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“INSIDE THE QUEENSLAND COMMISSION OF AUDIT – THE PROCESS, MAIN FINDINGS AND IMPLICATIONS” Mark Gray Adjunct Professor of Economics, University of Queensland.

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Presentation on theme: "“INSIDE THE QUEENSLAND COMMISSION OF AUDIT – THE PROCESS, MAIN FINDINGS AND IMPLICATIONS” Mark Gray Adjunct Professor of Economics, University of Queensland."— Presentation transcript:

1 “INSIDE THE QUEENSLAND COMMISSION OF AUDIT – THE PROCESS, MAIN FINDINGS AND IMPLICATIONS” Mark Gray Adjunct Professor of Economics, University of Queensland Chief Executive Queensland Commission of Audit UQ Business School Brisbane 6 May 2013

2 THE PROCESS 2

3 ESTABLISHMENT Pre-election commitment of the incoming Government Commission announced 29 March 2012, and Terms of Reference issued 3 Commissioners Honourable Peter Costello, AC Professor Sandra Harding Dr Doug McTaggart

4 TERMS OF REFERENCE – OBJECTIVES Comprehensive – two pages of text Review Queensland Government’s current and forecast financial position, and make recommendations on: – strengthening Queensland economy – Improving State’s financial position, including regaining AAA credit rating – ensuring value for money in delivery of front-line services 4

5 TERMS OF REFERENCE – SCOPE Terms of reference interpreted broadly by Commission – any matters relating to functions/activities of the Queensland Government 5 Key issues Financial position Improving the State’s financial position Service delivery Government commercial enterprises The economy

6 TERMS OF REFERENCE – TIMETABLE 6 15 June 2012Interim Report covering state of the Government’s financial position 30 November 2012Interim Recommendations 28 February 2013Final Report delivered to Government 1 March 2013Executive Summary of Final Report released 30 April 2013Full Report and Government Response released

7 OTHER COMMISSIONS OF AUDIT 7 Victorian Commission of Audit1993 National Commission of Audit, Commonwealth Government 1996 Queensland Commission of Audit1996 New South Wales Commission of Audit2012 Victorian Commission of Audit2012

8 WHAT IS A COMMISSION OF AUDIT? Comprehensive review of the role, functions, activities of government – Focus on efficiency, effectiveness and value for money Not an “audit” in the formal sense – not a “financial audit” – not a “performance audit” – but contains elements of both Unique perspective – view from “the outside looking in”, not an inside view Opportunity only arises infrequently – often with a change of government – Rarely instigated by incumbent governments 8

9 KEY FEATURES Independence Transparency Not bound by government policy Opportunity – to challenge the status quo – to consider innovative solutions (e.g. for service delivery) – to propose strategic objectives/direction for government – to set agenda for change over period of 10-20 years 9

10 PROCESS Secretariat established to support the Commission – small group: primarily public service officials seconded from Queensland Government agencies – some limited use of external consultants – Secretariat organised into teams to review key topics – worked under the direction of the Commission Extensive powers of investigation available to the Commission Funding provided from internal savings in Queensland Treasury and Trade 10

11 PROCESS cont…. Submissions from all core Government departments and Government Owned corporations (GOCs). No public submissions – some unsolicited submissions received and considered No public hearings – Commission met with Chairs and CEOs of all GOCs Secretariat had extensive ongoing contact with departments and limited contact with external parties Secretariat undertook research and analysis of issues, prepared papers for Commission’s deliberations – papers formed basis for Reports 11

12 MAIN FINDINGS AND IMPLICATIONS 12

13 OVERVIEW OF FINAL REPORT Focus of the Report is renewal in the public sector to provide better front-line services Most comprehensive review of Queensland Government functions ever undertaken 13 155 recommendations across four major headings (Front-Line Service Delivery, Public Sector, Financial Management, and Government Commercial Enterprises) 39 separate sections 1,000 pages of analysis 247 charts 127 tables 36 diagrams 47 case studies / illustrations

14 GOVERNMENT RESPONSE 118 accepted (76%)) 7 accepted in principle) 6 accepted in part)96% 13 noted) 5 for further consideration) 6 not accepted 14

15 ECONOMIC AND FISCAL CHALLENGE The challenge for Queensland is to lift its productivity performance to sustain the economic growth which will improve living standards for its citizens. 15

16 16 ECONOMIC AND FISCAL CHALLENGE cont …

17 17 ECONOMIC AND FISCAL CHALLENGE cont …

18 Pressure on fiscal position – Lower economic growth expected in future – Ageing of the population – Increased demand for government services Changes in service delivery to maintain stable fiscal position – Productivity improvements of 1% year after year – Costs to be reduced by one-third over 40 years This would lift GSP growth by 0.5% pa (extra $8,320 per capita pa in today’s dollars by 2050-51) 18 ECONOMIC AND FISCAL CHALLENGE cont …

19 19 SIZE OF GOVERNMENT

20 20 ROLE OF GOVERNMENT Private provision of public services

21 Key principles to manage and deliver services Focus on core services Facilitate contestability in service delivery Better demand management Greater workforce flexibility Capacity building Lower overhead costs Strengthen financial management Build productive capacity 21 ROLE OF GOVERNMENT cont …

22 The Government must achieve better value for money in service delivery. ‘Business as usual’ is not a sustainable option. The primary responsibility of the Government is to ensure services are delivered, not necessarily to be the agency that actually does the delivery. It needs to be the ‘enabler’, not necessarily the ‘doer’. 22 FRONT-LINE SERVICE DELIVERY

23 FRONT-LINE SERVICE DELIVERY cont … 23

24 FRONT-LINE SERVICE DELIVERY cont … 24

25 FRONT-LINE SERVICE DELIVERY cont … 25

26 FRONT-LINE SERVICE DELIVERY cont … 26

27 FRONT-LINE SERVICE DELIVERY cont … 27 Find more innovative and efficient ways of delivering services – reduce the high costs of service delivery – drive higher productivity Greater role for non-government providers in owning assets and delivering services (e.g. through contestability)

28 FRONT-LINE SERVICE DELIVERY cont … RECOMMENDATIONS Areas for greater involvement of non-government sector clinical, clinical support and non-clinical services in public hospitals mental health and community health services residential aged care facilities disabilities child safety corrective services social inclusion public housing services 28

29 FRONT-LINE SERVICE DELIVERY cont … RECOMMENDATIONS cont … Education improved student performance through increased devolution, autonomy and accountability at individual school level. VET independent industry-led skills authority competitive market asset ownership to be separated from TAFE Police and Emergency Services more flexible risk-based resourcing greater co-location of facilities to provide better integrated emergency responses and better asset utilisation 29

30 THE PUBLIC SECTOR The goal for the public sector must be to achieve the highest standard of excellence and ensure that Queensland is the best administered state in Australia. 30

31 PUBLIC SECTOR ARRANGEMENTS 31 Employing legislation PS Act 15 other acts Awards 50 Awards 50-60 Certified Agreements Variability, anomalies and inconsistencies Classification framework 250 levels 750 pay points Unnecessary complexity and rigidity Increased costs and complexity in administration of payroll, HR and IR systems Health Payroll 10 Awards Multiple industrial agreements 200 different allowances 24,000 different pay combinations

32 THE PUBLIC SECTOR cont … RECOMMENDATIONS Rationalise and consolidate core public service employment conditions Consolidate and simplify awards and certified agreements New flexible broad-banded classification system for public service Appointment of employees to broad-banded levels (not agency specific positions) More effective performance management system 32

33 THE PUBLIC SECTOR cont … RECOMMENDATIONS cont … ‘ICT as a service’ strategy – Source software, hardware and infrastructure as a service from private providers – Government should not own and manage ICT assets CITEC role to be discontinued within 2 years Reduce overhead administrative and corporate costs e.g. contestability of corporate services Queensland Shared Services (QSS) operate on contestable basis (not mandated) 33

34 There is an urgent need to restore the highest standards of financial management to public administration – with an enhanced long term financial planning framework, improved budget, cash and asset management, and greater transparency and accountability. FINANCIAL MANAGEMENT 34

35 FINANCIAL MANAGEMENT PRACTICES Relationship between the elements of the Appropriation Bill 2012 2010-11 financial year 2011-12 financial year 2012-13 financial year 2013-14 financial year Supplementary Appropriation for Unforeseen Expenditure (retrospective) Supplementary Appropriation for Unforeseen Expenditure 1 (retrospective) Appropriation sought for budget (vote) (prospective appropriation) Supply (interim appropriation) 35

36 RECOMMENDATIONS Intergenerational Report State Infrastructure Plan Simplified appropriation framework Improved budget, cash and asset management Charter of Budget Accountability Greater role for private sector in infrastructure investment Queensland Productivity Commission FINANCIAL MANAGEMENT cont … 36

37 FISCAL REPAIR STRATEGY Commission’s recommended strategy (Interim Report) -arrest deterioration in State’s financial position and stabilise position -pay down debt $25-30 billion debt reduction necessary to restore financial strength and provide buffer for adverse events -Will also restore AAA credit rating Debt reduction of this magnitude can only be achieved by releasing capital from the State’s balance sheet 37

38 38

39 39

40 40

41 41 Trigger range for AAA credit rating Actual Projection Total Government debt to revenue ratio Source: Treasury

42 42

43 43 Source: Treasury Actual

44 FISCAL REPAIR STRATEGY Commission’s recommended strategy (Interim Report) -arrest deterioration in State’s financial position and stabilise position -pay down debt $25-30 billion debt reduction necessary to restore financial strength and provide buffer for adverse events -Will also restore AAA credit rating Debt reduction of this magnitude can only be achieved by releasing capital from the State’s balance sheet 44

45 The Government must make better use of its balance sheet, by releasing capital locked up in mature assets to pay down debt, lower interest costs and free up funds for investment in new infrastructure (for example, flood prevention). GOVERNMENT COMMERCIAL ENTERPRISES 45

46 GOVERNMENT COMMERCIAL ENTERPRISES 46 Commercial assessment tests 1.No need for government to own assets that compete with private services in workably contestable markets 2.No need for government to own commercially sustainable businesses 3.Where government remains responsible for services: deliver through own agency or non-government providers deliver through contestability

47 GOVERNMENT COMMERCIAL ENTERPRISES cont …. Ownership patterns in the National Electricity Market – by indicative market share a Aurora Energy distribution 47

48 GOVERNMENT COMMERCIAL ENTERPRISES cont …. 48

49 Dispose of businesses operating in commercial markets, when conditions favourable: – Energex ($9.2B) – Ergon ($7.7B) – Powerlink ($5.3B) – CS Energy ($0.9B) – Stanwell ($1.7B) – Gladstone Ports Corporation ($1.2B) – Townsville Port Authority ($376M) – Queensland Investment Corporation ($18M) GOVERNMENT COMMERCIAL ENTERPRISES cont …. RECOMMENDATIONS 49

50 OTHER GOC RECOMMENDATIONS Transport Services Bulk Ports North Queensland to have supply chain coordination role. Mount Isa rail freight line integrated with Townsville Port Authority Passenger rail and bus services to be restructured to be delivered through: – contestable contracts – franchise and lease arrangements Reform of GOC governance model Single shareholding Minister model Improve efficiency of GOCs – Reform restrictive workplace practices – Remove unnecessary policy restrictions – Make transparent full cost of Government policy requirements GOVERNMENT COMMERCIAL ENTERPRISES cont …. 50

51 “ BUSINESS AS USUAL” IS NOT SUSTAINABLE High cost of delivering services Low productivity Ageing population and workforce placing pressure on financial position 51 Expenses expected to rise faster than revenues

52 Unlock scarce capital and free up resources for debt reduction and new investment 52 Innovative service delivery (including greater use of non-government sector) Improved public sector flexibility and efficiency Greater productivity and better resource use  including use of capital More front-line services (with stable fiscal position) STRATEGIC BLUEPRINT

53 VALUE OF COMMISSION OF AUDIT PROCESS Independent, objective, arm’s length view No “baggage” Fresh look at the way things are done Valuable input from the bureaucracy Long term strategic perspective Opportunity for renewal and reform Decisions are a matter for government 53


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