The NSW Commission of Audit’s interim report on public sector management has been released, finding that “generally managerial performance is far from excellent.”

 

In a scathing analysis, the Commission expressed surprise at “the low importance that has been attached to financial, people and asset management.”

 

It described the state’s public sector information systems as “complex and cumbersome and often non-existent.”

 

The audit was conducted by a conducted by a small secretariat led by Kerry Schott, CEO for NSW Commission of Audit and former Managing Director and Chief Executive Officer of Sydney Water.  It was assisted by an Advisory Board of Commissioners chaired by David Gonski.

 

It included a financial audit, convened by Acting Treasury Secretary Michael Lambert and completed before the last Budget in June 2011, which undertook a review of State finances, and developed a State Financial Strategy.

 

The Schott interim report for that the past operation of NSW agencies as independent organizations no long works well, and does not meet public expections of integrated services.

 

“Service users find it hard to make sense of government structures, particularly where they duplicate services or do not know what other areas of government are doing. This lack of clarity and simplicity erodes public confidence and trust.

 

“A proliferation of agencies also results in inefficiencies. There is fragmentation of both services and back office systems. There is also a misalignment between financial and legal accountabilities. Differing employment and staffing arrangements abound. Where different agencies should be working closely together this is often difficult.”

 

While agencies now operate in nine ‘clusters’, each with a Coordinating Minister and a Principal Department headed by a Director General, the report finds “there is still a long way to go to establish fully functional organisations that have the ability to provide the quality services that the community expects. Many clusters are not able to gain a single view of their organisation, cannot produce a set of monthly accounts or performance reports, or even email all staff on a common system.”

 

The Commission commented that at present there are so many entities within some clusters that coordination is impossible at the Director General level without some changes, and recommended that the number of entities should be reduced. Entities should be grouped or merged, or abolished if they no longer serve a purpose.

 

The report highlighted the lack of clear articulation of accountability in clusters, and the mechanisms to achieve it.  It recommended that leadership responsibility should be transparently set out for each cluster to clarify the roles of Coordinating and Portfolio Ministers as well as those of Directors General and Chief Executives.  There should be a a moratorium on transfers between clusters should be put in place for the current reforms to be bedded down, with a further review to occur within 12-18 months.

 

In its evaluation of management practices within the public service, the Commission found it “astounding to note the problems that management has faced and a credit to the public sector as a whole that service delivery has continued.

 

The main constraints on people management that the Commission identified are:

  • directives from central agencies that restricted new hires and informal government directions that made redeployment and redundancy extraordinarily difficult
  • central agency expenditure directives, at explicit line item levels, that removed management flexibility
  • industrial arrangements that are cumbersome and complicated and include matters which should more properly be agency and management prerogatives
  • inflexible position classifications and structures with too many layers causing confusion about responsibilities
  • a lack of information for managers and staff about performance related to both service outcomes and adherence to values and behaviours
  • capability shortcomings in some Human Resource units where the focus has not been on strategic service delivery but rather on employee advocacy and disputes.

 

The Commission criticized the current staff freeze imposed by Government to control expenditure as a ‘blunt instrument’. It recommended that cluster Directors General should determine the workforce composition of their cluster, including the appropriate number of front line staff, support staff and SES officers, and does not support the use of centrally-imposed executive caps or employee freezes.

 

The Commission found a tendency towards unnecessary top heaviness in agencies, and recommended that the Director General of each cluster should review the grading profile in their cluster, with a view to, as appropriate, increasing spans of control, reducing middle management layers and formally delegating responsibility to lower management levels.

 

The Commission made a total of 52 recommendations,  which the Premier Barry O’Farrell has said the government would consider. Key recommendations included:

  • Leadership responsibility should be transparently set out for each cluster, to clarify the roles of Coordinating and Portfolio Ministers as well as those of Directors General and Chief Executives;
  • Treasury, in consultation with agency CFOs, should commence scoping the design of a new financial management information system as a matter of urgency;
  • a major cultural shift is needed so that supervisors at all levels recognise that managing people is a key accountability; and
  • an asset management policy statement should be released to clarify responsibilities and linkages between the various planning and procurement frameworks.

The Commission's interim report can be downloaded here.  A further report by the Commission is expected to be released in April, which will examine aspects of Government services delivery.