Government defensiveness 'damaging public confidence'

Tuesday 18 February 2020

Taxpayers’ confidence in how the government is spending their money has been damaged by “historic defensiveness” and “poor controls”, a panel of politicians has claimed.

The criticism comes from the Public Accounts Committee (PAC) – the scrutiny panel focusing on how the government spends money – which, in its latest report, have produced a ‘health check’ on the way public finances are being managed.

The report makes a series of findings, as the government – under Chief Executive Charlie Parker – implements a top-down overhaul of departmental structures. 

Pictured: States' Chief Executive Charlie Parker is implementing a top-down 'transformation' of the Government structure.

As part of this ‘transformation’, the way departments get allocated their budgets is set to change. It’s intended that the Government switch over to ‘zero-based’ budgeting, which means that, at the start of every financial year, each department starts from scratch rather than build on previously established budgets. 

The government's outgoing spending watchdog, Comptroller and Auditor General Karen McConnell, had already emphasised the importance of this changeover, but the Scrutiny panel has expressed its concern that progress on this has been slow.

The report stated: “The PAC noted that little progress has been made by the Executive on developing targeted ‘zero-based budgeting.” 

The panel then went on to recall an interaction they had with the Treasurer of the States Richard Bell during a public scrutiny hearing in September last year where he agreed: “...Zero-based budgeting will provide the opportunity and a set of tools which hopefully everyone will understand and, therefore, everyone will hopefully trust by which we could deliver or assess current efficiency through benchmarking and such like, and deliver further efficiencies."

Pictured: Senator Sarah Ferguson chairs the Public Accounts Committee.

The report continued: “The PAC wanted to know how he proposed to affect the cultural change that would make government departments more willing to be challenged externally with respect to spending and the Treasurer agreed that establishing a ‘zero-based budgeting team’ should be progressed by the end of 2019.”

This background fed into one of the panel’s key findings that “the lack of zero-basing of departmental budgets, combined with historic defensiveness by embedded finance teams and poor controls across Government, undermines the confidence that money is being spent efficiently and effectively".

Having indicated this, the panel recommend that the Treasurer “accelerate consideration of zero-based budget reviews based on materiality and feed the results of the reviews into the Government Plan process".

Elsewhere in their report, the PAC’s findings addressed a number of issues including the outdated nature of the Government’s online functions.

While a strategy to modernise the Government’s IT system has recently been published and a tender process started, the PAC flagged up the inconvenience presented by manual processing when it comes to carrying out financial transactions. 

"The PAC remains concerned at the level of manual intervention required for everyday financial transactions and associated inefficiency and control weaknesses. It is supportive of the need to invest substantial sums of public money in modernisation of the systems and controls, to drive efficiency and reduce the risk of loss. The approach to managing this on a modular basis appears sensible, given failures in large scale implementation in the past and the rapidly developing technological capabilities of system vendors," the panel stated.

Pictured: The Government has recently published its strategy for modernising the civil service's IT system.

Making a recommendation in relation to this, the PAC added: “Government should be transparent about the total investment which it is believed will be required and the medium-term impact on public expenditure to finance this beyond the current government plan period. The benefits of this spend should be considered in the broadest sense and made clear as part of the business case.”

PAC also questioned why the Chief Executive had cited the government publishing its 2018 accounts in April, rather than the usual publication of July, as a "principal achievement".

The report continued: “The PAC emphasises that consideration should be given on whether the intangible benefits arising from an earlier close justify potential additional costs. Additional costs may arise from weaknesses in the arrangements for the preparation of the accounts and errors in the accounts submitted for the auditors’ initial review. There are significant challenges in obtaining sufficient, appropriate evidence to support the accounts, especially where the financial systems are labour-intensive and outdated.”

Commenting on the findings of the PAC, Mr Parker said: “The Treasurer and I welcome the recognition by the Public Accounts Committee of the substantial progress made in financial management by the Government and the need to invest in modernising systems and processes. 

“We are already making progress on actions to address the majority of the Committee’s recommendations, including closing our end-of-year accounts faster than ever before and preparing to move to zero-based budgeting in 2021. 

“We included information about the costs of the Finance Transformation programme in the Government Plan, and we will continue to provide further information about the longer-term costs and benefits of the programme as it develops.”