Victorian Auditor-General’s report
4 May 2011

Revitalising Central Dandenong 
Audit summary
Revitalising Central Dandenong (RCD) is a $290 million 16-year initiative to rejuvenate the Dandenong city centre. It started in 2005, and aims to establish central Dandenong as a thriving service hub, to attract over $1.17 billion of private sector investment, and to grow the number of residents and businesses in the area. It also aims to improve the central city amenity, safety and infrastructure.
Dandenong was one of 13 Transit Cities projects under the 2002 policy Melbourne 2030 which sought to curb the urban sprawl by focusing development around key transport centres. In 2008, it was reclassified as one of six Central Activity Districts (CAD) under the policy update, Melbourne @ 5 million.
RCD is the largest urban renewal project since the Docklands and is vital to the success of Dandenong as a CAD. The state’s investment in RCD comprises almost $50 million for two major projects and $243 million to VicUrban over 16 years for land acquisition, infrastructure and other improvements. It also includes government initiated seed projects to stimulate activity in the CAD, and streamlined planning processes to assist development.
While VicUrban is delivering the project on the ground in partnership with other agencies, the Department of Planning and Community Development (the department) has primary responsibility for managing the CAD program and is accountable for the results of RCD. The department has a memorandum of understanding with VicUrban and both agencies sit on the project control group, which governs the project with a whole-of-government approach, and oversees, monitors and holds accountable all agencies involved.
This audit examined whether the RCD initiative is being managed effectively and whether governance arrangements support effective project delivery and cross‑government coordination. It also reviewed whether the project is progressing as planned and if the intended outcomes are being achieved.
Conclusions
While RCD has made notable progress since 2005, it has occurred in the absence of sufficiently clear, agreed and monitored performance standards. Without them, or an adequate evaluation framework, neither the department nor its project control group can effectively assess the performance of VicUrban and other agencies, or determine if RCD is on track to generate the benefits and outcomes for central Dandenong that the initiative intended. 
The lack of sufficient performance standards and the weaknesses in project status reports have led the department and its project control group to focus mainly on monitoring physical projects, rather than the full range of activities contributing to RCD’s social, economic and financial objectives. As a result, performance monitoring is problematic, and while VicUrban monitors RCD finances, the department is not rigorously overseeing the long-term financial management of RCD.
Cross-government collaboration occurs on RCD, but is not systematic or structured to promote accountability for actions. Therefore there is little assurance that the department and its project control group are reliably identifying, prioritising and effectively resolving blockages. 
Findings
Progress to date
RCD has attracted more than $285 million of private sector investment since 2005. A new Government Services Building is under construction, and over seven hectares of land were acquired in central Dandenong without major public opposition. Major infrastructure works, particularly Lonsdale Street and the George Street Bridge, were also largely completed during this period. 
Data compiled by VicUrban’s consultants since 2008 show a number of trends in central Dandenong since before RCD began against measures designed to monitor achievement of RCD objectives and benefits. Specifically, the number of residents has increased by 20 per cent since 2006, and the decline in employment evident between 1996 and 2004 has been reversed with approximately 400 new jobs added since 2005. Additionally, 500 new dwellings have been added since 2006, commercial floor space increased by 10 per cent between 2005 and 2009, and patronage of Dandenong station has increased by 30 per cent since 2006.
These trends are encouraging, however, further work is needed by the department and its project control group to establish clear and agreed performance standards to assist interpretation of the results. 
As neither the department nor its project control group effectively monitor RCD against such standards, there is little assurance the progress to date is adequate or reflects what was intended.
For example, while it is positive that almost one-quarter of the target level of private sector investment has been achieved to date, most of the seed projects have experienced long delays, due mainly to inadequate cross-government coordination and support—factors largely beyond VicUrban’s direct control. Thus, in the absence of clear performance standards it remains unclear if the result to date is optimum particularly given that the business case identified the seed projects as critical for attracting investment.
Adequacy of governance arrangements
Actions to address previous issues
Previous reviews of RCD have highlighted the need to improve governance arrangements, but the department’s subsequent actions have not been effective.
In 2008 a Department of Treasury and Finance gateway review gave RCD a qualified green rating and recommended strengthening project governance. The review found that the Department of Planning and Community Development (the department) and VicUrban had worked collaboratively on RCD, but that the project objectives were ambitious given changed economic circumstances, and that action was needed to clarify project accountabilities. 
These findings were consistent with a 2008 internal audit of the department’s management of the Transit Cities program, which similarly recommended improving departmental project and program governance.
The department adopted the recommendations of both reviews, and has since clarified roles and responsibilities in a memorandum of understanding with VicUrban, and established a project control group as the main decision-making body for RCD. It also introduced standardised project and risk management reporting across all CAD projects to strengthen oversight.
However, key issues remain unresolved. Specifically, shortcomings in performance monitoring mean the department and its project control group cannot get an accurate understanding of RCD’s progress. Further, while VicUrban does monitor RCD finances, the department and its project control group do not periodically assess the initiative’s financial status against the business case, their cross-government coordination is inconsistent and lacks transparency, and the department’s arrangements for progressively evaluating RCD’s achievements have not been sufficiently developed.
Hence there is little evidence that the department’s project control group effectively governs, directs and monitors RCD, or that the group or the department systematically monitor RCD’s long-term objectives.
Performance monitoring and accountability
The department is responsible for setting and monitoring performance standards for RCD, but has yet to develop them sufficiently.
RCD performance is to be measured against objectives in the business case, milestones in the master program, and changes to performance standards developed by the project control group. However, the content of the project status report does not adequately cover this information. 
For example, the status report omits the measures for assessing progress towards achievement of RCD objectives because they have not yet been established by the department. Further, while some activities are monitored against milestones, the impact of variations is not sufficiently discussed. Changes to milestones are also not controlled, meaning there is insufficient assurance that activities are being assessed against appropriate standards.
Thus, while the project control group monitors RCD monthly, using project status reports, these are not sufficient to hold VicUrban and other RCD delivery agencies adequately to account. 
Financial management and oversight
VicUrban is required to offset 50 per cent of the state’s $243 million investment in RCD with revenue, mainly through land sales and by attracting sufficient private investment so the net cost to government is $124 million over the life of the project.
VicUrban develops whole-of-life and five-year rolling forecasts of RCD revenue and expenditure which it adjusts annually taking into account the progress of projects, changes to future priorities and the requirement for the initiative to achieve a net cost to the state of $124 million over its 16-year life. This analysis underpins requests to the department for annual allocations from the $243 million RCD budget approved in 2006. However, the department has no progressive performance targets for RCD finances, and neither it, nor its project control group systematically monitor the project’s financial status or its achievements against the whole-of-life financial objectives of the business case.
In addition, the department requires VicUrban to advise it only of the annual allocation amounts it requests from the approved RCD budget. The department, however, does not scrutinise the basis of VicUrban’s requests to gain assurance they are soundly based and meet the financial objectives of the project. 
Although VicUrban publicly reports on RCD finances annually, the information does not enable a whole-of-life assessment against the business case.
Cross-government coordination
While there is cross-agency collaboration on RCD and CAD projects, it is not systematic or structured to promote accountability for actions. For example, agency roles and responsibilities for RCD and CADs are not clear, with the RCD education seed project failing in large part because the parties could not coordinate effectively to resolve a funding impasse. 
A key role of the project control group is to govern and direct RCD through a whole of government approach and to provide support across government to achieve its implementation.
Additionally, a CAD Executive Management Group (EMG) was established in February 2010 comprising senior departmental representatives and is chaired by the department. The role of the EMG is to facilitate greater whole-of-government input to the development and delivery of the CAD program and to resolve cross-departmental blockages or problems that cannot otherwise be resolved.
However, the department does not require its project control group to report to other governance parties on issues needing collaboration, and there are no codified procedures, responsibilities and accountabilities for individual agencies to identify and resolve cross-agency blockages for RCD or CADs. Thus the means to resolving cross‑departmental blockages and issues is not transparent and relies heavily on the vigilance of individual staff.
In 2010, the department began to clarify the role of all departments engaged in CADs. While positive, these actions are at an early stage and require further development. Specifically, the department needs to clarify accountabilities, reinforce them through government endorsement and monitor their operation. The department advised that it intends to refine and further progress this work in the latter half of 2011. 
Evaluating Revitalising Central Dandenong outcomes
The department has no agreed indicators or framework for evaluating RCD outcomes and benefits. The 2006 business case set the foundation for evaluation but it needed to be developed. The department has not yet done this, with the result that there is no benefits management plan for RCD. Thus it cannot monitor whether RCD is achieving the expected benefits.
Although not VicUrban’s responsibility, it has started work on an evaluation framework which, being at an early stage, has not yet been endorsed by the project control group or the department. The framework seeks to understand progress in central Dandenong by monitoring a range of useful measures relating to investment, land use, employment, residents and perceptions. The measures are designed to monitor achievement of RCD objectives and benefits and VicUrban’s consultants have compiled data against them since 2008, which show a number of trends in central Dandenong since before RCD began.
The framework represents an important initiative by VicUrban to fill a gap in the department’s governance framework, but is not equivalent to a benefits management plan and has been developed without reference to such a plan.
The 2008 Department of Treasury of Finance gateway review recommended that a benefits management plan be developed for RCD. The review gave this recommendation an ‘amber’ rating meaning that action on the recommendation should have occurred before further key decisions were taken on the project. However, this recommendation has yet to be implemented by the Department of Planning and Community Development (the department) or its project control group.
Further, neither the department nor its project control group systematically monitor the measures against agreed performance standards designed to provide insights into whether RCD is on track to achieve its long-term objectives and benefits. Without such standards neither the department nor the project control can reliably assess the adequacy of RCD’s progress to date.
The department drafted a monitoring framework for the CAD program which identified indicators to assess achievement of the proposed CAD objectives. The framework was endorsed by the EMG in 2010, however the CAD objectives are not equivalent to the RCD objectives and the CAD framework does not clarify how it will help assess RCD achievements. 
In the absence of clear performance standards and a benefits management plan for RCD, there is little assurance that the department’s and VicUrban’s performance monitoring frameworks are sufficiently aligned.
The department advised it initiated a comprehensive review of VicUrban’s and RCD’s performance during our audit. The review is scheduled to be completed by June 2011 and seeks to examine progress against the objectives and benefits in the 2006 business case, including the extent to which planned outputs and outcomes have been achieved. 
Recommendations
Number	Recommendation	Page	
1.	That the Department of Planning and Community Development strengthen the governance arrangements for Revitalising Central Dandenong by:
·	establishing clear and agreed standards for progressively assessing performance of all critical Revitalising Central Dandenong activities in consultation with VicUrban and the project control group
·	reviewing and improving the design and content of its project status report so that it enables effective monitoring of activities and objectives
·	systematically reviewing its financial status and the basis of annual funding requests from VicUrban to determine whether they assure achievement of financial objectives
·	seeking assurance from the project control group that it effectively oversees performance and holds delivery agencies to account against agreed performance standards.	18	
2.	That the Department of Planning and Community Development strengthen cross-government coordination for Revitalising Central Dandenong and the Central Activities Districts program by:
·	establishing clear procedures for all Central Activities Districts projects for identifying, reporting and resolving matters requiring cross-government action
·	further clarifying the roles and responsibilities of all agencies whose activities affect Revitalising Central Dandenong and the Central Activities Districts 
·	establishing arrangements for systematically monitoring and reporting on the adequacy of cross‑government coordination based on the above.	18	
3.	That the Department of Planning and Community Development in consultation with VicUrban and the project control group reliably evaluate and report on Revitalising Central Dandenong achievements by:
·	developing performance indicators, targets and baseline measures for progressively assessing achievement of objectives
·	developing a benefits management plan to measure and monitor achievement of the benefits 
·	regularly monitoring and reporting publicly on the achievements against the above measures.	23	

Submissions and comments received
In addition to progressive engagement during the course of the audit, in accordance with section 16(3) of the Audit Act 1994 a copy of this report was provided to the Department of Planning and Community Development, VicUrban and the City of Greater Dandenong with a request for submissions or comments.
The City of Greater Dandenong acknowledged the request, and elected not to make a submission. Submissions were received from the Department of Planning and Community Development and VicUrban. 
Agency views have been considered in reaching our audit conclusions and are represented to the extent relevant and warranted in preparing this report. Their full section 16(3) submissions and comments however, are included in Appendix A.