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'Damning' evidence of wasteful spend-ups

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Public servants go into a spending frenzy towards the end of the financial year, blowing more than three times as much taxpayers' money than in other months.

A Fairfax analysis of more than 60,000 federal government contracts has revealed stark evidence of bureaucrats' "spend it or lose it" approach to budgets, which encourages agencies to use up all their funds rather than hand the money back.

This analysis is remarkable and damning. We will charge a commission of audit to look into this if we win government. 

Coalition finance spokesman Andrew Robb

The government's largest workplace, the Department of Human Services, has one of the worst records.

Over the two years examined, it entered into 984 short-term contracts worth $157 million. Of them, $123 million worth – 78 per cent – began in May or June.

Its spending spree covered a wide range of purchases, especially staff training, temporary recruitment, office fit-outs and IT services.

Opposition finance spokesman Andrew Robb described the findings as "remarkable and damning". The Coalition would investigate them as a priority if it won office, he said.

However, the government denied the trend was a sign of wasteful spending, saying it simply reflected the budget cycle.

The investigation analysed 60,605 short-term contracts – a means of spending money quickly – to find evidence of what public servants call the "spend-up season".

Government agencies have long rushed to get rid of leftover funds towards June, lest the Finance Department cite unspent money as a reason to cut their budgets.

This incentive to spend has led to anecdotal accounts of wild end-of-year splurges on travel, equipment and consultancies, though, until now, the public has lacked any quantitative evidence of it.

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Mr Robb said such spending was a decades-old problem that had affected many governments, but he was shocked by its extent.

"This analysis is remarkable and damning. We will charge a commission of audit to look into this if we win government ... We will make it a priority."

He said the commission would also consider giving agencies more scope to carry over funding from one year to the next, and to increase scrutiny on spending in the last quarter of the financial year.

"It's a bit rich that [Finance Minister] Penny Wong's out there talking about savings and this is happening right under her nose ... The analysis is so stark and remarkable that I would expect the Finance Minister to hear the alarm bells ringing. This must be fixed."

Former Labor finance minister Lindsay Tanner acknowledged the problem a few months before he retired from politics in 2010, saying it was "endemic to any system where you have annual budgeting".

He said the only effective way to fight the waste was to ramp up scrutiny on public servants, and hope the shame of getting caught would prevent them from abusing funds.

However, Senator Wong disagreed with Mr Tanner and denied the end-of-year spending was wasteful or discretionary.

Her spokeswoman said: "The contract start date represents the end of the procurement cycle, which includes development, time to market and approval processes of weeks or months' duration.

"The trend of agencies' procurement activities reflect the budget cycle, and are consequently back-loaded in the second half of the financial year. This pattern is consistent across agencies and reporting years."

Senator Wong's spokeswoman said individual agencies were responsible for ensuring their spending was in line with government policy, and the Auditor-General regularly audited their purchases.

The Department of Human Services' spokesman, Hank Jongen, also rejected "any assertion about wasteful spending".

All departmental purchases were "conducted to achieve priorities within the budget cycle and to gain maximum value for money".

Mr Jongen said short-term contracts were just a small proportion of the department's operating budget of $4.3 billion.

"There is a range of procurement activity required over these months to prepare for July 1 changes to payments and services, which have to be implemented across the Australian government's primary service delivery network – from updating systems to distributing public information and communicating new initiatives."

He said decisions in the federal budget in May each year also triggered work on legislative changes or new programs, which led to the need to spend more at that time of year.

with Hamish Boland-Rudder

29 comments so far

  • Is Andrew Robb serious? He is going to form another branch of the public service to investigate the public service.No doubt with an ex politician in charge,why not start with Peter Costello?
    Andrew make the ANAO accountable for the job they do or fire the lot of them and split up their role with the big accounting firms, or better yet get some small businessmen in as consultants, but no more commissions you've done enough damage with the likes of the MDBA and the Australian Fisheries Management Authority.

    Commenter
    Michael M
    Date and time
    August 05, 2013, 2:09PM
    • Ahh but of course.....what would I know.

      Commenter
      servant public
      Date and time
      August 06, 2013, 2:36PM
  • When the system punishes people for not spending their whole budget, you'll see the compensating behaviour called the yearly spend-up.
    When the system judges people (eg. teachers and schools) based on test results, you'll see focus orient towards and gaming of the test.
    Everyone runs around in shock-horror when it happens. However, it's as predictable as the run rising tomorrow.
    If people are judged and rewarded based on a judgement, then behaviour predictably follows. What matters is whether the reward system supports appropriate behaviour. Sure, people make their own choices, but those choices are also influenced by many other factors.

    Commenter
    Gery
    Date and time
    August 05, 2013, 2:38PM
    • I have seen this happen in a state pubic sector department. Some seven years ago when I was working there, they set up a knowledge management unit to take videos of the combined wise words of the fat cats at the top of the tree. All their speeches were videoed and stored by this unit. Back then digital equipment and TVs was still expensive. Our director said he had to do it as other projects he wanted to spend money on had been delayed and he had a surplus. If he didn't find a way to spend it. he would receive less money the next year and his delayed projects would not receive money. Folks this goes on but don't blame the average public servants. Its the one at the top who are all paid six figures. get pay rises well above the average public servant and have new cars thrown in to boot. They are the ones who have a wasteful attitude to public money and their sense of entitlement to their healthy pay packages is well entrenched.

      Commenter
      this does happen
      Date and time
      August 06, 2013, 6:14PM
  • How about some accurate journalism and put the whole facts on the table for a change. Government Department as only budgeted for a year at a time, they can not carry unused funds from one financial year to the next and if they are not spent it is returned to General Revenue. It’s significant effort to even get approvals to spend money which may impact on a following financial year.
    This means that Departments need to ensure that they don’t overspend during the year which leaves them a short period near the end in which they can do capital purchases and replace equipment. This has been made exponentially worse by the current government’s ongoing budgetary restrictions mid financial year which means more often than not Secretary’s need to find savings from allocated funds.
    I would love to see private industry have to deal with the level of oversight and control that the Departments have placed upon them.

    Commenter
    James
    Location
    Canberra
    Date and time
    August 05, 2013, 2:53PM
    • Think you have missed the point. They are spending what they have not used before the end of the financial year so that their budgets will not be cut the following year as a result of surplus funds.

      Commenter
      Catherine
      Date and time
      August 06, 2013, 12:37PM
    • @James I agree.
      What sort of a stupid system only rewards big spending in an environment that is constantly being told to cut spending? If you don't use all of your budget within a 12 month cycle then you don't get the same amount next financial year. Costs of operating are going up and no one wants to risk not having the same funding next year.....so of course they rush out and spend up big before the end of financial year. Blind Freddy could see that coming. The other issue we have here is the reporting of managers based on how they manage their funding, rather than the performance or tangible outcomes of their department/branch/team.

      You want responsible use of funding?
      1. Take the pressure off reporting against expenditure and start making managers accountable for delivery of a service or product.
      2. Encourage them to hand money back that isn't responsibly expended. Instead of decreasing their annaul budget, let them have access to additional funds if they prove they need them the following year.

      This over spending every financial year just for the sake of it is stupid and annoys the real people outside government. It's sad that this sort of behaviour has gone on so long and is tollerated at such high levels of government.

      Commenter
      RamRod - ACT
      Date and time
      August 06, 2013, 1:45PM
    • Could not agree more, have been a public servant for 35 years and have seen it all. Areas I have worked in only replace equipment that is needed at the end of the year when we know we have funds remaining to cover their cost. Its called responsible spending. We know the money is the publics but if you want us to be able to serve you we do need computers etc that work.

      Commenter
      CJ
      Location
      Melbourne
      Date and time
      August 06, 2013, 5:26PM
  • Its a totally crazy system- madness really . The unused funds should be returned to the taxpayer. This is where you can get your "efficiency dividend " Mr Rudd . Its staring at you. Departments should only be allowed to spend withing an historical average per month or else the funds should be returned to Treasury to be dispersed as tax cuts.

    Commenter
    Dan
    Date and time
    August 05, 2013, 3:08PM
    • Wake Up Dan, the money that is not spent is returned by the EOFY. It doesn't matter who is in power either, I have seen how the system works for 25 years.

      Commenter
      Stephen
      Date and time
      August 05, 2013, 7:47PM

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