and come back with a status of the plain English reforms. Is there a reform program or is it just department by department—or is it dead?

Dr Watt : I think it is department by department, the way it has been for a long period of time. There is no particular government initiative on plain language across the APS or across the government that I am aware of, but we will confirm that and check the status of it for you.

CHAIR: Do not put too much into it—just a bit of a status report on who is doing what.

Dr Watt : I think you are right: the previous Ombudsman did have an interest in this and did raise the issue, including, I think, in hearings before the parliament. But I am not sure it ever got beyond the interest stage.

CHAIR: Do you want to take the chance to answer the other two: capability review and efficiency dividends?

«Mr» Sedgwick : Yes, my colleague from Finance might pick up the efficiency dividend issue. On the capability reviews, last year we conducted a trial that involved three agencies. These are high-level reviews. They look at leadership, strategy and delivery. They are not meant to be an audit of an organisation; they are meant to be short and sharp reviews that are done with the agency management rather than against the agency management, if you know what I mean. They proceed by putting together a team of senior reviewers, usually a former secretary or senior agency head, somebody else who has experience in the private sector but also understands the public sector, and typically a band 3 of the Public Service for whom this is a development opportunity.

As a result of the outcomes of those trials, which have gone very well, the government has agreed to institute a rolling program of these. Every portfolio department and a number of the large agencies will be subject to a review over the next couple of years. Last year as part of the trial it was the Department of Education, Employment and Workplace Relations; the Department of Sustainability, Environment, Water, Population and Communities; and the Department of Climate Change and Energy Efficiency. On the agenda this year at the moment are the Department of the Prime Minister and Cabinet; the Department of Immigration and Citizenship; the Department of Finance and Deregulation; the Department of Agriculture, Fisheries and Forestry; the Department of Regional Australia, Regional Development and Local Government; and the Department of Infrastructure and Transport. They will be done this year.

On the lessons learned so far, it is a bit hard to draw very firm conclusions out of the three so far, but there have been some issues emerging that are not true of every one of them but issues around whether work is being done at too high a level within organisations, whether in fact we need to start pushing work down within organisations, whether organisations necessarily are well enough linked up internally or whether they are too siloed and as a consequence of that there are opportunities for the sharing of perspectives and for the leveraging of activity between different parts of an organisation in order to produce better outcomes. There has been some patchiness sometimes in policy development capability of organisations. Sometimes the processes around setting priorities could be improved. There are a number of different things, depending on the agency concerned.

In each case the senior management of the agency has embraced (a) the process and (b) its findings. We have worked through an agenda for change in each of those agencies, which we will be keeping track of on a regular basis. There will be a kind of health check about a year down the track to see where they are going. So they are alive and well. As I say, we kept them out of the detail—kept them at relatively high levels—and so far they have been quite powerful.

We were not surprised by that. We modelled them on something that the United Kingdom has been doing for some years now. There was an audit conducted by the National Audit Office in the United Kingdom after I think about one and a half rounds of these which showed they had quite a significant impact on the culture of the Whitehall departments by putting these organisational capability issues on the agendas of their senior management teams. From what we have seen so far, we are hopeful that in a year or so's time we will be to make the same claim.

Dr Watt : Chair, I have just had the PM&C review completed. It is the first one that has been completed this year as a full review—of the non-trial three anyway. It certainly is a very useful exercise. I got a number of insights into the organisation from the reviewers that will certainly help me in improving outcomes that PM&C produces. So in terms of your question, yes, they should lead to better outcomes. I have got to say that it is not a review that is going to keep me awake at night, in the sense that the organisation works reasonably well. I would have been enormously surprised had that not been the case. So perhaps I have got a better outcome than some others may or may not get. But such reviews are useful and worth doing. I certainly think it is important that, over a relatively short period of time— «Mr» Sedgwick mentioned 'a couple of years'—we cover the whole of the APS, because these reviews are important to making sure we have the capabilities to deliver for government. And, if we do not have that, we need to rectify it.

As a portfolio secretary it is very handy to have a team of outsiders do these short, sharp reviews. They are done, as «Mr» Sedgwick said, with the management. I was consulted all the way through the review. I did not seek to significantly influence the review; I thought that was beyond my powers and I did not do that. But I was kept informed and had the opportunity to discuss their work processes, their findings and the final report, as is perfectly proper. I will certainly be implementing it vigorously.

The key issues, I suspect, in my review go to ways of working and culture. That is not to say we have a poor culture or we do not know how to work, but they are the things that we will be most focused on. They are very important, but they are things where you have to set up a medium-term change program; you are not going to do it in a week by introducing a new committee or stopping a behaviour.

«Mr» Sedgwick : I must say Dr Watt's experience is quite typical. We have found that organisations generally are performing well. The thing is that there are opportunities for them to perform better, and this process has allowed us to identify some of those opportunities. It has been quite a productive exercise.

CHAIR: Okay. Do you want to talk about efficiency dividends now?

«Mr» «Helgeby» : The efficiency dividend works in such a way that government sets the overall parameters—it sets an overall level—while the impacts are managed at the portfolio level and the agency level, and that is what has happened in this case. It is operating in exactly the same way it has operated for the last 30 years. So the impacts are handled inside portfolios and agencies, which means you will get different treatments or different impacts agency by agency as those managers and organisations consider what the opportunities are for them, and what their circumstances happen to be, at any particular point in time. The impacts are disclosed in the portfolio budget statements, and they show how agencies are handling things in their particular cases.

In this most recent increase to the efficiency dividend, the government have essentially expressed the view that the first place to look is non-staff costs, to look at areas of operational efficiency that might go to inputs—for example, the use of consultants or use of travel and all those kinds of things. So they are pointing to non-staff costs as the first place any agency should look, and that is happening across agencies; they are looking in those places. Obviously, there are agencies that have chosen to also look at staff costs as part of that, and they have disclosed those things.

We also see that agencies are very keen to take advantage of whole-of-government arrangements where they are in place, procurement arrangements in particular. Where prices can be brought down for a given level of service or product, people are keen to take advantage of that. So some of those whole-of-government arrangements go to enabling people to manage the efficiency dividend, but the choices as to how the ED specifically impacts are made at the agency level.

CHAIR: My apologies; there is a division in the House so we will have to suspend proceedings. We will get back to you as quickly as possible. I am conscious that you wanted to be out of here by a quarter past 12.

Proceedings suspended from 11:54 to 12:14

CHAIR: We might just have another 10 minutes and then if there are any other questions, put questions on notice. Did we finish efficiency dividends?

«Mr» Sedgwick : I did not have anything further to say.

CHAIR: That plain English point. Is there any global figure available on redundancies at this stage?

«Mr» Sedgwick : Not at this stage. We have data which is published six-monthly that records the actual number; it does not break up those numbers between those who are voluntary and those who are otherwise. The latest data is available as at the end of the last calendar year. The data for June will be available usually in the context of the State of the Service report, which is November.

CHAIR: November of this year. Okay.

«Mr» Sedgwick : But we do not have an aggregated forecast of anything at that stage.

Ms O'NEILL: I have a question regarding the opening statement that we have received here. On the second page, 15 of the initiatives across the 28 recommendations have been completed and are now business as usual activities and another four have been completed with actions continuing as part of a reform initiative. Do you have a table of what has actually been achieved, how the implementation has been received and planning forward for ongoing review?

Dr Watt : Beyond the table already provided, which I am not sure gives you quite as crisp a breakdown as you are asking for—no, not with me. However, we can certainly provide it.

Ms O'NEILL: How does it look at this point in time in terms of reception, and what are the things that are coming? Is there a structure or organisational reason for the delay in those? Is there some plan for the last four?

«Mr» Sedgwick : For those things that are within our bailiwick, we have done all of those things that had precise time limits on them, like do the review of the SES, look at the introduction of a cap on the number of SES, do a review of our development programs, implement the program of capability reviews. There is a whole raft of quite specific things like that and each time that we have had a timeframe, we have been able to deliver on them. In a lot of those cases, though, they have then got a long tail of work that continues. For example, with the capability reviews we have got two or three years worth of work ahead of us in order to complete that round. There is work in hand to review the guidelines that are available to assist agencies to do recruitment; there is work in hand to look at the guidelines that are available to assist agencies to manage performance; there is work in hand to improve workforce planning across agencies, which is being picked up and applied by agencies in their own time but progressively over a period of time. So there is lots of work like that that is going to have a long tail, which you would expect it to have.

Dr Watt : To give you a specific example: 4.1, revise and embed the APS values. We have revised the values. They are awaiting parliament's consideration of the Public Service Amendment Bill. 'Embed' is clearly not something that is going to be done as quickly as revising. You would say this is going to take a period of time, and if you want to go further and say embed the values so that the APS lives and operates on them, that will take even longer. That is changing culture.

«Mr» Sedgwick : Yes, we do have a plan in mind as to how we would embed the values if the parliament agrees with the amendments that are now before it. There are some things that are included in the Public Service Act amendments like the formation of the Secretaries Board, for example, where we have done that administratively already. It has been operating now for over a year. A lot of the redefinition of the functions of the Public Service Commissioner are in the amendments before the House. We are operating in those kinds of frameworks now but we need ultimately the legislative authority of those amendments in order to do that on a firmer footing into the future. There is a mix of things like that. We can take you through each of the recommendations and tell you where we are up to, if you like, but that is a large amount of information and we have just given you the summary version. We can give you the detailed version if you want it.

Ms O'NEILL: In terms of what is coming, things that do not have that tight timeline, that are still waiting to be implemented, could you identify what those recommendations are, or the initiatives?

«Mr» Sedgwick : In our world the vast bulk of the things that are coming are things that are now becoming business as usual that were part of the reform agenda. But the big pieces of work are those that are associated with the amendments to the Public Service Act. The work that is involved with rolling out the revised approach to the development of leadership of the Public Service, the identification of the core skills that we want for larger numbers of public servants to have in common, that work will be completed within the next six to nine months. Subsequent to that we will have to think through how we give effect to the decisions that we make about what the core skills are and whether there are any gaps in the support that we have to provide those kinds of skills. I think they are probably the major ones where there is new activity. On the recruitment guidelines, the performance management material, we have done a lot of the preliminary work but the rolling out of the guidelines will occur over the next six or 12 months. We have a refresh of what is called APS Jobs, which is the electronic recruitment vehicle that is available. That goes live from 1 July but there will be some further work on that to improve its usability, particularly to us, another nine to 12 months down the track. There are just a whole lot of little things like that, because we have actually done all the big building blocks.

CHAIR: We are pushing the clock now, so we will have one question from the member for Kooyong and then put other questions on notice, in the interests of everyone. How many have you got?

«Mr» FRYDENBERG: A number.

CHAIR: Can you pick your favourite?

«Mr» FRYDENBERG: Dr Watt, thanks to you and your colleagues for coming. Congratulations to the APS on the important work that it continues to do for our country. I appreciate it. On the issue of diversity, I see that in the most recent State of the Service report it says that the employment of people in the APS with disabilities and of Indigenous background has been falling. Obviously that is significant. What are you doing to counteract that trend?

«Mr» Sedgwick : The reason why we have had a fall is complicated. There has been a trend decline in both the representation of people identifying as Indigenous and the representation of those identifying as having a disability. There has been a trend decline over quite a long period of time. We got a surprise, though, last year: the decline continued despite the fact that there has been quite a bit of effort put in particularly around the employment of people who identify as Indigenous. Looking at it, the reasons for that were that there are a number of large employers of Indigenous people who were not recruiting last year and that the separation rate of Indigenous Australians and those who identify with a disability tends to be much higher than that for the rest of the workforce. So the stand still option is that we will continue to see a decline in the representation of both of those groups.

Dr Watt and the secretaries board have agreed to establish a diversity council charged specifically to renew our efforts in those areas. There are two different programs to support an improvement in the representation of people who identify as Indigenous by attempting to improve the pathways for Indigenous people into jobs in the Public Service and by working to improve the retention of Indigenous Australians in our workforce. There has been a new strategy launched by the Minister for Public Service and Integrity two or three weeks ago which is called As One, which is a similar strategy to try and improve the welcomingness, if you like, of our environment for those with a disability. We are revising lots of our guidelines to improve the assistance that is available to help managers to allow people to feel more comfortable to identify that they have a disability, to recruit people who have a disability and to try and improve our retention of people with a disability. One of the things we will trial, for example, is that if people identify as having a disability with certain tests associated with that, we will guarantee an interview, because the likelihood is that once people apply and allow to have their talents assessed, that they will be recruited. So it is a key thing we are going to try to do on the disability space.

Dr Watt : When you look at what has happened to gender balance in the APS, it has changed dramatically. Now, some agencies may still have a fair way to go, but across the board it has changed. That is a real plus for the organisation. Key message? Get people into fields. Get them into recruitment processes. Once you do that, then ability comes through. That is certainly a very important part of our getting people in: get them into fields.

«Mr» FRYDENBERG: Just finally very quickly, on redundancies, there is obviously quite a lot of media attention about redundancies in the Public Service. Have any agencies indicated to you that they will not be able to meet the targets or the requirements for redundancies, and can they be met through voluntary redundancies, or is there going to have to be forced redundancies?

«Mr» Sedgwick : The government's preference is to avoid involuntary redundancies. There may well be circumstances, though, in which that cannot be achieved. There is at least one department that I am aware of where that is the case, but I do not have the complete picture of that.

CHAIR: Okay. If you could take that on notice if there is anything more to add, that would be great. Thank you for attending today and assisting the committee with its inquiry. The committee will have some additional questions due to running out of time, so, members, please feed those in. If we could also lean on you all to get those back as quickly as possible through the secretariat, that would be appreciated.

Is it the wish of the committee that the submission from PM&C, dated 20 June 2012, be accepted as evidence and authorised for publication as a submission to the inquiry? Moved by «Mr» Frydenberg. Thanks, Josh.

Resolved (on motion by Mrs D'Ath):

That the committee authorise publication, including publication on the parliamentary database, of the proof of the transcript of the evidence given before it at the public hearing today.

CHAIR: On behalf of the committee, I would like to thank all the witnesses who have given evidence at the public hearing today. I would also like to thank Hansard and Broadcasting for their assistance. I declare this public hearing closed.

Committee adjourned at 12:27