Preliminary Pages
Foreword
Transfer of Commonwealth funds to the states and territories
has always been an area of contention within Australia’s federal financial
relations, with the states/territories and the Commonwealth often holding
contrasting perspectives. However, developing and implementing a framework
which provides for the effective operation of Australia’s federal financial
relations is essential to ensure that the Australian people are best served.
For 2011–12 the Commonwealth dedicated a significant
proportion of its funding to the states/territories, with $45.5 billion to
payments supporting National Agreements and National Partnerships. This
Committee has an ongoing interest in achieving value for money for the Australian
taxpayer and believed the arrangements to distribute this amount deserved
parliamentary scrutiny. With the introduction of the Intergovernmental
Agreement on Federal Financial Relations (IGA FFR) in 2009, the Committee thought
it timely to investigate the implementation of national funding agreements
under this new approach.
The Committee found there was overall support for the new
framework. Witnesses identified that the underlying principles and intent of
the new framework address previous issues concerning federal financial
relations. These reforms undoubtedly mark a significant milestone in federal
financial relations. The JCPAA agrees the underlying principles provide a
robust framework for the future and assist in alleviating some of the historical
confusion and discontent within Commonwealth-state relations.
While the Committee is pleased that the fundamentals of the
new framework have been well received by key stakeholders, evidence presented throughout
the inquiry highlighted some separation between these principles and what is
occurring in practice. In particular the Committee was concerned with the:
n shortcomings in the
performance reporting framework;
n slow pace of
necessary cultural change across the public service; and
n adequacy of parliamentary
oversight.
Performance reporting is critical to gain insight and
understanding of the success or otherwise of national funding agreements
against the objectives of the wider reform agenda. Due to the shortcomings and
complexities described by key witnesses, the Committee believes that
enhancements to performance reporting are required. To achieve this, valid key
performance indicators (KPI) must be developed, better quality data collected,
and meaningful interpretation of the data ensured. It is essential that KPIs
are measurable, relevant and directly related to outcomes. In support of this,
the widespread problems with data quality and collection must be fully
addressed as quickly as possible. The Committee acknowledges that many
initiatives are underway to improve performance reporting. However, more action
needs to be taken to ensure they are speedily implemented. The Committee has
therefore recommended that efforts are made to streamline reporting by
developing a single report for the use of multiple agencies and establishing a
core set of standard data requirements across key areas.
The need for cultural change is another crucial element to
drive the reform agenda and ensure the full adoption and implementation of the
framework’s principles. The Committee acknowledges the marked conceptual shift
required by the IGA FFR in moving from an inputs based to outcomes based
framework. Measuring outcomes is more challenging than measuring inputs.
Although the Committee is aware that it will take time for this cultural change
to permeate all layers of the public service, it is urgent that the change is
actively promoted and encouraged. Accordingly, the Committee has put-forward
recommendations to encourage and enforce the application of the underlying principles
of the IGA FFR, including a more structured approach to training relevant
staff. The delivery of this training is an important step towards achieving the
cultural change needed for the reforms to be fully reflected in practice.
Parliamentary scrutiny is essential to ensure value for money
for the Australian taxpayer. National funding
agreements are typically negotiated at an
executive-to-executive level, only sometimes receiving parliamentary oversight
after signing. This inquiry therefore focussed on establishing whether current
parliamentary scrutiny is sufficient to foster
adequate accountability and transparency of the $45.5 billion transferred
through national funding agreements. The Committee was made aware of high level
mechanisms for the parliament and public to gain insight into the operation and
progress of the reform agenda. These mechanisms do not however provide an
adequate picture of national funding agreements to either the Parliament or the
public and the Committee believes increased parliamentary scrutiny is
warranted. The Committee has made a range of recommendations to enhance
scrutiny of the overall process, including the tabling of key reviews and
reports in Parliament along with Government statements in reply. These reports
should include COAG Reform Council Reports, the Productivity Commission reports.
Additionally the Committee has recommended that the Prime Minister make an
annual statement to the Parliament outlining the contribution of national
funding agreements to the wellbeing of all Australians. The Committee also
recommends that these reports should be referred to a proposed new Joint
Standing Committee for review.
If the issues
identified in this report are not addressed, the likelihood of the reform
agenda reaching its full potential and firmly embedding long-term change in
Australian public administration will be significantly compromised. The
Committee has therefore made a total of 15 recommendations. These
recommendations focus on delivering long-lasting improvements to ensure the
benefits of the framework are fully realised in practice.
The Committee is conscious that
work is underway to address many of these issues and that reform to the
framework is ongoing. The Committee acknowledges and welcomes the ongoing work of
the COAG Reform Council and the Productivity Commission in addition
to current work being undertaken by central agencies to refine and improve the
IGA FFR. Importantly the Heads of Treasury have undertaken a review with
many of its recommendations responding to these areas of concern. The Committee
has recommended this review’s findings and recommendations are made public.
This will raise greater awareness and provide greater transparency to the
Parliament and the public as to what remedial actions have been suggested and
to track what is occurring.
This report is one of a number of
recent reports on the IGA FFR. The Committee is aware that there are a number
of further reports due for release over the coming months. The Committee urges
the Commonwealth Government to take the opportunity to consolidate its efforts
and correct the identified problems with the framework ensuring that it reaches
its full potential.
With these changes Australia will be well positioned to
continue on the reform pathway in the coming decade.
Rob Oakeshott
Chair
List of recommendations
2 The Framework
Recommendation 1
The Committee recommends that the Department of Finance and
Deregulation examine the interaction between the new grants framework and grant
payments delivered under the Intergovernmental Agreement on Federal Financial
Relations. The report should propose options to remove inconsistencies and
improve governance arrangements for all grants provided to states and
territories.
A copy of the report should be provided to the Joint Committee
of Public Accounts and Audit, with the Government’s Response to this
recommendation - and both should be made publicly available.
3 Implementation of national funding agreements
Recommendation 2
The Committee recommends that the Commonwealth Government
makes the recommendations and a summary of the findings of the Heads of
Treasuries Review public, along with the associated Government response and
implementation strategies.
Recommendation 3
The Committee recommends that the Department of the Prime
Minister and Cabinet and central agencies investigate whether additional
measures are needed to encourage and enforce the application of the
Intergovernmental Agreement on Federal Financial Relations’ principles and
associated guidelines, and that the findings of the investigation be publicly
released and provided to the Committee.
Recommendation 4
The Committee recommends that the Department of the Prime
Minister and Cabinet and central agencies, in consultation with appropriate
experts, develop a set of agreed definitions for assurance requirements to be
used in National Agreements, National Partnerships and Implementation Plans.
4 Performance reporting for national funding agreements
Recommendation 5
The Committee recommends that a structured approach be
developed and implemented by the Department of the Prime Minister and Cabinet
and other central agencies to ensure relevant staff receive specific training
to enhance understanding of the Intergovernmental Agreement on Federal
Financial Relations and develop the skills required to meet outcomes focused
performance reporting requirements.
Recommendation 6
The Committee recommends that the Department of the Prime
Minister and Cabinet, in consultation with other central agencies, establish
processes to ensure that there is clarity of the outcomes to be achieved and
these are clearly reflected in national funding agreements. The committee
asserts that to underpin the achievement of outcomes, mutual understanding of
the end goal must drive the cultural change, the training and skill
development, and the quality and timeliness of data collection and publication.
At all times, outcomes should be the focus in the development of all national
agreements.
Recommendation 7
The Committee recommends that the Department of the Prime
Minister and Cabinet, in collaboration with agencies such as the Australian
Public Service Commission, should lead a process to provide training across the
broader Australian Public Service which incorporates information on the
Intergovernmental Agreement on Federal Financial Relations to explain the
importance of the Agreement and its principles.
Recommendation 8
The Committee recommends that the Commonwealth works through
the Council of Australian Governments to ensure that states and territories
develop and implement a similarly structured approach to foster cultural change
throughout departments and agencies and ensure all staff receive relevant
training to enhance understanding of the framework and develop the skills
required to meet outcomes focused performance reporting requirements.
Recommendation 9
The Committee recommends that the Department of the Prime
Minister and Cabinet and central agencies report back to the Committee within six
months on work undertaken to move towards the ‘single report to multiple
agencies’ ideal and the potential to develop a core set of standard data
requirements for key areas of national interest.
Recommendation 10
The Committee recommends that the Prime Minister through the
Council of Australian Governments, take steps to respond to the reports and
recommendations of the Council of Australian Governments Reform Council within
three months.
5 Scrutiny of National Funding Agreements
Recommendation 11
The Committee recommends that the Prime Minister table COAG
Reform Council reports in the Commonwealth Parliament one month after
submission to COAG, and that relevant Productivity Commission reports are
tabled as soon as practical.
Once tabled, these reports should be automatically referred to
an appropriate Joint Standing Committee for review.
Recommendation 12
The Committee recommends that signed National Partnerships are
tabled in Parliament, along with a complementary Ministerial Statement.
Recommendation 13
The Committee recommends that the Prime Minister deliver an
annual Statement to the House:
outlining
the Commonwealth Government’s perspective on the contribution of national
funding agreements to the improvement of the well-being of all Australians; and
summarising
the number of current, new, upcoming and expired National Agreements and
National Partnerships.
Recommendation 14
The Committee recommends that the Department of the Prime
Minister and Cabinet and central agencies investigate steps so that Portfolio
Budget Statements and annual reporting requirements provide a more
comprehensive picture of the performance and outcomes of programs under
national partnerships across government.
Recommendation 15
The Committee recommends that, in light of the range of review
activity currently underway, the Commonwealth Government take this opportunity
to institute and deliver on the Intergovernmental Agreement on Federal
Financial Relations’ full potential.
With these changes Australia will be well positioned to
continue on the reform pathway in the coming decade.