Transparency and accountability: theory and practice

The ANAO today released a report into Primary Healthcare Grants under the Indigenous Australians’ Health Program (link here).

The report identified a range of shortcomings, more misdemeanors than major issues. I don’t propose to provide a summary or detailed analysis as the report largely speaks for itself. I particularly commend it to readers interested in Indigenous health administration issues.

Notwithstanding its critical content, I confidently predict that the various issues identified, the ANAO report will garner very little media coverage or even Senate scrutiny.

In reading the report, however, one particular issue caught my attention, and it sparked an observation which is perhaps worth noting since it opens a window on to a much larger dynamic which can operate in the APS. This dynamic is where Ministers push the boundaries, public servants don’t see a way to hold the line, and ultimately it is Departments which are exposed as not meeting appropriate accountability norms.

Amongst its various findings, the ANAO uncovered the following issue. Included in comments on the lack of value for money assessments on a billion dollar round of funding, the ANAO also noted at para 16:

The department was also unable to provide evidence it had undertaken a value for money assessment regarding the $114 million grant to the Northern Territory Government. In virtually all cases, risk assessments formed part of the assessment process.

Later in the report, the ANAO provided more information:

2015 Northern Territory government grant

3.13 The Northern Territory government had been funded under pre-IAHP grant programs for the provision of primary healthcare to Indigenous Australians, mostly through clinics in remote areas. As part of seeking Ministerial approval about the funding process under the IAHP, the department advised the Minister that it would only make a formal offer of a grant following receipt of a specific grant proposal and undertaking a value for money assessment against the ‘deliverables’ in the proposal. The Minister approved this approach in mid May 2015.

3.14 No specific departmental assessment plan or selection criteria was developed for the Northern Territory grant. The department contacted the Northern Territory Department of Health on 26 June 2015 to request that it provide a proposal. Departmental records indicate that a formal offer of a $114 million funding agreement to the Northern Territory Government was made on 6 August 2015, before the proposal was received on 15 August 2015. A funding agreement was signed in October 2015. The department was unable to supply the ANAO with evidence that it had undertaken value for money or risk assessments of the proposal.  

The ANAO, whose remit is the operations of Departments and not Ministers, leaves the impression that this was largely an oversight on the part of the Department.

My own experience working within Government tells me that Departments rarely take decisions on these sorts of matters without clear authority from Ministers. There may or may not have been evidence on the file, but it would be a severely career limiting move for a public servant to act without ministerial authority on a grant to a subsidiary jurisdiction such as the NT. Instead, what we have is a ‘mistake’ by the Department, and when caught out by the ANAO, the Department expresses contrition, agrees with the ANAO recommendations, and resolves to do better in the future.

If my supposition is correct, (and I emphasise, it is merely supposition), this would tell us a number of things.

First that the NT Government of the day was apparently so incompetent that they could not develop a timely funding proposal making the case for Commonwealth funding.

Second that there may have been formal or informal signals from ministers to ‘just get on with it’.

Third, that in such circumstances the senior bureaucrats in the Health Department at that time may have felt unable to stand up to the Minister. The provision of frank and fearless advice seems increasingly rare in the highly politicised (with a small p) world of public policy administration in Australia, and this may well have been another instance.

Fourth, that there may have been electoral considerations in play as the timing of the decision to grant the funds to the NT was in the year before an NT election. The then CLP Government, headed by Chief Minister Adam Giles, was closely aligned with the Nationals. The Federal Health Minister at the time was Peter Dutton; the Assistant Health Minister was Nationals Senator Fiona Nash.

Fifth, that if the Senate Estimates Committees are doing their job, we could expect that there would be direct questions at the next hearings directed to determining whether there was ministerial involvement in the Department’s decision to prematurely offer the funds to the NT Government. And if not, what action was taken to counsel the officers involved in making the premature offer without a value for money assessment.

To sum up, what we appear to have with this audit is a good degree of transparency, courtesy of the efforts of the ANAO, but limited or non-existent accountability. There was merit in the traditional Westminster notion that Ministers are responsible for the actions of their Departments. Ever since that notion lost effective traction, accountability standards within Government have gone downhill. And the voting public and taxpayers are the losers. In theory we have accountability, in practice we don’t.

Addendum to previous post on financial exclusion

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has released a further Background Paper titled ‘Aboriginal and Torres Strait Islander consumers of financial products’ (link here).

The Background Paper provides a useful but basic overview of the available data on Indigenous access and use of financial products. The Paper emphasises that data on this topic is limited as most providers of financial services do not collect data on the Indigenous status of their customers.

The Paper provides, in section 5, an account of policy reforms since 2010 to address financial exclusion of Indigenous people. I don’t propose to undertake a detailed critique or commentary, but suffice to say the information provided is rather thin gruel. Closing the Gap would improve financial inclusion, but the gap is not closing. Indigenous Business Australia is an important statutory entity, but its impact on financial inclusion is rather diffuse. The other issues mentioned are all positive, but the depth and breadth of their impact is likely to be minimal in my view, although I hasten to add that no-one knows for sure, because none of these initiatives have been reviewed or evaluated to assess their impact on Indigenous financial inclusion.

Notwithstanding the negative tone of the comments above, they are not directed to criticising the Royal Commission. Indeed, the Commission is to be commended for identifying the issue and seeking to document what is happening in relation to Indigenous use of financial products and services.

However, nothing in this Paper leads me to revise my overarching observations in the previous post.

One further idea worth considering would be for the Government to initiate a Parliamentary Inquiry into financial exclusion amongst Indigenous citizens. This in turn might lead to further academic research and a higher profile amongst both public and private sector agencies for these issues.

Indigenous financial exclusion and the Banking Royal Commission

‘He that dies pays all debts’

Tempest, Act 3, scene 2

It is a while since I wrote anything on financial literacy (link here and here)

Last week the Banking Royal Commission, or to give it its full name, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (link here) published a Background Paper titled ‘Some Features of Financial Services in Regional and Remote Communities’ (link here).

This was a welcome development and at first blush suggests that the Commission is being proactive in seeking to identify areas of potential concern. The focus of the paper is on the access to financial services of the 6.9m people (or 28 percent of the Australian population) who reside in regional or remote locations. The paper provides a good overview of the issues involved, including the footprint of and interactions with financial services, and the extent and consequences of financial exclusion in regional and remote Australia.

Necessarily in a brief overview, the paper is written at a high level, and makes few references to issues around Indigenous access to financial services. There is a passing acknowledgment that Indigenous citizens are overrepresented in the severely or fully financially excluded group (page 14). There is a brief discussion about limited ATM access and high fees and transaction costs, which while it doesn’t mention Indigenous citizens in the text, relies for its source on a Treasury report from 2011 which examined Indigenous ATM issues (page 19; link here). There is mention of the links between financial exclusion and high cost lenders, but again without mentioning the particular issues associated with remote communities.

The experience in the APY Lands in this regard has had publicity in recent years (link here and here), but it is a widespread and longstanding issue across Indigenous Australia. The Commission paper references a 2003 paper by Siobhan McDonnell (link here) which provides a more academic insight into the issues facing remote Indigenous communities, and references a number of other useful publications and reports from the early 2000s including by my co-collaborator Neil Westbury.

The Commission’s paper prompts a number of observations.

First, the financial literacy issues facing Indigenous Australians and the impact of financial exclusion appears to have gone off the policy agenda in recent years. I haven’t conducted a comprehensive search of the literature recently, but my intuition is that the past ten years have seen a loss of focus on these issues. So for example, a look at the Department of Prime Minster and Cabinet (PMC) website finds no specific mention of financial literacy under its list of current initiatives, and within the focus area of economic development and the most recent Closing the Gap report no focus on financial literacy either.

Of course, there are exceptions; see this 2016 article by Marcia Langton and Josephine Cashman (link here) calling for the Community Development Program to be oriented much more explicitly to financial literacy. Their proposal does not appear to have been taken up by the Government in any wholehearted way.

Second, the Commission’s paper is welcome in focussing attention on financial literacy issues in regional and remote areas, but its focus on a ‘mainstream’ as opposed to an Indigenous–specific lens raises the prospect that the Commission itself is potentially vulnerable to reinforcing Indigenous financial exclusion.

Third, a search of the Commission’s website using the search term indigenous throws up scores of passing references, but very little that is substantive. The most salient reference was to the Australian Bankers’ Association commissioned review of their Code of Banking Practice by Phil Khoury (the Khoury Review). In a chapter on customers with special needs, Mr Khoury recommends that clause 8 of the Code should be rewritten to remove a series of heavy qualifications, to expand the obligation on banks framed by the Principle of financial inclusion, and to apply to all Indigenous Australians and not just those in remote and regional Australia. The Australian Banking Association has a revised draft Code on its website (link here and here) which appears to have taken into account the Khoury Review recommendations (refer to Chapter 13 of the revised Code). Of course, the Code is only the first step, and it depends entirely on the commitment of banks to implement it for its efficacy. There is thus a case for ongoing monitoring of bank actions in relation to their Indigenous customers.

Fourth, and flowing on from the last point, there is clearly a need for a more high profile and active advocacy peak body for the Indigenous financial literacy sector. This could be the National Congress or some other body. It is clearly a gap which needs to be closed!

Fifth, by definition, those excluded from the financial services sector will not be adversely affected by sins of commission (to use a term from my third grade catechism), but rather will be subject to sins of omission. A question for the Indigenous interests and the Royal Commission is how to ensure that sins of omission come onto the Royal Commission’s agenda. One obvious solution would be if affected individuals and organisations which service them were to make submissions. While over 6000 submissions have already been made to the Royal Commission, its website has not published them and accordingly, it is not clear whether there are any Indigenous related submissions. My intuition tells me that it is likely there have been very few. Perhaps the Prime Minister’s Indigenous Advisory Council might consider developing a detailed and comprehensive submission to the Royal Commission.

Finally, there appears to be strong case for a renewed academic focus on Indigenous financial literacy and financial exclusion. Over the past decade, there has been a huge change in digital access and technology, which potentially is a game changer, and cries out for detailed assessment. In particular, there do not appear to be many ‘on the ground’ analyses of the impacts of financial exclusion on Indigenous citizens, their families and communities.

Hopefully the nation’s policymakers will refocus on the issue of Indigenous financial exclusion in the near and medium term. For as Keynes said in his Tract on Monetary Reform: ‘in the long run we are all dead’.

Declaration of Interest: in 2007, along with Neil Westbury, I undertook a consultancy for the NAB focussed on options for improving NAB’s services for Indigenous Australians.