Effectiveness of the Victorian Public Sector Commission

Tabled: 8 June 2017

2 Planning and oversight

Strategic plans and annual plans are necessary for agencies to identify priorities and set out how they will meet them. Planning should meet legislative requirements, be linked to an agency's objectives, and support allocation of resources to achieve priorities.

Under the Public Administration Act 2004 (the Act), the Victorian Public Sector Commission (VPSC) must develop:

  • a three-year strategic plan every third year, identifying key challenges and opportunities for the public sector and how VPSC's priorities align with them
  • an annual plan, linked to the strategic plan, detailing priority areas and key outputs and specific activities for each area.

The Act requires VPSC to develop these plans with input from its advisory board and submit them to the Premier of Victoria for approval.

As VPSC's portfolio department, the Department of Premier and Cabinet (DPC) is responsible for maintaining an effective portfolio relationship with VPSC and supporting it to meet its obligations under the Act.

2.1 Conclusion

VPSC's strategic and annual planning is inadequate—it has not met the requirements of the Act and, for most of the time VPSC has operated, it has focused on delivering immediate priorities at the expense of long-term planning that would help it achieve its objectives. As a result, VPSC cannot be sure that its short-term decision-making is helping it to achieve its long-term strategic goals.

VPSC has recently improved its planning activities, but more work is necessary to ensure it is systematically and appropriately prioritising its resources to achieve its medium- and long-term objectives.

Governance and oversight of VPSC has not been effective in helping it to overcome these issues. DPC did not successfully establish the advisory board until more than 12 months after VPSC was established. As a result of this delay, and confusion about which agency had responsibility for the secretariat function, the advisory board has not yet achieved its original policy intention.

Recent revisions to the advisory board's secretariat arrangements and terms of reference represent a new opportunity for the advisory board to perform the role intended for it under legislation.

DPC and VPSC have a close working relationship that is supportive and collaborative. Despite this, DPC has not operated effectively as a portfolio department when important issues have occurred, such as VPSC's noncompliance with its planning obligations under the Act.

2.2 Strategic and annual planning

We assessed whether VPSC has developed strategic and annual plans that meet the Act's requirements and support VPSC to achieve its objectives.

2.2.1 Preliminary planning activities following establishment

VPSC was established on 1 April 2014. We expected to see evidence that it engaged in a range of activities at its establishment, such as:

  • reviewing the State Services Authority's (SSA) existing activities to understand costs, effectiveness and opportunities for efficiencies
  • checking that the activities inherited from SSA aligned with VPSC's revised legislative obligations, and identifying any gaps
  • engaging with stakeholders across the public sector
  • assessing and diagnosing the risks facing the public sector to underpin the way VPSC prioritises its activities
  • gathering any additional evidence needed to inform VPSC's first strategic plan.

These activities did not take place until February 2016. VPSC stated that it was not able to undertake such activities because it lacked sufficient resources. As the majority of its functions continued SSA's work, VPSC focused on continuing to deliver the existing services rather than reconfiguring its activities to reflect its status as a new agency.

When VPSC was established, changes were also made to its functions legislative obligations and funding. This created a need for the new agency to review its activities, to ensure they were financially sustainable and fulfilled its legislative obligations. By not undertaking this work at its establishment, VPSC lacked a robust evidence base to inform its planning, help prioritise its activities and ensure it was able to operate effectively and sustainably within its budget.

2.2.2 Complying with planning obligations

VPSC has developed strategic plans and annual work plans, but it has not complied with its planning obligations under the Act.

The delay in establishing the advisory board meant that VPSC was unable to meet its obligation to consult with the advisory board during the development of its strategic and annual plans until October 2015.

Establishing the advisory board was DPC's responsibility and outside VPSC's control, but there are further instances of noncompliance with planning requirements that were within VPSC's control.

Strategic plans

Contrary to the requirements of the Act, VPSC has not developed a three-year strategic plan informed by its advisory board and approved by the Premier. Under the Act, the three-year strategic plan must include prescribed content, including challenges and opportunities for the public sector and how VPSC's priorities strategically align with these matters.

Instead, VPSC has developed a range of different plans, outlined below:

  • A seven-year strategic plan (2014–2021)—comprising a one-page chart that did not include challenges and opportunities facing the public sector or how VPSC's strategic priorities align with them. It was not developed with input from the advisory board and was not submitted to the Premier for approval.
  • A four-year strategic plan (2016–2020)—which never became active. It was underpinned by research and analysis, and includes challenges and opportunities and how VPSC's strategic priorities align with them. It was developed with input from the advisory board but was not approved by the Premier.
  • A one-year strategic plan (2016–2017)—which is VPSC's current plan. It does not comply with the required three-year time frame, does not include challenges and opportunities, or how VPSC's strategic priorities align with them. It was not developed with input from the advisory board and was not submitted to the Premier for approval.

The four-year 2016–20 strategic plan is VPSC's most thorough planning exercise to date.

In 2015–16, VPSC received additional funding of $2 million to review current operations and their alignment with government priorities for strengthening the public sector. Within this funding, $200 000 was earmarked for the development of a strategic vision and plan, and a business case to underpin a bid for additional recurrent funding.

VPSC did a range of work to develop these documents, including contextual analysis of the issues facing the Victorian public sector, consultation with other public sector commissions in Australia and New Zealand, and engagement with DPC and the Victorian Secretaries Board (VSB). The plan was discussed at the advisory board's first meeting in October 2015. However, the funding bid was unsuccessful and the plan never became active.

In February 2016, VPSC began a separate planning exercise to develop the one-year 2016–17 strategic plan, which overlapped with its work on the 2016–20 strategic plan and business case. This involved distilling the ideas in the four-year strategic plan into three strategic outcomes:

  • a public sector leadership group and workforce that can deliver excellence
  • public sector organisational capacity that delivers high performance
  • a public sector committed to values, integrity and performance.

VPSC used this planning to inform an organisational restructure to improve the clarity and accountability of roles, and support achievement of the three strategic outcomes. VPSC advised that this new strategic planning exercise incorporated work undertaken for the 2016–20 strategic plan.

Although this plan does not meet all of the requirements of the Act, VPSC's work to align the new strategic plan to its objectives, the structure of the organisation and its activities is positive, and has helped VPSC to gain a more strategic focus.

Annual plans

Since its establishment in 2014, VPSC has not developed an annual plan that meets the requirements of the Act.

The Act prescribes specific content that should be included in the annual plan, including links with the strategic plan, priority areas for the forthcoming financial year, and key outputs and specific activities for those areas. The plan should be developed prior to the commencement of each financial year, with input from the advisory board, and should be approved by the Premier.

VPSC has prepared two plans in the past three financial years, but neither fulfils all of these requirements.

Following its establishment, VPSC developed a 2014–15 annual plan that contained the prescribed content. The advisory board was not yet in place and therefore could not be consulted, but VPSC attempted to comply with its legislated requirements by submitting the plan to DPC for transmission to the Premier for approval.

DPC reported that it provided feedback on this draft and expected that it would be revised and resubmitted. This expectation was detailed in an agenda for a meeting between the Secretary of DPC and the Commissioner. However, we have not received evidence that this feedback was provided to VPSC or that the plan was resubmitted to DPC. The plan remained in draft form and did not receive the required approvals.

VPSC did not develop an annual plan for 2015−16, advising that it instead continued to deliver its core statutory functions while developing its business case and the 2016–20 strategic directions document. It did not seek endorsement of this approach or raise it with the Special Minister of State or the Premier.

VPSC again developed an annual plan in 2016–17. This annual plan links to the current strategic plan, and identifies priority areas and specific activities. VPSC developed it between February and June of 2016 without input from the advisory board.

Following the plan's completion in June 2016, VPSC asked DPC to schedule a meeting of the advisory board to discuss the plan. This meeting did not take place until September 2016, rather than before the beginning of the financial year as required by the Act. As a result, the plan had already been in use for four months when it was discussed by the advisory board. The plan was not submitted to the Premier for approval.

Planning and responding to requests

The lack of a clearly defined plan is significant because of VPSC's legislated obligation to be responsive to requests—under the Act, VPSC is required to perform any action relating to its functions if it is asked to do so by the Premier. If a minister or a public agency makes a request related to VPSC's functions, VPSC has discretion over whether it will perform the requested action.

In practice, VPSC's resource constraints have led it to decline ad hoc requests for work from other agencies or ministers, for example, when VPSC's informal assessment of the task deems it to be a lower priority than other review activity. This assessment occurs on an informal basis, in consideration of the relevance of the request to VPSC's core responsibilities, and is not guided by criteria nor informed by proper planning that defines VPSC's priorities based on an assessment of public sector risks and challenges. Effective planning would enable VPSC to assess ad hoc requests against defined priorities or predetermined risks. This would provide a transparent basis for accepting, declining or deferring requests for work and reprioritising resources where necessary.

2.3 Governance and oversight

When SSA transitioned to VPSC, the number of leadership positions was reduced. VPSC's governance structure consists of:

  • a single Commissioner, combining the formerly separate roles held by the SSA chair, commissioners and the public sector standards commissioner
  • an advisory board, appointed by the Premier, of up to seven members, who provide a mix of knowledge, skills and experience in public sector, business, service delivery and regional matters.

We examined how effectively VPSC's governance and oversight arrangements are working, including the roles of DPC—as VPSC's portfolio department—and the advisory board.

2.3.1 Role of the Department of Premier and Cabinet

DPC and VPSC have a close working relationship, which includes:

  • regular meetings between the Secretary of DPC and the Commissioner of VPSC
  • regular meetings between senior executives of DPC and VPSC
  • joint workshops on budget and strategic planning
  • participation by DPC staff in VPSC projects, where relevant
  • six-monthly Budget Paper 3 reporting from VPSC to DPC
  • DPC support for VPSC management activities, including preparation of budget submissions.

Through this close and multifaceted relationship, DPC has a strong grasp of VPSC's activities, priorities and challenges. It has also worked closely with VPSC on preparing budget submissions to enhance VPSC's capability and performance. This is an important foundation for effective oversight by a portfolio department.

However, DPC could not demonstrate that it had adequately fulfilled its broader role as a portfolio department by systematically advising government about VPSC's performance, including VPSC's noncompliance with its legislated planning obligations. DPC considers that advice on legislative obligations should avoid an overly legalistic approach that prioritises advice on compliance issues over broader strategic issues. However, receiving this sort of advice gives government a chance to address issues if it chooses to, but DPC has not provided such information about VPSC's performance.

DPC has briefed the Minister on VPSC's budget and funding bids. DPC provides covering briefs with any materials that VPSC submits to the Special Minister of State and the Premier. It sees this approach as a way of providing real-time monitoring of VPSC's performance. However, this approach is reactive in nature and therefore does not enable DPC to give timely advice to government about any gaps in VPSC's performance or instances where work that should be occurring is not.

DPC's responsibilities for VPSC's advisory board

DPC was responsible for establishing VPSC's advisory board and for performing secretariat functions. It began work to identify and appoint advisory board members in late 2013, but these efforts were not successful until August 2015—more than 12 months after VPSC was established. VPSC did not try to expedite the establishment of this key component of its governance structure.

Though the Secretary of DPC is required to be chair of the advisory board, DPC did not raise concerns about the advisory board's establishment and operation or compliance with legislative requirements.

DPC also did not fulfil its secretariat role, responsible for coordinating three meetings per year. DPC advised that this was because of an understanding that DPC would arrange the first meeting of the advisory board, and VPSC would arrange subsequent meetings and effectively assume secretariat responsibility. VPSC did not share this understanding.

Briefing materials that DPC prepared for discussions between the Secretary of DPC and the Commissioner of VPSC show that it intended to communicate this arrangement to VPSC, but it is not possible to verify whether this discussion took place.

However, the terms of reference for the advisory board—drafted by DPC and approved by the Special Minister of State in July 2015—specify that DPC has secretariat responsibility. This inconsistency between working knowledge and documented procedures resulted in confusion about which agency was responsible for the secretariat function.

This confusion persisted until June 2016, when VPSC contacted DPC twice to arrange the second meeting of the advisory board. This second meeting took place in September 2016, and included discussion of the secretariat function to clarify responsibilities going forward.

2.3.2 Role of the advisory board

VPSC's advisory board has not operated as required under the Act. As a result, VPSC's governance structure has not been functioning as it is intended to under the legislation, and VPSC has not been able to realise the policy intention that underpinned the establishment of the advisory board.

This includes providing assistance in developing strategic and annual plans, advice on appropriately targeting VPSC's work, and advice on matters relevant to VPSC's objectives and functions.

Under the Act, VPSC must consult the advisory board:

  • to inform development of its three-year strategic plan
  • before each financial year, to develop its annual work plan.

The advisory board did not meet until October 2015—17 months after VPSC began operating—and it has met only twice since VPSC was established. With the exception of the 2016–17 strategic plan, which was never enacted, VPSC has not met requirements to consult the advisory board on its strategic and annual plans, as outlined in Section 2.2.2.

Fulfilling the policy intention of the advisory board

The policy intention that underpinned the establishment of the advisory board was to give VPSC a longer-term strategic outlook. This need was first identified in DPC's 2012 review of SSA. The review noted that, under SSA's governance structure, multiple commissioners were appointed to lead individual projects, which led to a short-term focus on outputs. It went on to recommend the establishment of an advisory committee to set strategic direction for the agency by developing triennial strategic plans and annual work plans.

These recommendations were reflected in amendments to the Act that coincided with the establishment of VPSC. The Act defined the composition of the advisory board—specifically that its members have a mix of knowledge and skills pertaining to the public sector, business, service delivery and regional matters. DPC advised government that the advisory board would also help VPSC to operate within the recently reduced budget, by ensuring it appropriately targeted its efforts.

The delay in establishing the board has exposed VPSC to multiple risks, specifically that:

  • it may remain focused on outputs at the expense of longer-term priorities and delivering activities that make progress towards them
  • its work program and allocation of resources may be open to influence from other stakeholders, such as the members of the VSB who do not have a legislated role in shaping VPSC's organisational priorities
  • its work program may not be shaped by the mix of expertise offered by members of the advisory board
  • it may not be able to redefine its budget and expenditure in response to priorities defined by the advisory board.

VPSC recognises that it has not yet benefited from the input that the advisory board was intended to provide, but it has taken actions to do so.

Following discussions at the second meeting of the advisory board, its terms of reference were amended to:

  • transfer secretariat responsibility to VPSC
  • reduce the minimum number of meetings to one per year
  • make the Commissioner of VPSC a standing invitee to board meetings
  • introduce the opportunity for board members to contribute to individual VPSC projects in an advisory capacity.

These changes reflect the critical role of the advisory board in VPSC's governance structure. They should help VPSC to meet the schedule for strategic and annual planning and coordinate the advisory board's activities.

Since this change, VPSC has engaged individual advisory board members on a range of projects, including its executive officer review program, the Victorian Leadership Academy and the Integrity Strategy. These are positive steps towards achieving the intended benefits of having an appropriately skilled and engaged advisory board.

VPSC will need to ensure that it also engages the advisory board in annual and strategic planning to comply with its legislation, and realise the board's policy intention.

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