Date: May 01 2012
Too often, when governments get to the position the Gillard government now finds itself in - polls looking ominous and an election on the horizon - they become morbid and sulky and inclined to stick the slipper into ''the media'' for not giving them a fair go. Fate has not dealt them the hand they deserve and all would be better if only they could get the story of their virtues across.
In such drab circumstances, it rarely occurs to governments to try to do something about the important but tedious business of improving the workings of the machinery of government. This is not the stuff of useful political propaganda and votes. Indeed, if enhancing the functioning of the government machine makes basic performance more obvious, governments could end up making rods for their backs.
Better public administration is a first-year-of-government thing, not a last.
Finance Minister Senator Wong and her department have side-stepped this quagmire. They've pressed on with the Financial Accountability Review announced at the end of 2010. In March this year, they issued a discussion paper on the Commonwealth's ''financial framework'', unfortunately burdened with the ridiculous title Is Less More? Less or more than what?
Still, Wong's paper is not the first in modern government to be blighted with a silly title and, in this case, it's not something to fret much about; the paper is a serious and substantial work. It's well researched and written, and it has plenty of good ideas. It bears no signs of the malign influence of consultants. Maybe the lessons of recent unhappy experience of having government reports prepared by ill-equipped outsiders are getting through. If ministers want a decent report, they should turn first to officials in their departments, who will usually have the advantage of knowing what they're talking about.
The paper makes out a solid case for looking again at the Commonwealth's financial system and legislation. The Financial Management and Accountability Act, the Commonwealth Authorities and Companies Act, the Auditor-General Act and the Charter of Budget Honesty Act are all now in their teenage years. Times have changed. Accrual budgeting, outcomes-based appropriations, the GST and new funding arrangements have followed these laws. This is enough to justify the need for the paper and it doesn't need to bolster its case by the spurious claim that now ''public policy issues are increasingly complex''; as this column has wearied of pointing out, the seriousness and difficulty of governments' tasks ebb and flow but, in the last 25 years or so, public policy problems have been markedly less complex than for most of the 20th century.
Perhaps the best way to come quickly to grips with the mass of material in the paper is to divide it into the clearly good, the more debatable and what is missing or not said loudly enough.
On the budget documents (the appropriation bills and the portfolio budget statements), the paper observes that these have ''become more voluminous'' and that it's ''not clear that this has improved transparency''. That's right. The paper points out that a medium-sized department had a portfolio budget statement of 397 pages (834 for its portfolio) and an annual report of 634 pages including 113 pages of financial statements for 14 ''outcomes''. This is not so much less being more, it's more being worse. It may well be typical, and no doubt it's down to more than just officials wanting to see the importance of their activities given as many pages as possible in the official documents. That is to say, it's a product of the system.
To provide a means of making things simpler and clearer, the paper suggests:
■ Moving away from appropriations to ''outcomes'', to appropriating a single amount to an entity or a portfolio.
■ Better lining-up of external reporting and internal management.
■ Making the portfolio budget statements more like a corporate plan.
But, if this is all too much:
■ Appropriating to ''particular programs''.
■ Basing annual appropriations on the ''net annual cash requirement for an entity''.
So far as current financial legislation is concerned, the paper says: ''One option would be to replace … the FMA and CAC acts with a single act that would more readily support fit-for-purpose governance arrangements.'' This, the paper points out, would allow consideration of the best governance to concentrate more on the function to be performed rather than whether the entity was a department or something else.
On a section on ''improving performance'', it's noted that managers who spend their annual budgets so as to avoid having future allocations reduced might not necessarily be doing a good job. The paper therefore suggests allowing savings to retained as a incentive for better management and that there may be advantages in ''appropriating amounts over multiple years'', a big ask.
The paper also argues for an ''integrated performance management framework'' and the development of ''indicators that allow performance to be measured and compared across the public service''.
Noting that ''the public sector is often seen to have a low risk tolerance'', but that ''risk is crucial for achieving innovation'', the paper suggests an ''overarching risk-management framework'' and that organisations manage risk and report on it to governments.
So all of the foregoing and much else in the discussion paper look pretty good.
However, some of its specific proposals around governance are less appealing.
First, specifying in legislation the role of secretaries of departments ''in advising the responsible minister on the financial performance of portfolio bodies'' is a bit much. Different ministers can be relied upon and should have the flexibility to use their secretaries and departments in whatever way best suits them and the nature of their portfolios. Ministers with a large number of small agencies may very well welcome the help of their secretaries in ensuring their best financial performance. On the other hand, ministers may well prefer to have more direct dealings with large agencies - such as the Taxation Office, the ABC or the Bureau of Statistics - rather than having that organised principally through their secretaries.
Second, the suggestion that the use of ''boards'' that include people ''from outside the public sector'' to ''provide a diverse range of skills and experience'' would certainly be, as the paper notes, ''a significant step''. Too right: a significant step backwards. There are plenty of ways for departments to obtain the benefit of solace and counsel from outside and ''diverse'' opinion without the bother and expense of bureaucratic boards of busybodies who are likely to be more of a nuisance than a help. Boards are desirable in many statutory authorities as a means of bolstering their independence; no such reason exists for departments.
Third, the idea that the finance minister should have the power to create and abolish statutory organisations by regulation should also be quietly shelved. The primary reason for statutory organisations is to make functions independent of ministers, and their creation and abolition should therefore be a matter for the Parliament. The life and death of statutory authorities should not be a matter for the finance or any other minister, as that would fundamentally undermine the independent performance of their functions.
The discussion paper is sound on one aspect of ''governance'': it ignores the now thoroughly discredited Uhrig report on statutory authorities that appears to have been consigned to the oblivion it always so richly deserved.
And so to a couple of points not so explicitly covered in the discussion paper.
First, it's almost too obvious to say, but the extent to which governments want to measure performance or be willing to expand their risk horizons is essentially a matter for ministers. If they prefer to talk about the amount of money spent on needy causes rather than results, and to play it safer, then that will define the boundaries of performance measurement and risk-taking within which officials must live.
Second, the benefits of improving the efficiency of the government machine should not be mindlessly ploughed back into providing better services. Governments should consciously determine the quality of the services they provide and allow for efficiency savings to be paid as a dividend to all taxpayers.
Third, while making a couple of pointed observations about accrual accounting, the discussion paper does not assess its usefulness, especially for departments. The Howard government was beguiled into accrual accounting in the late 1990s; the cabinet at the time had little idea what it was doing when it agreed to introduce it. It's highly probable that this form of accounting for Commonwealth organisations - certainly those wholly or mainly dependent on the budget - is more trouble than it's worth, and everyone would be better off if it were to be cashed in.
Of course, Wong's discussion paper is as dry as a biscuit and not likely to appeal much to the excited scribblers in the Murdoch press and their salivating readers, who like nothing more than having their prejudices played back to them on such things as The Colourful Adventures of Speaker Slipper. That's a pity: the discussion paper is much more important.
Paddy Gourley is a former senior public servant.
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