Sunday, 5 February 2017

ANAO Audit of the Indigenous Advancement Strategy

‘Though this be madness, yet there is method in it’
Hamlet Act II, Scene ii

The ANAO released its effectiveness audit (link here) of the Indigenous Advancement Strategy (IAS) last Friday (3 February 2017). The IAS (link here) is the Government’s major grants program in Indigenous Affairs, allocating in excess of $1bn per annum for activities designed to deliver services to Indigenous citizens and communities.

The Australian described the audit as ‘scathing’ (link here), and noted:
However the audit found that a seven-week planning and design period had “limited the department’s ability to fully implement key processes and frameworks, such as consultation, risk management and advice to Ministers”.
The program’s short implementation time had then “affected the department’s ability to establish transitional arrangements and structures that focused on prioritising the needs of indigenous communities”.
Further, the department’s grants administration process “fell short of the standard required to effectively manage a billion dollars of Commonwealth resources”.

The ABC story (link here) led with the following paragraph:

The Abbott government bungled its overhaul of billions of dollars worth of Indigenous funding, a major report has found.

The Department of Prime Minister and Cabinet website published a summary of the Department’s response to the audit (link here) which tries valiantly to shift the focus to the future and away from the findings, and as a result, in my opinion fails to adequately acknowledge the seriousness of the findings.

The Minister for Indigenous Affairs published a media release in response to the audit (link here) titled “Government a step ahead of the ANAO audit recommendations” which stated in the first paragraph that the audit findings related to the 2014 grant round, and ‘should be viewed as a historical observation on a process carried out two-and-a-half years ago’.

The implication that the ANAO and the Auditor General is a step behind the Government in releasing this report, and that its assessment is not ‘fair and reasonable’, is on its face extraordinary. So too is the Minister’s quite direct criticism of the ANAO for failing to focus on the Government’s alleged successes as stated in the minister’s media release:

Assessing the success of the IAS based on the introductory period is premature. Any fair and reasonable assessment of the IAS needs to consider a timeframe well beyond the introductory period to give the strategy time to deliver the intended benefits.
By focusing its audit on the grants round, the ANAO has paid insufficient regard to the state Indigenous Affairs was in when the Coalition Government came to office in 2013 – and hence the need for the Government to implement its reforms.
Before the Coalition introduced the IAS, it was not possible to say where and how much taxpayer money was being spent or what outcomes were expected for the outlay. I know this to be true, because they were questions I repeatedly asked in Senate Estimates as an Opposition Senator. 

These criticisms ought to be seen for what they are: attempts to divert attention from the shortcomings identified by the ANAO. In relation to the claim about assessments in the ‘introductory period’ the Minister himself decided that the previous Government’s Remote Jobs and Communities Program was a failure and should be abolished while it was still less than 12 months old, and the replacement Community Development Program is in diabolical trouble, with soaring breach rates and substantial community concern (link here). The comments about not being able to say where the money was being spent and what outcomes were expected under the previous Government are issues identified by the ANAO in relation to IAS. The degree of transparency in relation to the IAS is virtually non-existent, as a cursory trawl through the PMC website will reveal.

To take just one example, the level of detail available in relation to expenditure on the Minister’s signature program, the Remote School Attendance Strategy is woeful, with no accessible detail on the allocation of funding, no detail on the numbers of students impacted, only one internal quantitative evaluation which suggests that the program’s impact, while positive, is far from making a meaningful difference to overall remote school attendance. Yet the media releases, magazine articles and good news stories keep rolling out.

In an interview with the ABC in relation to the ANAO Report, the Minister was reported as stating that he did not think errors were made (link here):

"I don't accept that this was some sort of disaster at all," Senator Scullion told the ABC.

"All of these criticisms are about departments and processes. What my job is to do is focus on what people who receive the services think.
"The fact is Aboriginal and Torres Strait Islanders, as a consequence of these remarkable changes, are far better off."

In essence the Government’s response has been to argue that the IAS involved “remarkable changes”, that any issues identified by the ANAO are “historical observations” of no relevance today, and that ‘these criticisms” are ‘unreasonable and unfair’ and all about bureaucratic processes for which the minister is not responsible.

Before assessing the merits of these arguments, it is worth noting some of the ANAOs detailed findings. Of necessity, they are extracts and the report needs to be read in its entirety. Nevertheless, a number of the findings are extremely concerning, and suggest deep-seated problems existed (and presumably continue to exist) in the way Indigenous public policy is being implemented.

In terms of understanding what has gone on here, it is important to understand that the ANAO is precluded for examining the actions of Ministers; its focus is entirely on the actions of agencies, notwithstanding that the Minister is the decision maker and he and his office would have been integrally involved in the roll out of this program (as was confirmed in Secretary Parkinson’s letter (discussed below).

Here are some of the more worrying quotes from the ANAO report (emphasis added):

7. While the Department of the Prime Minister and Cabinet’s design work was focused on achieving the Indigenous Advancement Strategy’s policy objectives, the department did not effectively implement the Strategy.

10. The department’s grants administration processes fell short of the standard required to effectively manage a billion dollars of Commonwealth resources. The basis by which projects were recommended to the Minister was not clear and, as a result, limited assurance is available that the projects funded support the department's desired outcomes. Further, the department did not: • assess applications in a manner that was consistent with the guidelines and the department’s public statements; • meet some of its obligations under the Commonwealth Grants Rules and Guidelines; • keep records of key decisions; or • establish performance targets for all funded projects.

11…..The department has commenced some evaluations of individual projects delivered under the Strategy but has not planned its evaluation approach after 2016–17.

16…..The department did not meet its commitments with respect to providing advice on all the elements identified as necessary for the implementation of the Strategy. The department also did not advise the Minister of the risks associated with establishing the Strategy within a short timeframe.

24. The department did not maintain sufficient records throughout the assessment and decision-making process. In particular, the basis for the committee’s recommendations is not documented and so it is not possible to determine how the committee arrived at its funding recommendations. The department did not record compliance with probity requirements. Further, the department did not maintain adequate records of Ministerial approval of grant funding.

1. 15…..the ANAO does not have assurance that the department has produced complete records of the design and implementation of the Strategy.

2.9…… The department advised the ANAO that it met with Indigenous leaders and national peak bodies outside of the council but did not keep records of the meetings. As such, it is not clear who the department met with, what feedback the department received and how this was considered in developing the Strategy.

3.21….. There is limited evidence that regional profiles were considered in the grant assessment process. As at August 2016, two years after the commencement of the regional network, the department has drafted but not finalised regional strategies.

3.23 The department advised that it has provided the Minister with dashboard reports since August 2015. The reports include a short local issues section that, until January 2016, focused on the Community Development Program and Remote School Attendance Strategy. The dashboard reports provide a reflection of activity within the regions, but do not meaningfully report on the performance of the regional network.

4.17 ….. This meant that the information from the application assessments was so aggregated that it did not provide meaningful information to the committee against the selection criteria, and subsequently the Minister.

4.20 ANAO analysis shows that some projects that were awarded a high score against the selection criteria and need score were not recommended for funding, and some low-scoring applicants were recommended. For example, 59 projects that were awarded assessment scores of 20 or below and a need score of 3 or less were recommended for funding. Further, 222 projects that were awarded assessment scores of 26 or above, and a need score of six or above were not recommended for funding.

4.25 The department provided the ANAO with a list of 415 demand-driven applications it assessed, but could not confirm that it was a complete list of the applications received. The ANAO identified 11 applications that were under assessment for more than one year, with the longest time between application and notification of outcome being 592 days.
4.34 The review of applications identified 300 missing applications that the department had received but not registered for assessment.
4.36 The requirement that all projects were assessed by two staff was not applied to all projects. Analysis by the ANAO identified that 815 out of approximately 5000 project assessments did not receive two assessment scores….4.37  As a consequence of being assigned an automated score, the 815 projects were not appropriately considered against each of the individual selection criteria at the assessment panel stage.

4.40 The probity plan required that committee meetings be recorded, with minutes signed by the Chair of the committee, and that the Chair ensure that the grant assessment process be comprehensively documented and tied explicitly to the selection criteria. The committee did not record minutes of its meetings, keep a record of the actions taken by the committee to address conflicts of interest recorded by committee members, or keep records of key decisions.

4.41 The ANAO was provided with two different spreadsheets that, according to the department, recorded the funding recommendations made by the committee. Neither spreadsheet matched with the value of funding recommendations recorded on the brief that the committee Chair signed to approve the recommendations to the Minister, and one of the spreadsheets recorded recommendations that the department later advised the Minister were not an accurate representation of the committee’s recommendations.

4.46 The department provided descriptive information (such as project locations and electorates), but did not provide the Minister with assessments of the extent to which projects met each of the five Strategy selection criteria. The department advised the ANAO that it provided the assessment score and need score to the Minister in its initial $917 million recommendation brief, but was unable to provide evidence of this.

4.48 Similarly, the department did not maintain adequate records of the grants approved by the Minister.

4.61 As such, the department has limited assurance that the process of negotiating funding agreements and amounts was conducted fairly, and that applicants received similar treatment across the regional network.

5.26 The department drafted an evaluation strategy in June 2014…... A constraint on evaluation activity was that the evaluation strategy was not formalised and no funding was set aside to implement the evaluation strategy.

The ANAO has also published at pages 67/68 a copy of the letter responding to the audit from the Secretary of PMC, Martin Parkinson. It is a only a slightly more balanced response than that provided by the Minister, but is nevertheless a letter which no Secretary, let alone the Secretary of PMC would ever wish to have to sign.

Parkinson acknowledges what he terms shortfalls in ‘some’ of the Department’s processes including record keeping. He notes, inter alia:

The department worked closely with the Minister for Indigenous Affairs and his Office to ensure that they were apprised of the progress being made and implementation challenges…The department considers the shortfalls in its processes outlined in the Report and the potential implications arising from them are overstated when seen in the full light of the transition….

The substantive issues raised by the ANAO are extremely serious in their own right, but it seems to me that there are two broader issues which deserve attention.

The first goes to the quality of the advice provided by the Department to the Minister. The ANAO makes clear that the advice was substantively faulty in relation to a substantial proportion of the grants being considered. This raises broader issues relating to the capacity of the APS to provide quality advice to Ministers. It needs to be remembered that while Indigenous affairs is a complex area of public administration, managing grants programs is core business for the bureaucracy and it seems almost unbelievable to me that a central agency such as PMC could get it so wrong. One must wonder where the Department’s Audit Committee was during this process? Where was the Executive Leadership Group which according to the Annual Report for 2013-14 (link here) ‘considers strategic issues impacting on the Department, including any ongoing or emerging risks, and monitors performance in delivering outcomes’?  

It was less than ten years ago that Peter Shergold (the then Secretary of PMC) identified policy and program implementation as key areas of focus for the APS and established an implementation unit in PMC to drive a stronger focus on the issue across the APS.

More importantly, and more worryingly, is the implication which can be drawn from reading between the lines of Parkinson’s letter, (and from paragraph 16 of the ANAO summary) that PMC failed to properly advise the Minister of the risks of attempting to implement major change to Indigenous funding programs ‘within very ambitious timelines’ presumably set by the Minister, either because it didn’t recognise the full nature of the risks (but see paragraphs 2.18 and 2.19), and in any case  decided to ignore or discount them. The inevitable conclusion drawn by the ANAO was that the bureaucracy did not provide appropriate (ie frank, fearless and quality) advice, and we might surmise that the Department was perhaps afraid to tell the minister and government that the reform agenda in the timeframe demanded was not possible.

This is an issue of much broader import than program administration in the Indigenous affairs portfolio, and goes to the increasing politicisation of senior levels of the APS, not in a partisan sense, but in the sense that it is career suicide for a senior public servant to say ‘no Minister that is not possible’. This increased ‘politicisation’ of the bureaucracy strengthens the arguments for stronger independent checks and balances elsewhere in the systems of public policy and administration.

The second issue goes to the notion of ministerial responsibility. It is appalling that no-one appears prepared to take responsibility for what is an extraordinary litany of incompetence and ineffective program implementation. Of course the ANAO can only asses what is recorded and it may well be that the Department was verbally warning the Minister of the risks and the need to take corrective action. And of course, once the course is set by the Minister, it is often impossible to turn the clock back. Given the inevitability that the bureaucracy’s advice and relationship with the minister is a ‘black box’, even to auditors, and that the levels of resourcing for agencies are set by governments, there is an extremely strong public interest in the minister being held accountable for the performance of his Department. This is the normal Westminster theory, a notion which appears to be increasingly ignored in practice.

What is particularly concerning in the present case, and unprecedented in my memory, is the Minister’s preparedness to denigrate the ANAO and attack the ANAO conclusions (replicated more diplomatically by the PMC Secretary). This has the effect of eroding the authority and independence of the ANAO and deserves public censure.

The overall outcome of all this is just too cute. The Department did not advise the minister of the risks, so he takes no responsibility. The Secretary claims the program was integral to ‘a very ambitious reform agenda but one that was long overdue in the delivery of Indigenous programs’ and any ‘shortfalls in its processes outlined in the Report and the potential implications arising from the are overstated when seen in the full light of the transition…’, so there is no case for the Department to be held responsible. The Minister claims that as a result ‘of these remarkable changes’ Indigenous people ‘are far better off’, the problems identified by the ANAO are merely of historical significance and in effect have either been fixed or are being fixed. No one takes responsibility.

The information disclosed in the ANAO Report may just be an account of teething problems in the reform of a complex grant program under tight deadlines. But those reforms, driven by the minister, also created a system which created the potential for substantial subversion of normal grant management principles and normal principles of governance, where the Minister could if he so wished, take funding decisions in accordance with whatever whim came to him, could reward favorites, punish enemies, without reasons being recorded, details kept, and all hidden from view and scrutiny. There is no evidence in the ANAO report that this occurred in relation to this program, but the question is: where is the assurance that it didn’t occur? And where is the assurance that it is not occurring today? That is the purpose of good process, record keeping, timely transparency and equal and fair grant management processes.

We might believe that virtually all politicians and ministers are akin to saints, and will never seek to pursue personal or political agendas, but the realist within tells me there will always be a minority who are prepared to opportunistically pursue self-interest and political agendas under the guise of operating in the public interest. And that is why all those with an interest in good governance ought to be concerned with what has been shown to have gone on here.

Personal disclosure: I worked as a ministerial adviser for Minister Macklin from 2008 to 2011, and in the Department of Families, Housing, Community Services and Indigenous Affairs from 20011 to 2013.