1. The Secretary's review 1999-2000
3. A summary of the Department's roles and the new reporting framework
4. Analysis of performance for Outcome 1
5. Analysis of performance for Outcome 2
6. Analysis of performance for Outcome 3
8. Management and accountability
9. External scrutiny and legal matters affecting the Department
A2. Occupational health and safety
A4. Payments to advertising and market research organisations
A6. Performance against actual results against outcomes and outputs
Section 1. Introduction
Section 2. Corporate governance
Section 3. Corporate and operational planning, reporting and review
Section 4. Managing financial and operational risk
Section 5. Ethical standards
Section 6. Purchasing and assets management
Section 7. Consultancies and competitive tendering and contracting
Section 8. Managing better
Section 1 - Introduction
This chapter examines our corporate governance practices, our accountability framework and other management issues.
Section 2 - Corporate governance
Senior management committees and their roles
There are five senior management committees: the Executive; the Corporate Leadership Group; the Audit and Fraud Committee; the Equity, Research and Evaluation Committee and the People and Information Technology Committee. The Audit and Fraud Committee report direct to the Executive. The Equity, Research and Evaluation Committee and the People and Information Technology Committee are sub-committees of the Corporate Leadership Group which in turn reports to the Executive.
Chart 6. Senior management committees
The Executive manages high level corporate strategies, assigns senior staff and allocates resources.
The Corporate Leadership Group’s mandate includes both corporate management and portfolio policy functions. It assists the Secretary to manage the Department efficiently, effectively and ethically.
The Equity, Research and Evaluation Committee coordinates departmental work that relates to equity and participation, research, analysis and evaluation. The People and Information Technology Committee coordinates the management of people and information technology. They are sub-committees of the Corporate Leadership Group. They can make independent decisions but also provide recommendations on major strategic issues to the Corporate Leadership Group and, in some instances, the Executive.
The Audit and Fraud Committee is one of the key elements in the corporate governance framework. The Committee comprises the Deputy Secretary as Chair, two external members and observers from the Australian National Audit Office. It assists the Secretary with financial reporting, the maintenance of an efficient system of internal controls, improvement of performance and accountability and the review of matters raised during external reviews. Under the Committee’s general direction, the Audit Branch and the Legal, Business Assurance and Investigations Branch have provided independent, specialist advice to the Executive and Managers in the Department’s Divisions and State and Territory offices on audit and fraud matters, ways to improve performance and accountability and meet external and internal reporting requirements.
Section 3 - Corporate and operational planning, reporting and review
Planning
A number of management planning processes are used in the business planning of the Department. In many cases they are managed through the committees described above.
Chart 7. Strategic Framework
The Corporate Plan describes the strategic management framework of the Department. (The Corporate Plan can be found at http://www.detya.gov.au/publications/corporate_plans/1999/corpplan99.pdf. This framework links the Department’s purpose to its vision (described in Chapter 2), its leadership behaviours and values. It also links the Department’s service to its customers and success factors. The plans and processes which embody the framework help us to translate our intentions into action.
They include:
- divisional business plans;
- local level business plans, workplans and operational plans that are derived from divisional plans;
- Centrelink and State Office business partnership arrangements; and
- individual performance agreements.
There are a number of additional planning processes used that contribute to our performance culture. These include the;
- Annual Audit Plan,
- Fraud Control Plan,
- Risk Management Plan,
- Equal Employment Opportunity Action Plan,
- Occupational Health and Safety Plan,
- People Management Improvement Plan, and
- Continuity Management Plan.
Performance reporting and review
The simplified diagram that follows illustrates the broad planning and reporting framework for the Department. Divisional business plans are the core of the Department’s operational planning. They link to other departmental plans (such as risk management and fraud) and to the business partnership arrangements between National Office and State Offices and between the Department and Centrelink.
The Divisional Business Plans consist of five major elements:
- an examination of the business environment including the likely priorities within the coming two to three years, any major risks which can be anticipated and strategies to address them;
- the reporting framework which includes key strategic and Corporate Plan priorities and priorities and outcomes/outputs identified in the Portfolio Budget Statements (PBS);
- the business for the next year, measured against outcomes and performance indicators;
- Divisional resources; and
- a report against the previous year’s Business Plan.
Each Division’s Business Plan is discussed between the senior management of that Division and the Executive before being finalised. This includes a review of the previous year’s performance and builds on the quarterly performance reports against the PBS outcomes - outputs framework to the Corporate Leadership Group. In addition Division Heads are held accountable for their performance against their business plans in their performance agreements. Performance against the PBS outcomes - outputs framework is reported annually through the PBS and the Annual Report.
This year there was an increased focus on the future and improved links between business planning and other plans such as risk management and performance agreements. The business planning process is reviewed annually to improve both the process itself and our performance management.
The National - State Business Partnership Arrangements set out arrangements for service delivery by the Department’s State and Territory Offices. The Arrangements set out key performance indicators. These are monitored through quarterly reports to the Corporate Leadership Group and quarterly meeting between National Office programme managers and State Managers. These are supplemented by fortnightly phone conferences. Performance is included in annual reporting under the appropriate Outcomes and Outputs in the Performance Budget Statements and the Annual Report.
The DETYA Centrelink Business Partnership Arrangement 1999-2002 is an agreement between the two agencies, which sets out arrangements for the delivery of the Department’s services by Centrelink. The Business Partnership Arrangement is reviewed annually.
The Business Partnership Arrangement provides for monthly business management meetings and meetings of a Strategic Forum chaired by the Secretary and the CEO of Centrelink. Performance by Centrelink is monitored regularly in relation to key performance indicators which are set out in the agreement. The Business Partnership Arrangement is underpinned by a set of protocols relating to communication including relationships with the State Offices, accountability and reporting, business compliance, budget and finance and information technology.
Chart
8 The Department’s Business Planning Framework
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Section 4 - Managing financial and operational risk
The Department has a number of strategies in place to ensure that the risks associated with its work are identified, planned for and managed properly.
Risk Management
The Department has established a corporate approach to risk management based on the Australian standard AS/NZS 4360 Risk Management in order to include risk management as part of the Department’s management culture.
A three-tier risk management framework has been established. Under the framework, there are plans identifying risk and setting down control strategies at the corporate, divisional and programme levels. Over 500 staff have now attended risk management training courses and policy and practical guidance has been issued.
To continue this emphasis on applying risk management principles to all departmental programmes and support activities, the Department has established a Business Assurance Section that brings together policy responsibility for risk management including fraud risk, insurable risk, procurement practices, compliance monitoring and financial viability assessment of suppliers and funded bodies. This Section is within the Legal, Business Assurance and Investigations Branch, creating strong ties between risk management, legal advice and fraud investigations.
Fraud
In conjunction with its risk identification and management role, Legal, Business Assurance and Investigations Branch undertakes DETYA’s fraud prevention function through:
- promoting and implementing fraud prevention and deterrence measures including reviewing programme guidelines and undertaking risk assessments;
- detecting illegal and financially inappropriate activity and impropriety through, for example, undertaking compliance surveys and investigation of irregular activity; and
- improving accountability through debt recovery, prosecution and correction of programme and procedural weaknesses identified through investigations.
The Department’s Fraud Control Plan sets out:
- the Department’s obligations under the Fraud Control Policy of the Commonwealth and the Financial Management and Accountability Act 1997;
- the organisational values and behaviours, policies and procedures and organisational arrangements underpinning those obligations; and
- the roles and responsibilities of departmental staff in preventing, detecting and reporting suspected fraud.
Additionally, the National Investigations Unit of Legal, Business Assurance and Investigations Branch is based in National Office and undertakes both external and internal investigations across Australia. The Unit investigates allegations of fraud and other offences against the Department’s programmes and criminal or misconduct matters involving our staff.
Audit
To complement these developments, the Department’s Annual Audit Plan was compiled on the basis of risk factors identified in consultation between the Audit Branch, Divisions and State Managers. Audits were conducted into the operation of Information Technology systems, programme tendering, contract management and the Department’s financial statements.
Section 5 - Ethical standards
The new Public Service Act 1999 came into effect on 5 December 1999 and sets ethical standards for Australian Public Service employees. The Department has developed policies to ensure effective implementation of these standards and to take advantage of the greater flexibility offered by the new Act. These policies are about;
- handling breaches of the Code of Conduct,
- whistleblowing,
- engagement of ongoing and non-ongoing non-SES employees,
- promotion/movement of non-SES employees,
- engagement of a person who has received a redundancy benefit,
- review of actions,
- termination of employment,
- non-performance of duties, and
- age retirement.
The policies have been widely promulgated to staff through circulars and presentations to all branches. The information provided looked at the new, flexible framework and the shift in emphasis from prescriptive rules and detail to a principles based approach. It also highlighted the importance of the Public Service Values and Code of Conduct and showed how they related to the Department’s Organisational Values and Leadership Behaviours. Finally, our Intranet contains information on public service employees’ obligations under the Crimes Act 1914, the Privacy Act 1988 and Public Service Regulation 2.1 - Duty not to Disclose Information.
Section 6. Purchasing and assets management
The Department’s Finance Management Manual and Procurement Manual detail processes for procuring goods and services that comply with Commonwealth Procurement Guidelines. Both manuals are readily available to staff through the Departmental Intranet site. They are also available via the Department’s Procurement Management Information System (PROMIS) which is currently under development.
The Procurement Manual specifically outlines the issues related to contract management. It covers how to;
- develop a contract management plan,
- establish roles and responsibilities in managing a contract,
- establish contract administration procedures,
- measure performance,
- manage poor performance or non-performance, and
- evaluate the project.
Responsibility for most procurement in the Department has been devolved to programme areas. This has increased responsiveness and given programme managers high levels of responsibility for their decisions. However, it can cause a loss of procurement expertise and compliance. That’s why the Department is developing PROMIS. The first two phases of the system have already been implemented. It has two main purposes:
- to guide staff through and obtain the best possible compliance with the correct Commonwealth and Departmental procurement processes; and
- to collect and report data on all contracts for service, including consultancies, engaged by the Department for management purposes. Reports include details of contracts for the Department’s Annual Report and in response to Parliamentary Questions.
The controls within this system should ensure high levels of procedural compliance while maintaining devolved procurement. To help control the procurement process, PROMIS:
- provides direct access to proforma documents such as standard contracts, contract variations, requests for tender and quotations;
- inserts a procurement number into those standard documents to establish a management trail; and
- records details of all contract variations, such as monetary and end date variations, for each contract.
To help officers comply with the core principles contained in the Commonwealth Procurement Guidelines, PROMIS:
- requires documented authorisation of decisions to vary from the prescribed policies;
- provides complete, accurate and timely data about procurements; and
- requires officers to assess compliance with other Commonwealth policies. As part of this function it provides an Internet link to the Affirmative Action website to allow checks for non-compliant suppliers.
Procurement performance
Probity audits were conducted on four tender processes during the 1999-2000 financial year. The tenders were set up to purchase education and training services from external suppliers for eligible clients under the New Apprenticeships Support Services programme and the Jobs Pathway Programme. The selection criteria included a reference to value for money.
In all four instances, Audit Branch found that the tenders had been conducted in accordance with the probity plans approved by the Department’s lawyers. While the audits confirmed that the value for money criterion had been applied by both the tender assessment teams and the tender evaluation committees, the audits did not include an independent assessment of whether the final outcome of each tender represented best value for money.
The large majority of services procured by the Department are sourced from within Australia. Departmental programmes such as New Apprenticeships Support Services, Jobs Pathway Programme and Job Placement, Employment and Training use goods and services from a wide variety of small and medium size enterprises.
Asset management
Given the limited scope and legislative basis of much of the total value of the assets under departmental control, asset management within the Department is not a significant aspect of our strategic and fundamental business. It is nonetheless recognised as a priority task. Asset management is devolved to Divisions, State and Territory and they are responsible for the assets under their control. A number of tasks are coordinated by National Office, including the annual stocktake of assets and the revaluation of assets. However, the basic management and responsibility for the safe keeping of assets remains within each functional area. The Department of Finance and Administration requires agencies to revalue their assets every three years. The Department intends to revalue all of its assets in the 2000-2001 financial year to meet this reporting requirement.
An asset replacement strategy has also been developed by the Department to ensure that it has an adequate budget in place for the replacement of assets as they come to the end of their useful lives.
Section 7 - Consultancies and competitive tendering and contracting
Consultancies
In 1999-2000, the department undertook 190 consultancies with expenditure of $14.5m including 114 new consultancies let in 1999-2000 with a total contract value of $14.2m. Details of summary usage by the department and consultancies let in 1999-2000 are listed in Appendix 5.
Competitive tendering and contracting
The Department’s Performance Improvement Cycle Review began in July 1999 in response to the Government’s requirement to systematically review its activities and use of resources, to identify the most cost effective means of delivering departmental services.
In June 2000, DETYA concluded a re-tendering exercise for the panel arrangement for external legal services which it has had in place since 1996. The estimated total value for the external legal services panel is $1.4m in 2000-2001. This process has enabled DETYA to continue to get best value for money in the legal services market place as well as retaining its ability to call on a broad range of expertise.
The Department made significant progress in preparing a Request for Tender to outsource its information technology and telecommunications services as a member of Group 11 under the Whole of Government IT Outsourcing initiative.
In addition, the Department will be proceeding to market test (separately) its financial, property, banking, office and human resource services in 2000-2001.
Section 8 - Managing better
In addition to the corporate governance matters discussed above, the Department has introduced several management improvement initiatives in response to the changing public sector environment and to achieve efficiencies in the way we achieve our objectives.
Financial performance
Departmental expenses reduced from $308.4m in 1998-1999 to $232.9m in 1999-2000. This reduction was due largely to the change in Administrative Arrangement Orders in October 1998 which resulted in the employment function being transferred to the then Department of Workplace Relations and Small Business. For the 1999-2000 financial year the Department’s Statement of Revenue and Expenses shows an operating deficit of just over $4.2m. This compares favourably to the budgeted operating deficit of $15.7m. The operating deficit is largely the result of the accounting treatment of unspent funds from the 1998-1999 financial year which required the Department to treat these as a capital injection rather than as appropriation revenue. It is anticipated that the operating deficit for 2000-2001 will be of a similar magnitude as some operating reserves are used up and then stabilise to produce a net zero result from 2001-2002 onwards.
For 1999-2000 the total assets of the Department were $88.9m compared to the 1998-1999 asset base of $83.7m. An asset replacement strategy has been developed to ensure that funding provision has been set aside to replace assets on a timely basis.
The 1999-2000 Statement of Administered Revenue and Expenses reveals a net surplus of $699.6m against a proposed budget outcome of a $6.2m deficit. This change in operating result can be mostly attributed to a change in accounting treatment for the Higher Education Contribution Scheme (HECS). When the budget was prepared, the agreed approach was to treat the Commonwealth contribution to HECS as an injection of capital, which as such would not pass through the Statement of Revenue and Expenses. However, the actual treatment that has been adopted in the preparation of the financial statements recognises the Commonwealth’s contribution as revenue and consequently has produced a positive operating result. The difference in treatment reflects work in progress to identify and agree a single approach to the treatment of HECS in the Department’s accounts and in the whole of government accounts. (Further information on HECS liabilities and outstanding debt is set out in Appendix 8 of this Report.)
As at 30 June 2000 total administered assets managed by DETYA were $11 499.8m. There are two main elements to this. The first is appropriation receivable of some $5 385.2m which reflects the funds yet to be paid for calendar year education grants in the second half of the 2000 calendar year. The second is $6 242.7m which reflects the total HECS debt owed to the Commonwealth.
Implications. It is expected that financial results for both Departmental and Administered items will remain fairly stable over the next few years. As the Department gains further experience in managing its resources on an accrual basis and agreed accounting treatments are put in place, it is anticipated that it will be able to predict financial results more accurately.
Devolved banking and cash management
From 1 July 1999 banking was devolved to agencies and the Department became responsible for managing its own bank accounts. The Reserve Bank of Australia performed the function of the transactional banker for the Department. It provided a range of services including processing of electronic funds transfer, cheque and direct entry payments, and overseas banking requirements.
The Department also became responsible for its own cash management. For Departmental Items, cash not required for immediate operational requirements was invested to earn interest while maintaining sufficient balances to meet day-to-day business needs. For the 1999-2000 financial year, the Department earned $1.75m interest against a target set by the Department of Finance and Administration of $822 000. An investment strategy was developed which resulted in around 93 per cent of our funds being held in term deposits each day.
For Administered Items the Department was required to provide forecast cash requirements to the Australian Office of Financial Management each month. These forecasts were daily estimates of cash required. On average, our daily forecasts were generally within 2 per cent of the final cash requirement. The Department is working towards further improving its forecasting accuracy in 2000-2001.
The provision of transactional banking services will be market tested during 2000-2001.
Accrual accounting and monthly reporting
The 1999-2000 budget was the first Commonwealth Budget presented on an outcome - output accrual basis. The Department budgeted and managed on a full accrual basis for the 1999-2000 financial year. Whilst accrual reporting has been part of the Commonwealth accountability framework for a number of years, this year provided a series of new challenges.
The Department of Finance and Administration (DOFA) introduced a new system, the Accrual Information Management System to enable Departments to provide updated estimates to DOFA, to enable DOFA to capture all Commonwealth Estimates, and to provide a mechanism for the monthly reporting of actuals.
Consistent with its external reporting requirements the Department’s internal monitoring and reporting was rebuilt to accommodate accrual reporting. The Corporate Leadership Group is provided with monthly financial reports prepared on a full accrual basis. This provides the Department’s leadership with full detail of financial activities and provided a sound vehicle for monitoring the implementation of the accrual system across the Department.
In addition to the monthly reporting process, the full cost of delivering outputs is prepared and presented to the Corporate Leadership Group quarterly. This helps to consolidate the cost attribution methodologies and draws a clearer link between cost drivers and outputs. The Department is required to conduct a pricing review of its activities with DOFA during the 2001-2002 financial year. The development of a strong cost model will enable the Department to readily identify the price of different activities.
Goods and Services Tax
The introduction of the Goods and Services Tax (GST) involved fundamental changes to internal operations and business arrangements for all government agencies. From 1 July 2000 this Department has been required to collect GST on the services provided under user-charging arrangements and pay GST on the supplies purchased (except where the services are GST-free or out of scope of the GST).
A GST Implementation Unit coordinated and progressed implementation of all aspects of The New Tax System in the Department.
The key areas in which work was undertaken were:
- the Department’s business and internal accounting operations;
- determining GST-free courses under the GST legislation;
- providing input to GST rulings and information products for the education sector, and
- the distribution of GST start-up assistance in the education sector.
The Department’s core financial systems are SAPfihre and IES/PASS which, among other things, manage all our internal and external payments respectively. Where these systems were affected by The New Tax System they were enhanced to support the tax accounting and administration of GST. Approximately 20 000 of our business partners were provided with information on how the introduction of The New Tax System would affect them and requested to provide details of their Australian Business Numbers where appropriate. The Department also developed and delivered general and specific GST training courses to staff in National Office and in State Offices.
The Educational Textbook Subsidy Scheme began operation on 1 July 2000 as part of the introduction of the GST. The aim of the scheme is to mitigate the price effect of the GST on educational textbooks. To do this, it provides a subsidy to participating educational booksellers who sell textbooks to students at Australian educational institutions (or to their parents or guardians) at a discount. The subsidy is capped at eight per cent of the GST inclusive price of each textbook.
During the 1999-2000 financial year the Department developed its approach to the Scheme with bookseller associations and independent educational booksellers. Australian educational institutions were also informed about the scheme as it developed. At the end of July, 625 booksellers had registered to participate in the scheme for 2000-2001.
Information Technology
The Department continues to improve its information technology use and applications in order to best achieve its outcomes.
The Information Technology Systems and Services Group successfully implemented the Department’s Y2K programme. Very few problems were experienced during critical periods, none of which affected clients, payments or service delivery. Lessons learnt in the Y2K programme will have continuing benefits for the Department’s services.
In addition to improvements in the design and usability of the Department’s internet site, the Group has implemented a number of internet based applications designed to collect and disseminate information to schools and other organisations online. This has made significant progress towards meeting the Prime Minister’s commitment to deliver all appropriate services online by 2001. The Department already delivers many services online and was listed in a recent ANAO Audit Report as the second highest Government agency provider of electronic service delivery.
The Group has also developed an integrated policy framework on the role of education and training in the information economy and the sector’s own use of information and communications technologies. The framework has been accepted by Cabinet and is supported by the Ministerial Council on Education, Employment, Training and Youth Affairs.
Continuity Management Plan
The Department has established a leading-practice Continuity Management Plan across the whole organisation. The plan links to and supports a range of other risk assessment and reduction tasks in the organisation. It was first used in the Y2K programme.
The Plan first ensures the safety and wellbeing of Department staff and visitors. Then it ensures the protection of the Department’s essential business services and assets from adverse incidents and the fastest possible recovery of those essential businesses in the event of disruption.
In addition to its use in case of disasters, the Plan can be used on a day to day basis to monitor and examine the Department’s emergency preparedness and occupational health and safety.