Effectiveness of the Victorian Public Sector Commission

Tabled: 8 June 2017

Audit overview

Impartiality, professionalism and integrity are important foundations for the public sector. Public sector staff must act with these values in mind, to ensure the use of public funds is as effective and efficient as possible, to meet community needs and to maintain public trust. Government and Parliament must be able to rely on the public sector to deliver effective services and provide robust advice to guide decision-making.

In previous VAGO audits, we have found instances of poor leadership across multiple public sector agencies, including difficulties in creating positive and ethical organisational cultures. Agencies have not always provided robust, complete, high‑quality advice to government—a key aspect of an impartial public sector. These examples, coupled with recent integrity failures, demonstrate the public sector's need for guidance and support to deliver its work.

In Australia, public sector commissions have important responsibilities for supporting the professionalism, integrity and capability of the public sector. The Victorian Public Sector Commission (VPSC) was established in 2014 to replace the State Services Authority (SSA). Under the Public Administration Act 2004 (the Act), VPSC's objectives are to strengthen the efficiency, effectiveness and capability of the public sector, and to maintain and advocate for public sector professionalism and integrity. It undertakes many activities aimed at maintaining and improving the skills required of an effective public sector.

As VPSC's portfolio department, the Department of Premier and Cabinet (DPC) is responsible for supporting VPSC to meet its legislated obligations, and advising the Premier and Special Minister of State on the performance of VPSC and the Act.

There have been significant recent changes in the funding for Victoria's public sector commission function and in its structure. In 2013, SSA's budget was reduced by 36 per cent. SSA, and then VPSC, was expected to continue to deliver its activities within the reduced budget. In 2014, when VPSC was established, the governance structure changed with the introduction of an advisory board and the establishment of a single Commissioner.

In this audit, we examine the effectiveness of VPSC, its governance and its oversight. We focused on organisational planning across VPSC, and looked at how it prioritises its resources and measures its performance.

To understand the effectiveness of the individual activities VPSC carries out, we examined four aspects of its work—its administration of the Graduate Recruitment and Development Scheme (GRADS) on behalf of the public sector, its promulgation of codes of conduct and standards, the maintenance of two key datasets, and VPSC's organisational review function.

Conclusion

VPSC is delivering important work that is valued by its public sector clients. However, its effectiveness in strengthening the performance, capability and professionalism of the public sector is hampered by its lack of robust planning and its inadequate understanding of the impacts of its activities.

VPSC's planning activities do not comply with the Act, and it has not prioritised its activities based on a solid understanding of their costs and outcomes. While VPSC is fulfilling its statutory functions, the work it is not performing—thorough planning informed by consultation with stakeholders, as well as activities to measure and understand its impact and better target its work—is also critically important. Without an evidence-based understanding of the costs and outcomes of its work, VPSC cannot effectively target its work to the risks, challenges and opportunities facing the public sector.

VPSC's performance measurement and reporting provides information on its activities, but little insight into what these activities achieve. We found examples of VPSC's work leading to positive outcomes, but also inefficiencies and gaps that compromise VPSC's efficiency and effectiveness. Encouragingly, VPSC has recently taken action that will contribute to addressing key weaknesses we have identified.

Finally, VPSC's governance and oversight arrangements are not operating effectively. Because the advisory board is not operating as required under legislation, it is unable to make a meaningful contribution to VPSC's strategic direction. While DPC closely supports VPSC's work, it has not been fully effective as the portfolio department. Gaps in DPC's advice to government about VPSC's performance and legislative compliance mean that government has lacked a complete picture of VPSC's performance.

Findings

Strategic and annual planning

VPSC's strategic planning and annual planning are not adequate, do not provide it with clear direction and do not help it to strategically prioritise its efforts.

Since its establishment, VPSC has not complied with all of the planning requirements in its legislation, including obtaining required inputs and approvals. VPSC has made recent improvements, but more work is necessary to ensure it is systematically prioritising its resources appropriately.

When VPSC was established, it continued to deliver the same activities as its predecessor agency, SSA. It did not undertake a systematic and thorough review of activities against its functions under the Act, which would have informed its plans and helped it to work more effectively and sustainably.

In the context of financial challenges arising from a reduced budget, VPSC considered this exercise to be too resource intensive. Recognising the substantial similarity between its functions and SSA's, VPSC chose to continue delivering the existing activities.

In the past 12 months, VPSC has introduced a defined set of strategic outcomes and an annual plan that links VPSC's activities to its objectives, and is tracking the progress of these activities.

Governance and oversight

DPC and VPSC have a close working relationship. However, DPC has not fulfilled its obligations to forward VPSC's strategic and annual plans to the Premier of Victoria for consideration and approval. DPC has also not performed its role of advising the Special Minister of State and the Premier about VPSC's noncompliance with the Act.

DPC did not establish VPSC's advisory board until more than 12 months after VPSC was established. Due to delays in appointing board members, it has only met twice in VPSC's three years of operation. As a result, the advisory board has not tangibly contributed to VPSC's strategic or day-to-day operations, and has not fulfilled its original policy objective of facilitating a longer-term strategic outlook for VPSC.

However, we note that recent changes to the advisory board's terms of reference, combined with a shift of the secretariat function to VPSC, aim to help VPSC benefit from the advisory board's expertise.

Measuring performance

We were not able to obtain sufficient assurance as to how well VPSC is performing its functions. This is largely because VPSC does not have a comprehensive understanding of its performance because of its lack of performance measures, reporting and evaluation of its activities.

VPSC's Budget Paper 3 (BP3) measures are not adequate—they do not accurately reflect VPSC's performance and outcomes because they do not comprehensively measure the effectiveness of its activities.

Case studies of key activities

We examined four of VPSC's key activities and found examples of good performance. We also found inefficiencies and gaps that compromise how efficiently and effectively VPSC works.

Our first case study focused on the organisational reviews and other reviews that VPSC conducts in response to requests from public sector agencies, the Premier and the Victorian Secretaries Board. VPSC follows well-developed project management practices to deliver these reviews and seeks opportunities for continuous improvement. Feedback from stakeholders indicates these reviews are effective and highly valued. However, VPSC could improve its performance measurement to better understand the effectiveness of these reviews.

The second case study focused on VPSC's delivery of GRADS for the Victorian public sector. Although VPSC has a solid understanding of the outputs it delivers each year, it does not have a comprehensive understanding of the program's impact. Within VPSC, an ongoing lack of strategic oversight of the program means that the long-term outcomes are not known.

The third case study examined the data collection activities that allow VPSC to fulfil its statutory obligations. There are flaws in VPSC's processes and controls which have resulted in inefficient data management. These flaws threaten the reliability of VPSC's data and the effectiveness of activities that use this data. VPSC is aware of these issues and has developed a strategy to address them.

The final case study considered VPSC's promulgation of codes of conduct and standards, which is an obligation under the Act. VPSC has not yet developed systems to understand whether its work on codes and standards is effective—instead, it relies on output-based performance measures and only measures compliance.

VPSC's Integrity Strategy, introduced in 2016, includes more active monitoring and a defined program of work, which VPSC has already begun to implement. This is a positive development that has given VPSC's codes and standards work a more strategic focus, and provides a good foundation for VPSC to improve its understanding of the impact of its work.

Recommendations

We recommend that the Victorian Public Sector Commission:

1. undertake strategic and annual planning activities that comply with its statutory obligations (see Section 2.2)

2. develop and implement a performance measurement system that demonstrates the impact of the activities it undertakes to achieve its statutory objectives (see Section 3.2)

3. implement its planned improvements to data storage, management and use (see Section 3.3).

We recommend that the Department of Premier and Cabinet:

4. advise government on the Victorian Public Sector Commission's compliance with its legislative planning obligations (see Section 2.3).

Responses to recommendations

We have consulted with Victorian Public Sector Commission and the Department of Premier and Cabinet, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994 , we gave a draft copy of this report to those agencies and asked for their submissions and comments.

The following is a summary of those responses. The full responses are included in Appendix A. VPSC accepted the recommendations, but commented that VAGO's conclusions about the inadequacy of planning and prioritisation are flawed. VPSC asserted that the limitations with these activities were caused by factors outside its control. DPC accepted its recommendation and referred to existing work it is undertaking that will address the recommendation.

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