Doing our Business Better
Response to the Review of the Administration of the Home Insulation Program (the Hawke review) and the Independent Inquiry into the Green Loans Program (theFaulkner review)
As part of the DEWHA 2009-10 Strategic Plan, a number of critical areas were identified for internal review. The key components of this were independent reviews of financial management, corporate services and information management. This was coupled with an enhanced commitment to strategic planning at organisational, outcome and divisional levels and enhanced governance oversight through changes to financial and performance reporting to the DEWHA Executive Management Group. These changes and initiatives were in recognition that the scope of the department’s responsibilities had steadily grown over a number of years and this trend had been exacerbated by the department’s new responsibilities with the Home Insulation Program stimulus measure.
Since the release of the 2009-10 DEWHA Strategic Plan the independent reviews on financial management, corporate services and information management have been completed and management responses to the findings of the reviews have been agreed.
In addition three major external reviews have been finalised. The ANAO has completed an Audit of the delivery of Climate Change Programs, an independent review of the Home Insulation Program has been completed, and more recently an inquiry into procurement processes and contractual arrangements under the Green Loans Program has also been completed. These reviews were targeted on Energy Efficiency programs which have subsequently been shifted to the new Department of Climate Change and Energy Efficiency, however, the reviews have a number of broader implications for the future administration of the DEWHA. While at first glance the key findings of these reviews can be viewed within a narrow prism of energy efficiency program delivery and the added complexities imposed by the delivery of stimulus, the findings have heightened the need to accelerate the change management process that was initiated with the release of the 2009-10 DEWHA Strategic Plan.
At the same time it is also important to recognise that the reform measures do not place unnecessary red tape on the ongoing delivery of key government priorities. The DEWHA has a very strong track record in delivering a complex and diverse range of responsibilities. In 2009-10 this has included the ongoing administration and reform options for the EPBC Act, we have purchased billions of litres of water to help our environment, we have added more than three million hectares to the National Reserve System, we have established nine new Indigenous Protected Areas and we have established a resale royalty scheme to ensure visual artists benefit from secondary sale of their work. On balance however, the findings of the reviews, and particular the review of the administration of the Green Loans Program, require a comprehensive package of reforms to enhance organisational internal control mechanisms and systems and strengthen accountability frameworks. In this context while no reforms can prevent aberrant or illegal behaviour, stronger systems can lead to rapid detection, cessation and remedy.
The key reforms already put in place or underway include:
Improved Executive Governance Framework
A new DEWHA Governance Framework commenced on 1 July 2010 to ensure better performance and consistent compliance. The new Framework strengthened all major oversight structures and establishes a DEWHA Management Board with three key subordinate committees: a new Finance and Operations Committee, an enhanced Workforce Management Committee, and a new Information management Committee. The DEWHA Management Board will be supported by Deputy Secretary led Outcome Project Boards which will report regularly on priority project, program management milestones, ongoing responsibilities and risks. The governance framework also includes a monthly meeting of all SES to address key emerging issues and to enhance communication flows inside the governance framework.
Organisational Reform
The roles and responsibilities of the central DEWHA corporate functions have been further clarified and strengthened. This includes the establishment of three new functions with the appointment of a new Chief Operating Officer, the establishment of an Information Management and Technology Division, and the establishment of the Business Improvement Division. The Business Improvement Division will include a new Governance Branch which will operate as a centre of excellence and internal advice on project management, program management, procurement, contract management, risk management and audit. These new positions and functions are largely being funded from internal savings identified through an internally commissioned review of corporate functions.
Ongoing Commitment to Improved Strategic Planning and Reporting
The 2009-10 DEWHA Strategic Plan marked a new chapter in Strategic Planning for the organisation. This will be further strengthened in 2010-11 with the addition of more detailed Annual Operation Plans for DEWHA Outcomes. Underpinning the Annual Operational Plans will be consistent Divisional Plans that will have increased emphasis on the development of key performance indicators to enhance accountabilities. Increased reporting will also occur through the Outcome Project Boards. A new Executive Reporting Platform has been developed to improve the effectiveness and efficiency of reporting to the DEWHA Management Board and Ministers.
New Procurement Arrangements
A revised procurement system will be developed to provide automated and timely identification of procurement activities that sit outside identified parameters. In the interim there has been an immediate tightening of expense delegations, particularly with respect to sole supplier delegation levels. There will also be more comprehensive and aggressive identification and reporting to Senior Managers on contract variations. In addition a central register of contracts will be established replacing current decentralised arrangements. Central procurement and contract advice will also be provided through the newly established Governance Branch. It will be mandatory for the Governance Branch to be involved as a gatekeeper in development of all new projects, and approval for all new project and procurement plans.
Training
Enhanced and mandatory training in procurement, compliance and contract requirements and practices will be provided for all staff with delegations under the Chief Executive Instructions. Delegations for such mandated activities will only be activated once training has been successfully completed. All Senior Executive will be subject to these mandated conditions.
Audit
As part of the changes to the Governance framework, the Audit Committee will comprise an independent Chair and three independent members plus one Deputy Secretary level internal member. Internal Audit for DEWHA will focus on key risk areas with particular attention to non-standard contracts, high volume contracts, high value transactions and analysis of breaches. Internal Audit will also review all Tier 1 and Tier 2 projects over the coming twelve months. In response to the Green Loans review, an internal Ombudsman will be appointed to provide staff with an additional pathway to raise any concerns with Management on issues such as program design, procurement and contract negotiations. As part of the commitment to business improvement, a new internal compliance and consultancy team will also work with areas to achieve best practice across all program delivery functions. In addition to the appointment of a new internal audit provider (PWC), DEWHA has also commissioned KPMG to conduct a review of procurement and contracting processes across the department to follow up the work done on the Green Loans Program.
Change Management Oversight
The long term commitment to change management is a leadership challenge for all DEWHA Senior Executive Service. The agenda will be supported through the Change Management Reference Group which is chaired by Secretary. Change Management is also supported through a Change Management Taskforce and a Corporate Review Implementation Steering Committee. The reform agenda will be further outlined in the 2010-11 DEWHA Strategic Plan.
Summary
The outcomes of the internally commissioned reviews and the external reviews of the Energy Efficiency programs reveal a clear case for change across the organisation. The first steps are already underway and will change the way in which the Department operates, with key elements in place from 1July2010. Our approach to improving organisational effectiveness will be comprehensive and address the findings of the Hawke and Faulkner review. Changes to the way in which the Department is governed, additional structures to provide central advice to program areas, a commitment to an enhanced audit program, new training and procurement arrangements, coupled with DEWHA’s commitment to improved strategic planning and performance measurement will provide increased checks and balances. Details of these initial measures are outlined in the tables below.
Mapping of key DEWHA reforms against issues raised in
the Independent Inquiry into the Green Loans Program (theFaulkner review)
Table 1
Issue(paragraph references are to the Independent Inquiry into the Green Loans Program) / Response measure
Procurement and Probity Issues
FMA Act and Regulations Breaches (s5.4.1)
Contract Splitting (s5.4.2)
Poor Procurement Planning (s5.4.3)
Lack of Commercial Terms in contracts (s5.4.4)
Poor Management of supplier Request for Quotes (s5.4.5)
Direct Source of Suppliers – rationale not justified (s5.4.6)
Poor Record Keeping (s5.4.7)
Contract disclosure issues (s5.4.8)
Significant cost escalations and weak budget control / New Procurement Arrangements
The Department has tightened expense delegations, including with respect to sole supplier delegation levels. A revised procurement system will be developed to provide automated and timely identification of procurement activities that sit outside identified parameters and thereby ensure more comprehensive and active identification and reporting to senior managers on contract variations. In addition, a central register of contracts will be established replacing current decentralised arrangements. Central procurement and contract advice will also be provided through the newly established Governance Branch, as recommended by the ANAO. It will be mandatory for the Governance Branch to be involved, above certain thresholds, in the development of all new projects and approval for all new project and procurement plans.
Internal controls and governance are also being significantly strengthened through regular reporting of key organisational metrics and establishment of project boards to examine risks and operations for all significant projects and activities.
Underlying Causes of Inquiry Findings
Absence of Effective program leadership (s7.1)
Lack of Program Supervision by SES (s7.1)
High turn-over of SES (s7.1)
Absence of program centred governance model (s7.2)
Poor interface with corporate functions (s7.2.1)
Inadequate Number of Personnel (s7.3.1)
Assembling a team with required skills for the design and implementation phase (s7.3.2)
Program design flaws (s7.4.1)
Project Planning (s7.4.2)
Poor Risk Assessment and Management (s7.4.3) Program Reporting (s7.4.4)
Program Guidelines (s7.4.5)
Complaints Handling (s7.4.6)
Quality of Procurement Planning (s7.5)
Quality of Communication within team (s7.6.1)
Quality of Communication with departmental executive (s7.6.2)
Quality of Communication with central corporate support (s7.6.3)
Quality of Communication with Minister’s office (s7.6.4) / Improved Executive Governance Framework
A new DEWHA Governance Framework commenced on 1 July 2010. The new framework establishes a DEWHA Management Board with three key subordinate committees: a new Finance and Operations Committee, an enhanced Workforce Management Committee, and a new Information management Committee. The DEWHA Management Board will be supported by Deputy Secretary led Outcome Project Boards which will be required to report regularly on progress on Tier 1 and 2 Projects, program management milestones, ongoing core responsibilities, and highlight emerging risks. The governance framework also includes a monthly meeting of all SES to address key emerging issues and to enhance communication flows inside the governance framework.
Organisational Reform
The roles and responsibilities of the central DEWHA corporate functions have been further clarified and strengthened. This includes the establishment of three new functions with the appointment of a new Chief Operating Officer, the establishment of an Information Management and Technology Division, and the establishment of a Business Improvement Division to ensure implementation over the next six months of the package of response measures. As recommended by ANAO, the new Governance Branch will operate as a centre of excellence and internal advice on project management, program management, procurement, contract management, risk management and audit.
Program specific shortcomings
Poor documentation and process around the appointment of the Assessor Accrediting Organisation (s6.1)
Delay in implementing a Program audit process (s6.2)
Failure to build changing assumptions about program costs into budget forecasts (s6.3)
Failure to obtain approval from the Minister for an increase in fees (s6.3)
Inappropriate arrangement that allowed Fieldforce to make assessment booking without going though the call centre (s6.4) / Training
Enhanced and mandatory training in procurement, compliance and contract requirements and practices is now required for all staff with delegations under the Chief Executive Instructions. Delegations for such mandated activities can only be activated once training has been successfully completed. All Senior Executive are subject to these mandated conditions.
Audit
As part of the changes to the Governance framework, the Audit Committee will comprise an independent Chair and three independent members plus one Deputy Secretary level internal member. Internal Audit for DEWHA will focus on key risk areas with particular attention to non-standard contracts, high volume contracts, high value transactions and analysis of breaches
Internal Ombudsman
In response to the review, an internal Ombudsman will be appointed to provide staff with an additional pathway to raise any concerns on any issues, including program design, procurement and contract negotiations.
Internal Compliance Measures
As part of the commitment to business improvement, a new internal compliance and consultancy team will also work with areas to achieve best practice across all program delivery functions.
Mapping of key DEWHA reforms against issues raised in the Review of the Administration of the Home Insulation Program (the Hawke review)
Table 2
Issue(page references are to the Review of the Administration of the Home Insulation Program) / Prevention measure
Program Governance
Insufficient engagement with States and Territories during development and delivery phases (p.20)
Ordinary processes of Government for delivery, oversight and reporting of program not in play due to stimulus (p.20)
A strong and consistent regulatory framework for insulation installers should be implemented by states and territories, building on the lessons learnt from HIP (p.21) / Improved Program Reporting
A new DEWHA Governance Framework commenced on 1 July 2010. Under this Framework, the Management Board and its subordinate committees will be required publish regularly reports on the progress of priority projects, program management milestones and ongoing core responsibilities. In addition, the Deputy Secretary led Outcome Project Boards and monthly meetings of all SES will highlight and assess key emerging issues.
Strengthened Engagement with Stakeholders
As part of our commitment to doing our business better, an increased focus will be placed on mechanisms for engaging our stakeholders in the development of policies and procedures. This will include actions such as scheduled executive forums and roundtables with key stakeholders, and best practice forums to share experiences and learnings with Australian Government agencies.
Program design and administration
Timeframe had an impact on planning and design of final model (xi) Where time is short there must be clarity around key objectives, their risks and what is achievable so that expectations can be managed (p.xi)
Time pressure due to Stimulus resulted in fraud and compliance issues (p.29)
Fundamental design elements led to fraud, low quality work and no incentive for householders to take normal level of responsibility (p.29)
Tradeoffs must be carefully balanced in program objectives, design and implementation (p.xi)
Business models, including audit and compliance frameworks, must be scalable and flexible should there be unprecedented demand (p.xi)
Opportunity to step back from day to day management of program and ask hard questions was not taken until late in program (p.xii)
Resources were tied up in crisis management (p.xii)
Frequent changes to program increased complexity and absorbed resources (p.xii) (p.8)
Management structures should allow for considered review when delivering programs of this nature so that the need for change can be recognised and realised. (p.xiii) / Stronger Leadership and Accountability
Establishment of a set of agreed leadership behaviours to strengthen the focus on good management of our people. This will be supported by monitoring of these behaviours in performance assessment process.
Strengthened Support Structures
A new Governance Branch has been established to act as a centre of excellence and internal advice on project management, program management, procurement, contract management, risk management and audit. It will be mandatory for the Governance Branch to be involved, above certain thresholds, in the development of all new projects and approve new project and procurement plans.
Internal controls and governance are also being significantly strengthened through regular reporting of key organisational metrics and establishment of project boards to examine risks and operations for all significant projects and activities.
Risk Management
Delivery model (ie based on household demand) contained risks which could not be mitigated and remained high through the program (p.x)
Warnings were heeded, but reactively (p.43)
Installer registration measures should have been tightened at the outset in light of little industry regulation (p.43) / Managing Risk
Outcome Project Boards will provide regular oversight of key activities, above certain thresholds, including examining risks and operations. In examining activities, the Project Boards will consider issues such as project management, procurement planning, risk management, staffing needs, information technology and record keeping, and communications with and feedback from clients, stakeholders and other interested parties.
Complaints, Audit and Compliance mechanisms
Contract management a weakness, exacerbated by high staff turnover (p.48)
DEWHA unable to effectively take action on PWC audit findings (p.48)
Overly generous ‘show cause’ provisions before deregistering non-compliant installers until final months (p.50) The implementation of the ‘one-strike you’re out’ policy re fraud and safety came too late, despite being included in the program design (xii)
Implementation of audit and compliance framework lagged behind (p.xi) A full audit and compliance regime was not in place until 1 July 2009 – consideration should have been given to expediting the procurement process for the service provider (p.56)
Early targeted audits could have identified unscrupulous operators and sent a message to others. (p.56)
Would be beneficial to have tool kit on compliance audit for new programs, to avoid having to reinvent compliance frameworks for every program (p.56) / Audit
The DEWHA internal audit program will focus on key risk areas with particular attention to non-standard contracts, high volume contracts, high value transactions and analysis of breaches.
Internal Ombudsman
The appointment of an internal Ombudsman will also provide staff with an additional pathway to raise any concerns on any issues, including program design, procurement and contract negotiations.
Resourcing, Capacity and Business Platform Issues
The initial management structure for HIP was not ideal delivery of significant and complex program (ie managed within Branch already tasked with number of other responsibilities) (p.60)
Insufficient senior management oversight of a program with the profile and significance of HIP (p.43) Higher level of full-time senior management oversight, including a dedicated Deputy Secretary, should have been assigned for the duration of the roll out or until such time as its delivery became routine (p.x)
Capacity of staff insufficient to run a program of this size and nature a problem throughout implementation of program (p.ix, 34 & 60)
Internal project management infrastructure insufficient to support demands placed on them (p.60)
Design of business model, external contracting, partnership arrangements and internal restructuring not backed up by necessary level of dedicated senior executive oversight or sufficiently timed contracting out. (p.62)
Merit in ensuring future programs developed in close consultation with industry, state and territory regulators and service delivery agencies (p.62)
Potential take up of programs is a key program design element and must be carefully considered if implementation is to be managed well (p.62)
Demand control mechanisms should be considered in program design (p.62) / Improved Executive Governance Framework
A new DEWHA Governance Framework commenced on 1 July 2010. The new framework establishes a DEWHA Management Board with three key subordinate committees: a new Finance and Operations Committee, an enhanced Workforce Management Committee, and a new Information management Committee.
Training
Mandatory training for all staff with delegations has also commenced. This will be support by a broader core skills training program for our staff.
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