Introduction

1.1 In February 2014, the National Commission of Audit (NCOA)¹ recommended:

… that a single, integrated border agency, to be known as Border Control Australia, be established through the merger of the border control functions of the Department of Immigration and Border Protection and the Australian Customs and Border Protection Service.

1.2 On 9 May 2014, the Minister for Immigration and Border Protection announced that the government would carry out this recommendation and integrate Australia’s immigration and customs functions into a single entity—the Department of Immigration and Border Protection (DIBP – the department). The Australian Border Force (ABF), headed by a Commissioner, would be established within the department as the ‘frontline operational border agency’.² The new department and the ABF came into existence on 1 July 2015, and operated under this nomenclature through to 2017.

1.3 On 18 July 2017, the Prime Minister announced that the government had decided to establish a Home Affairs portfolio which would have responsibility for:

• federal law enforcement;
• national security;
• transport security;
• criminal justice;
• emergency management;
• immigration and multicultural affairs; and
• border-related functions.

1.4 The Department of Home Affairs has assumed all of the department’s functions (including the ABF) in addition to functions from each of the Departments of Prime Minister and Cabinet; Social Services; Infrastructure and Regional Development and the Attorney-General’s department.

1.5 In addition to the ABF, the Home Affairs portfolio also includes the following entities:

• the Australian Federal Police;
• the Australian Criminal Intelligence Commission;
• the Australian Transaction Reports and Analysis Centre; and
• the Australian Security Intelligence Organisation.³

1.6 The new entity formally came into existence on 20 December 2017. Fieldwork for this audit was undertaken between June and December 2017. This audit principally focusses on the period May 2014 to December 2017, while the department was known as DIBP, however some of the department’s responses to ANAO inquiries occurred after it became the Department of Home Affairs. For simplicity, this report refers to ‘the department’ to signify both the Department of Immigration and Border Protection and the Department of Home Affairs (except where the context requires a distinct reference).

Audit approach

1.7 The objective of this audit was to examine the effectiveness of the integration of the Department of Immigration and Border Protection (the department) and the Australian Customs and Border Protection Service (ACBPS).

1.8 To form a conclusion against the audit objective, the ANAO adopted the following high-level criteria:

• Did the department establish sound governance arrangements for implementation of the integration and capability reform process?
• Did the department manage the integration and capability reform process in accordance with government decisions and relevant plans?
• Can the department demonstrate that the intended outcomes of integration and the capability reform process are being achieved, including financial outcomes?

1.9 The ANAO examined the department’s high-level arrangements for tracking the progress and financial status of the reform program, but did not examine the administration of individual projects within the program.

1.10 The announcement of the creation of the Home Affairs portfolio occurred after the audit had commenced and is not within the scope of the audit.

1.11 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $530,000.

1.12 Team members for this audit were Julian Mallett, Bradley Medina, Anne Kent, David Lacy and Paul Bryant.

Reviews

1.13 There have been a number of internal and external reviews of aspects of the department’s administration of the integration and reform process. These are shown in Table 1.1. The ANAO has drawn upon these reviews during the audit and, where appropriate, referred to them throughout this report.

Table 1.1: Reviews of the department’s implementation of integration and reform

Note a: This includes projects with an estimated cost of more than $30 million or programs with a total estimated cost of more than $50 million. Review teams are appointed by the Department of Finance in consultation with the relevant entity.

Source: ANAO from DIBP data.

2.1 The government made the decision to integrate the department and ACBPS in May 2014. Full implementation required the passage of legislation, and it was decided that the effective date for the formal creation of the new department, the creation of the ABF and the abolition of the ACBPS would be 1 July 2015. There was consequently a period of over 12 months in which the department had time to commence structural reorganisation and to prepare the staff from the respective entities for the change.

2.2 In addition to the ‘organisational’ integration of the two entities, the proposal approved by the government included:

• a series of projects which had been initiated as part of an earlier Customs Reform Program commenced in 2013; and
• new projects designed to develop or enhance border capabilities.⁴

2.3 The overall program, known at the time as the Portfolio Reform Program, included two implementation plans: one for the period from the Minister’s announcement in May 2014 to June 2015 and the other for the period from 1 July 2015 onwards. The initial allocation of funds for the Portfolio Reform Program in the 2014–15 budget was $710.4 million.⁵ Additional funds were approved in successive budgets which brought the total funding for the Program to $977.8 million. Further detail about the funding arrangements is included in Chapter 3.

Structure of the Portfolio Reform Program

2.4 The conceptual structure of the Portfolio Reform Program is shown in Figure 2.1.

Figure 2.1: Conceptual structure of the Portfolio Reform Program

 

 

Source: DIBP.

2.5 As shown in Figure 2.1, there were three core tasks facing the department:

• the structural and organisational reform necessary to merge the ‘old’ department and the ACBPS to create one new organisation;
• the creation and establishment of the Australian Border Force; and
• the management of 38 major capability reform projects with a total value of $977.8 million.

2.6 The Portfolio Reform Program approved by government included a detailed Business Case (the Integration Business Case) which had 13 appendices and ran to almost 1 000 pages. The Integration Business Case included:

• high-level specification of capability reform projects;
• a Portfolio Reform Program management plan and delivery schedule;
• risk management plan;
• benefits realisation plan;
• an organisational change management plan; and
• a procurement strategy.

2.7 The Integration Business Case was the key document detailing the overarching plan for the integration of the department and ACBPS. It also represented the department’s commitment to the government on what was to be achieved, by when, and the expected benefits of integration.

2.8 The overarching objectives contained in the Integration Business Case were to:

• Objective 1: Consolidate the Department of Immigration and Border Protection (DIBP) and the Australian Customs and Border Protection Service (ACBPS) as a single border organisation.
• Objective 2: Establish the Australian Border Force as part of the single organisation.
• Objective 3: Implement reform measures to strengthen Australia’s borders, tackle crime, and support economic growth and productivity by supporting legitimate trade and travel by reducing the burden of compliance.
• Objective 4: Bring forward submissions to Government to secure funding and establish the authority to continue the integration and reforms in the out years.

2.9 The Integration Business Case also outlined the benefits expected to accrue from integration. This is discussed further in Chapter 4.

Did the department establish a sound governance framework?

2.10 Following the Minister’s 9 May 2014 integration announcement, a Portfolio Reform Task Force⁶ was created on 12 May 2014, a Portfolio Reform Board (PRB) met for the first time on 16 May 2014 and a new Executive Division, combining the most senior executives of the former department and the ACBPS, was ‘stood up’ in August 2014. In October 2014, the Secretary released a Blueprint for Integration which provided staff with details of the department’s mission, the new organisation, the organisational focus and the integration timeline.

2.11 The Integration Business Case outlined a proposed high-level governance framework as shown in Figure 2.2.

Figure 2.2: Portfolio Reform Program governance framework (January 2015)

 

 

Note: The Independent Assurance Partner was Third Horizon.

Source: DIBP.

2.12 The role and functions of key parts of the framework are shown in Table 2.1.

Table 2.1: Interim governance framework to 1 July 2015

Note a: The Assurance Partner was engaged by DIBP as a consultant for the period 19 June 2014 to 18 June 2016 with a contract value of $2 million The total paid to the consultant was $1.6 million. Due to the department’s concerns with the Assurance Partner’s performance, the engagement ended early in August 2015.

Note b: The RITF was a division of the department with four branches and comprised approximately 100 people.

Source: DIBP.

2.13 The Integration Business Case included a proposed single accountability framework post 1 July 2015. It also noted that in the interim period prior to integration, ‘Delivery of in-flight programmes and projects in 2014–15 will continue to be governed by existing arrangements within the respective organisation.’

2.14 In April 2015, as the date of formal integration approached, the Executive Committee decided to adopt a governance model that ensured that ‘accountability for change outcomes is placed squarely with relevant business owners’ to better align capability delivery and business needs and approved a revised governance framework as shown in Figure 2.3.

Figure 2.3: Revised governance framework

 

 

Source: DIBP.

2.15 The key differences between the new framework and the previous one were:

• the creation of a Major Projects Working Group to manage and coordinate capability reform projects through a number of ‘business-led’ sub-programs (as opposed to a more ‘centralised’ model through the RITF and its Programme Management Office);
• the Portfolio Reform Board was subsumed into the Executive Committee; and
• the RITF was disbanded.

2.16 In May 2015, shortly after the revised governance framework was approved, the department commissioned the Boston Consulting Group to undertake a review of the department’s readiness to deliver the 38 capability reform projects. The resulting report⁸, which was delivered in June 2015, found that:

• Although there is a high-level vision, the outcomes that capability reform needs to deliver are not clear enough to guide implementation;
• Despite recent measures, the department’s governance and capability functions were not yet mature enough to effectively co-ordinate and support the business-led delivery model for what is a major, complex change programme; and
• The approach to implementation did not have a clear sequencing or prioritisation logic.

2.17 Following consideration of the ‘readiness’ review, the Executive Committee decided upon a substantial revision of the governance framework as shown in Figure 2.4. The key change in the framework was the creation of a ‘Deputies’ Committee’ comprising all Deputy Secretaries and Deputy Commissioners to provide high level oversight of capability reform projects. In particular, emphasis was given to the establishment of program boards, each chaired by a Deputy Secretary.

Figure 2.4: Governance framework as at October 2015⁹

 

 

Source: DIBP.

2.18 As noted at paragraph 2.15, the RITF was disbanded in April 2015. Its responsibilities for the coordination of the broader organisational change and integration agenda (such as facilitation of processes for ICT integration, staff engagement mechanisms, change management and stakeholder coordination) were not initially reallocated elsewhere. The 2016 review Assessment of the consolidation of ACBPS and DIBP observed that during this period, there was a ‘loss of momentum’ in the reform process. In discussion with the ANAO, senior department officers agreed that the disbanding of the RITF contributed to a loss of visibility by the Executive of the ‘implementation effort’ and a drop-off in internal communications to staff. In December 2017, the department advised:

As identified internally, and in the 2016 Rand Report, a loss of momentum with Reform occurred following integration, so the SRG [Strategic Reform Group] was established to provide a central area to coordinate and oversight Reform.

2.19 The SRG was established in December 2015. It was disbanded in December 2016 and its functions transferred to the Enterprise Strategy, Reform and Performance division.

2.20 In December 2016, with the structural integration of DIBP and the ACBPS completed, the department engaged Deloitte to review its governance arrangements. The review found that while the various committees which form the governance structure are operating as designed, ‘the committee structure is not operating as effectively as it could to support enterprise-wide decision making.’ Since the review, the Home Affairs portfolio has been created, with consequential changes needed to governance arrangements. The department advised that it has used the review to inform the development of new governance arrangements.

Was implementation progress reported to relevant stakeholders?

Reporting on structural and organisational reform

2.21 As noted previously, the Portfolio Reform Board (PRB) and the Reform and Integration Task Force (RITF) were the two key internal bodies managing and coordinating the reform and integration process until they were discontinued in April 2015.¹⁰ The ANAO examined the records of both bodies to assess the adequacy of the processes for reporting on progress.

Portfolio Reform Board

2.22 The PRB met fortnightly on 16 occasions between 16 May 2014 and 2 April 2015. The agenda and minutes of the meetings demonstrate that the PRB fulfilled the role described in the Integration Business Case. Matters considered, discussed and (where necessary) decided by the PRB included:

• workforce planning;
• consolidation of common functions such as ICT¹¹, corporate services and intelligence;
• corporate strategy and planning;
• change management strategy and approach;
• integration risk planning;
• organisational design and structure;
• revised integrity framework; and
• legal framework for the department and ACBPS and establishment of the ABF.

Reform and Integration Task Force

2.23 The RITF was a division of the department. In addition to its role in coordinating and managing the integration process, it also provided the secretariat function to the PRB.

2.24 The First Assistant Secretary (Senior Executive Band 2) of the RITF chaired a weekly meeting, known as the Portfolio Programme Management meeting. This body met some 40 times between July 2014 and May 2015. Senior Executive Service Band 1 officers were required to provide the RITF with a two-page weekly report (using a standard template) on ‘matters of significance’ within their areas of responsibility, which the department described as a ‘succinct summary of achievement over the last week and a forecast of planned management focus over the coming week’.

Reporting to the Executive on capability reform

2.25 As noted at paragraph 2.5, the integration of the department and ACBPS comprised the integration of the ‘old’ department and ACBPS, the creation of the ABF as well as a suite of 38 capability reform projects with a value of $977.8 million. While the PRB and RITF documents examined by the ANAO demonstrated that there was routine reporting on organisational change and integration, there appeared to be minimal emphasis on reporting to the Executive about, and consideration of, progress in the suite of 38 capability reform projects.

2.26 While the ANAO located a small number of ‘project dashboard’ reports prepared during 2015, these carried the caveat ‘preliminary’ and were incomplete as they contained no financial status reporting.

2.27 The 2017 Gateway Review report¹² noted that:

… under the current assurance arrangements there is formal program reporting to the program board only and there is no routine provision of critical Program performance information to the Executive Committee. The review team considers that line of sight of Program issues to the Executive Committee is of critical importance.¹³

2.28 Although it noted that the department had made considerable progress since its last (2016) review, the Review Report went on to recommend that the department:

Ensure that the Executive Committee has visibility of critical project and program performance information through regular reporting.

2.29 In July 2017, the Enterprise Strategy, Reform and Performance division provided the Executive Committee with an Enterprise Transformation Blueprint which had been in development for some months. The purpose of the Blueprint was to provide the Executive Committee with a document which detailed eighteen ‘change initiatives’ across six ‘transformation outcomes’.¹⁴ For each initiative¹⁵, the Blueprint showed key milestones and whether each was complete, on track, a cause for concern or requiring corrective action. As a high-level document, while the Blueprint did not explicitly show the status of each of the 38 capability reform projects, it provided a consolidated high-level overview of ‘transformation’ activity across the department. Arrangements for monitoring the progress of capability reform projects is discussed in Chapter 3.

Reporting to the Minister

2.30 The Integration Business Case stated that one of the responsibilities of the PRB was to ‘report progress to the Minister’. In examining PRB documents and minutes, the ANAO found reference to officials having met with the Minister (or staff in his office) at various times but saw no written briefs to formally advise on progress, despite the commitments the department gave the government in the Integration Business Case that it would provide an assessment of the benefits of integration (see Chapter 4).

Did the department establish communication plans?

2.31 The department recognised that communication of the reform agenda to its staff would be a key to success. In July 2014, it commissioned Nous Group to assess the ‘change readiness’ of the former department and ACBPS and to recommend appropriate strategies. The consultant’s report found that while the workforce recognised that integration could bring future opportunities, change readiness and engagement in both entities was low and there were low levels of confidence in the ability of mid-level and senior leaders to achieve integration and reform.

2.32 Following the Minister’s announcement in May 2014, there was a range of activities to inform the department’s staff about integration. These included launches by the Secretary and Australian Border Force Commissioner, all staff emails, information packs for all staff and more than 200 ‘National Roadshow’ sessions held across Australia. In October 2014, the Secretary and Commissioner released the Blueprint for Integration which provided staff and external stakeholders with information about the department’s mission, organisation and focus as well as an indicative timeline.

2.33 A portfolio integration communication plan was developed in July 2015.

2.34 A Plan for Integration was released in February 2015, building on the Blueprint for Integration and in July 2015, the Strategy 2020 was released, which outlined the department’s:

• mission and vision;
• culture, values and behaviours;
• strategic environment; strategic objectives; and
• strategic response.

2.35 Surveys of staff engagement have demonstrated mixed results. A ‘Pulse Check’¹⁶ survey conducted in April/May 2015 found on the one hand, that ‘communication, when content is informative, timing is appropriate and regular, and feedback opportunities are provided (i.e. all-staff emails and weekly newsletters), has contributed to employee awareness and understanding of integration and reform outcomes’. However, the survey also reported that ‘Communications thus far have failed to provide relevant, targeted detail that is satisfactory to employees… Some of the workforce have felt overwhelmed by too many high-level, untargeted all-staff communications. Key messages in emails are lost in large bodies of text and are not effectively disseminated to employees by their leaders’.

2.36 In 2016, the department engaged the RAND Corporation to undertake an assessment of the ‘consolidation’ of ACBPS and the department. The RAND review report observed that there had been a ‘loss of momentum’ shortly after integration formally began and stated that ‘Several interviewees mentioned that the early road shows used to talk about the integration of the workforce had stopped and had not been replaced with any other engagement efforts. This was mentioned as a shortfall from all levels, from DIBP headquarters to the regional commands’.

2.37 The most recent Pulse Check (conducted in early 2016) showed that there had been increases in the proportions of staff who: will contribute to the department’s objectives where possible; understand their role in achieving the department’s role and mission; and are clear about how the implementation of the department’s objectives will impact them. However, there were significant decreases in the proportions of staff who: felt valued for their contribution; had confidence in the senior leadership to achieve the department’s vision and mission; and believed that communication between senior leaders is open and transparent.

Has the department maintained adequate records?

2.38 In accordance with its usual practice, the ANAO sought the department’s assistance in locating key documents which were referred to in other documents.

2.39 In some cases, the ANAO was able to subsequently locate the documents through its own searches of the department’s systems, although key records forming parts of series were not able to be located. In a significant number of cases, the department was unable to locate the documents. Searches are made difficult by the fact that although the department has an Electronic Document and Records Management System (EDRMS) called TRIM, many staff do not use it, preferring to store documents in ‘network drives’ or local area networks (LANs)¹⁷ which are not designed or approved for electronic document storage, retention or retrieval.¹⁸ The department’s inability to locate some documents requested was not assisted by a high turn-over of senior staff, leading to a loss in corporate memory.¹⁹

2.40 Inadequate record keeping has been a persistent theme in the ANAO’s audits of the department. Since July 2010, seven audit reports of the department have identified issues with record keeping²⁰, with three of the reports having made specific recommendations aimed at improving the department’s record keeping, to which the department agreed.

2.41 Other independent reviews have also pointed to record keeping deficiencies and their consequences:

• as far back as 2005, a report²¹ into the unlawful detention of Ms Cornelia Rau²² found:
  

  … evidence of a record keeping system that is seriously flawed. It was difficult to pull together all DIMIA²³ records on this case because relevant documents were kept in several different locations and as both hard copy and computer records. Throughout its investigations the inquiry found DIMIA file management practices poor, and there seemed to be no unified organisational approach to file establishment, access and control … File discipline was lax. This situation exposes DIMIA to risk.

• Similarly, an unpublished report found that the unlawful detention in June 2017 of two Australian citizens was caused partially by access to poor data.
• a May 2016 report²⁴ of a panel into the wellbeing and protection of children in immigration detention and regional protection centres commented:
  

  The Panel experienced considerable challenges in reviewing some of the cases presented by the Secretariat because of poor record keeping by the Department and some service providers.

2.42 The department is aware of the record keeping issues. A November 2016 submission to the Executive Committee entitled Records and information action plan 2016–20 stated:

Since 2006 at least 17 reviews of various aspects of records and information management (IM) have been completed, all of which identify significant scope for improvement. An assessment of the collective review recommendations confirms a consistent theme throughout each; a lack of sustained follow through, which in turn has left the Department’s IM in a critically poor state.

2.43 The department has 200 million documents stored in network drives (estimated to be growing at 55 per cent per year), 238 million records in TRIM²⁵, 553 000 cartons (or 241 ‘shelf kilometres’) of paper-based files and an ‘unknown quantity’ of records stored in emails. The submission noted that:

These issues aren’t new and have been highlighted in various reviews over the last decade resulting in:

• Poor decision making and advice to key stakeholders or for individuals
• Failure to comply with legislative requirements due to poor information and records managements policies, systems and practices
• Failure to deliver on strategic objectives and priorities (risk and crisis management).

2.44 The submission noted that while two projects had been approved totalling $4.29 million²⁶, this represented funding for 2016–17 only, and that an investment of $14.55 million over five years would be required to implement the recommendations of an earlier review. It also stated that should the Executive Committee wish to ‘expedite critical aspects of the Action Plan’, additional resourcing of two staff and $320 000 would be required. In May 2018, the department advised that this additional resourcing had not been provided.

2.45 With the creation of the Home Affairs portfolio in December 2017 and the transfer into the department of a number of organisational functions and units from the Departments of Prime Minister and Cabinet, Social Services, Infrastructure and Regional Development and the Attorney-General’s department, the department’s information holdings will increase further. Unless urgent and significant action is taken to address the record keeping problems and issues which have previously been repeatedly identified, the ANAO continues to consider that there is a risk to the department’s core functions. The Records and information action plan 2016–20 identified possible risks in the following terms:

• Poor decision making and advice to key stakeholders or for individuals;
• Poor intelligence to support operational requirements;
• Inability to accurately and comprehensively locate information on demand;
• Ongoing resource and productivity impacts as staff are redirected from core duties to manually locate or manipulate records and information;
• Rapidly escalating storage costs for both physical and digital material;
• Rapidly increasing resource costs and demands to manage records and information;
• Failure to comply with legislative requirements due to poor and inconsistent records and information management policies, systems, strategies and practices;
• Failure to deliver on strategic objectives and priorities (risk and crisis management);
• Increasing costs to defend the Department’s reputation; and
• Excess exposure to litigation, FOI, investigations, audits and government accountability.

Did the department develop an integration risk management plan and strategy?

2.48 The Public Governance Performance and Accountability Act 2013 and the Commonwealth Risk Management Policy27require all Commonwealth entities to establish and maintain appropriate systems of risk oversight, management and internal control.

2.49 Prior to integration, both the department and ACBPS had established risk management frameworks in accordance with policy and legislative requirements. After the integration announcement in May 2014, the department recognised that the process of integration would present its own set of risks. The Integration Business Case included a list of these integration risks and noted that once the two entities were integrated, there would be a need for the separate development of an Enterprise Risk Management framework in relation to ‘business as usual’.

Integration risks

2.50 The 16 integration risks that were developed are shown in Table 2.2.

Table 2.2: Integration risks

Source: DIBP.

2.51 Each of the risks was assigned to a Risk Lead at the SES officer level. The status of each risk was reported through the RITF to the PRB. As with other aspects of the RITF’s work, integration risk reporting ceased in April 2015 when the RITF was disbanded and the PRB was subsumed into the Executive Committee.

2.52 Project-level risks for capability reform projects were included in the Project Initiation Document (PID) for each project, and are managed in centralised project risk registers. High and extreme risks are extracted into the project monthly status reports for executive reports and governance bodies.

What external assistance did the department engage to assist with integration?

2.53 Consultancies are a particular type of contract and can be distinguished from other types of contracts in that:

• the contract involves the development of an intellectual output that assists with decision making;
• the intellectual output represents the independent view of the service provider; and
• the output is the sole or majority element of the contract in terms of relative value or importance.²⁸

2.54 All entities are required to report details of contracts that they enter into on AusTender, the Australian government’s procurement information system. Consultancy contracts are required to be indicated with a ‘flag’.²⁹ Figure 2.5 shows the value of consultancy contracts entered into by the department since 2007–08. The total value of consultancy contracts entered into by the department between 2007–08 and 2016–17 was $358.9 million.

Figure 2.5: Value of consultancy contracts entered into, 2007–08 to 2016–17

Note: Data for years prior to integration includes ACBPS and the department combined.

Source: ANAO analysis of AusTender data.

2.55 Figure 2.5 shows that the value of consultancies entered into by the department increased significantly following the government’s announcement of integration, although the department was not able to identify which consultancy contracts related to integration (as opposed to its ‘business as usual’).

Evaluation of consultancy contracts

2.56 The department requires its staff to evaluate contracts (whether consultancies or not) upon completion. Its Contract Management Manual (CMM) provides guidance and direction for staff about all aspects of the contract management lifecycle. The chapter on ‘Ending the Contract’ states:

It is DIBP policy that an evaluation of the contract and contract outcomes must be undertaken at the end of each contract. The evaluation should encompass the overall performance of both the contractor and DIBP.

2.57 The CMM provides an evaluation checklist covering the following points:

• Has the contract facilitated the achievement of the activity identified in the approach to the market?
• Did the contract achieve its objectives?
• Were stakeholders’ requirements met?
• Did the contract deliver quality outcomes?
• How well did the performance regime work?
• Did the management arrangements established by DIBP facilitate achievement of contract outcomes?

2.58 The CMM requires staff managing contracts to ‘document the lessons learnt’ and ‘keep sufficient records’, which includes providing a report ‘in which conclusions are supported by the data’.

2.59 As the department was unable to advise which consultancy contracts related specifically to integration (see paragraph 2.55), the ANAO asked the department to provide a copy of the end of contract evaluation report for all consultancy contracts which:

• had a contract start date on or after 9 May 2014³⁰;
• were completed as at 30 June 2017; and
• had a contract value of $1 million or greater.

2.60 There were 33 consultancies with a total value of $83.3 million which met these criteria. Of these, only two (with a total value of $8.1 million) had been evaluated as required by the CMM.

2.61 During the fieldwork phase of the audit, the ANAO found evidence that suggested that the department had not been satisfied with the performance of two consultancies which had values of $17.6 million and $2.0 million respectively. Despite this, neither of these consultancies had been evaluated.³¹

2.62 The ANAO sought the department’s advice on how it proposed to ensure future compliance with the requirements of the CMM. In March 2018, the department advised:

The Department has already commenced a project to implement an end to end Procure to Pay system which will enforce the requirement and more importantly support consideration of past performance as part of the ongoing procurement process.

2.63 The ANAO examined the Project Initiation Documentation (PID) for the Procure to Pay system. While the system is intended to ‘provide improved information and analytic capability for contract management’, the PID is a project planning document and does not refer to the CMM requirement for evaluation of contracts.

Has the department managed capability reform projects effectively?

3.1 Since the governance changes in October 2015 outlined in Chapter 2, the Major Capability Division (MCD) has had carriage of the 38 capability reform projects. Figure 3.1 shows the department’s ‘capability lifecycle’ and the project governance arrangements that the MCD has instituted.

Figure 3.1: The department’s Capability Lifecycle with Governance

 

 

Source: DIBP.

3.2 The functions of the key committees shown in Figure 3.1 are outlined in Table 3.1.

Table 3.1: Capability reform project governance

Source: DIBP: Programme and Project Delivery at a glance.

3.3 The 38 capability reform projects are grouped together into five programs. Table 3.2 shows the programs and the budget as originally approved by government.

Table 3.2: Capability reform projects

Source: ANAO from DIBP data.

3.4 In accordance with the department’s project management framework, each of the 38 projects has a detailed project plan which sets out:

• project purpose, definition and approach;
• dependencies with other projects;
• a detailed business case;
• project phases (which are envisage, establish, execute, embed and evaluate);
• schedule;
• financial overview and budget;
• project team structure;
• quality management plan;
• risk management plan; and
• resource management strategy and plan.

3.5 ANAO review confirmed that there is a Project Initiation Document (or project plan) for each project and that the costings were agreed by the Department of Finance in accordance with usual practice.

Project reporting

3.6 As noted at paragraph 2.25, the department’s Executive Committee has not been routinely receiving reports on the status of capability reform projects. However, since January 2016, MCD has prepared monthly ‘dashboards’ for each program which are being provided to each respective program board. For each program, the dashboards contain a wide range of information including:

• the overall program status;
• cumulative, actual and forecast budgets;
• the current top three program risks and issues;
• for each project, a short narrative description and status summary;
• the six-year capability delivery roadmap; and
• a summary of current exception reports.³²

3.7 The ANAO did not attempt to verify the accuracy of the dashboards but noted that for the purposes of the individual program boards, they provide a comprehensive overview of the status of the capability reform program.

Current status of capability reform projects

3.8 Appendix 2 lists the 38 capability reform projects as reported by the department and their status as at 31 December 2017. In summary:

• five projects have been completed;
• ten projects are in progress and are on schedule;
• three projects are in progress and are ahead of schedule;
• fifteen projects are in progress and are behind schedule;
• two projects have been cancelled, one is under review, one is closed and one is yet to commence.

Has the department delivered required efficiency savings and additional revenue?

3.9 As outlined in Chapter 1, a significant component of the integration of the department and the ACBPS was a suite of 38 capability reform projects to be implemented over eight years, commencing in 2014–15 and costing $977.8 million. This allocation of funds was to be more than offset by:

• $560.1 million in savings from efficiencies gained by integrating the department and ACBPS; and
• $498.0 million in additional revenue through improved customs duty compliance (known as revenue uplift).

Efficiency savings

3.10 In his speech in May 2014 announcing the government’s decision to integrate the department and the ACBPS and create the ABF, the Minister referred to the potential for efficiency savings to be achieved. The Integration Business Case stated that the department had developed an Efficiency Delivery Strategy which identified the following areas where savings were proposed to be achieved:

• staffing reductions by reducing the number of SES officers; increasing the ‘spans of control’ of Executive Level staff; and other reductions in staffing at more junior levels;
• property expenses: reduction in the number of properties leased by the department and ABF and more efficient facilities management;
• ICT costs: merging existing technology and telecommunications contracts as they expire and reducing the number of ICT contractors and consultants; and
• other contracts: reductions in spending³³ on non-ICT contractors and consultants.

3.11 Table 3.4 shows the efficiency savings proposed as a result of the Efficiency Delivery Strategy.

Table 3.4: Efficiency Delivery Strategy – proposed savings

Source: Integration Business Case

3.12 In the 2015–16 budget, the government reduced the department’s budget funding for existing operations by $270.1 million over 2015–16 to 2018–19.³⁴ This was to partly offset the new expenditure on the capability reform projects. In that sense, the proposed savings were factored into the budget process. The ANAO examined whether the department had taken steps to implement the Efficiency Delivery Strategy as proposed.

3.13 Since 2014–15, the department has not undertaken any detailed analysis to confirm that the efficiency measures which were directly costed and agreed in the Integration Business Case have been completely implemented or achieved at the rate proposed. This is inconsistent with the commitments made to government in relation to the achievement of efficiency savings.

3.14 In January 2018, the department advised that to date, it had:

• undertaken an analysis of contracts existing at the then ACBPS and the department and identified which contracts could be consolidated over future periods;
• merged corporate, enabling and governance functions and developed a new organisational structure;
• developed a ‘Strategic Plan for Onshore Commercial Property 2015–2025’, which analysed the then ACBPS’ and the department’s leased property footprint to identify future requirements and presence that could be consolidated to fewer locations;
• undertaken a workforce requirements analysis and functional accountability review that examined, amongst other things, span of control.

3.15 These activities were all agreed actions as part of the original Integration Business Case.

Revenue uplift

3.16 As the government’s second-largest collector of revenue behind the Australian Taxation Office (ATO), the department collects a range of duties, taxes and other charges. The most substantial of these is Customs duty, which totalled $14.2 billion in 2016–17. Like the ATO, the department has a responsibility to ensure that companies and individuals comply with their payment obligations. ‘Compliance’ covers a range of regulatory activities intended to collect duty that has not been paid, whether inadvertently or as a result of deliberate evasion. Revenue uplift was the term given in the Integration Business Case to a number of initiatives aimed at improving the effectiveness of the department’s compliance efforts. At the time of integration, ACBPS’ compliance activity resulted in additional duty collection of approximately $29 million per year.

3.17 In April 2014, prior to the public announcement of integration, the department had proposed to the government that it would improve revenue collection and compliance and collect an additional $346.6 million over the six years from 2014–15 to 2019–20.

3.18 In April 2015, after further analysis and assessment requested by the government, the department proposed (and the government agreed) to increase the commitment by $151.4 million, bringing the total commitment to $498.0 million over six years.³⁵

3.19 Table 3.5 details the amount of additional revenue that the department ultimately committed to collecting in each year.

Table 3.5: Commitment to improved revenue collection and compliance, 2014–15 to 2021–22

Source: DIBP.

3.20 After the initial revenue uplift commitment in April 2014 (but before the further commitment in April 2015), the Executive Committee had received Monthly Finance Updates in March 2015 and April 2015 which highlighted trends indicating that the initial uplift commitment would not be realised. By May 2015, the Monthly Finance Update advised that ‘the annual revenue uplift will fall well short of the full year forecast’.

3.21 An April 2015 report entitled Revenue Uplift – the way forward noted that targets were not being met and growing shortfalls were developing. The report stated that development of the initiatives had encountered ‘technical design difficulties’, and that the only initiative that had been fully completed to date had raised doubts about how effective it would be in predicting non-compliance that was not already known to ACBPS.

3.22 Further reports to the executive in July, August and November 2015 confirmed growing shortfalls in revenue uplift collections and outlined a number of reasons, including:

• problems with the development of analytic models by the consultant;
• the redirection of officers from revenue compliance activities to ‘other activities considered of higher operational priority’;
• workforce issues including long-term vacancies; and
• delays in implementing the ‘initiatives’.

3.23 In October 2016, revenue uplift was discontinued as a separate capability reform project and the responsibility was transferred into ‘business as usual’ operations in the Customs Compliance branch. An End Project Report completed to close out the process noted that there had been difficulties in developing the proposed fourteen initiatives, and another February 2016 report stated that ‘the predictive analytics models originally planned to be developed by the Task Force were not feasible’. The Customs Compliance branch has continued with revenue compliance work, but work on the originally envisaged advanced analytics approach and the ‘fourteen initiatives’ appears to have ceased.

3.24 In the meantime, revenue uplift collection results have continued to be reported to the executive. Figure 3.2 shows amounts of additional revenue actually identified for collection compared with the commitment given to the government in April 2015.

Figure 3.2: Revenue uplift collected vs commitment, June 2014 to December 2017

Note a: The peaks shown in February to April 2017 are due to a small number of large value transactions associated with elements such as tobacco product imports. Figures shown are additional to the baseline collection of approximately $29.0 million per year (see paragraph 3.16).

Source: ANAO from DIBP data.

3.25 By the end of 2016–17, the amount of additional revenue collected since July 2014 was $80.3 million compared with a commitment for the same period of $190.2 million (42.2 per cent). If revenue uplift collections continue at the same average monthly rate as to date ($2.2 million per month), the shortfall by the end of 2019–20 will be $340.6 million and the department will have achieved less than a third (31.6 per cent) of its commitment to the government. Figure 3.2 shows that the revenue uplift commitment was met in six of 36 months in the period 2014–15 to 2016–17.

3.26 In the light of the significant shortfall to date, the ANAO asked the department whether it believed that the original revenue commitment of $498.0 million would still be achieved. In February 2018, the department advised:

As the performance of Customs Duty to budget is in line with expectations (variation of <1%) to the published PAES 2016–17 budget numbers, the department considers we are achieving our revenue targets.

3.27 The department’s advice is inconsistent with both the Integration Business Case and the department’s specific commitment to increase the revenue collected from its customs duty compliance activity, to which the government agreed as part of the offsets to the costs of integration and reform.

Can the department demonstrate to the government the benefits of integration?

4.1 The Integration Business Case stated that:

The decision to support and fund the Programme hinges, among other things, on whether or not the investment in this major transformation can be justified. A key question that needs to be considered is whether the envisaged Programme objectives and outcomes will deliver benefits that justify the investment that Government will be asked to make.

4.2 A Benefits Realisation Plan was included as an attachment to the Integration Business Case. Ten key program benefits were specified, forming four overarching benefits. These are shown in Table 4.1.

Table 4.1: Integration Business Case: benefits of integration

Source: Integration Business Case, Benefits Realisation Plan.

4.3 The Plan also listed 27 ‘proposed measures of benefit’.³⁶ The department advised in March 2018 that it had not collected any data in relation to these measures.

4.4 The Benefits Realisation Plan gave a detailed description of the benefits management framework, including the approach and process, governance and reporting. The Plan required the development of the documents and reports outlined in Table 4.2.

Table 4.2: Benefits Realisation Plan: required documents and reports

Source: Integration Business Case, Benefits Realisation Plan.

4.5 Despite establishing a detailed benefits management framework (including the development of blank templates for each of the components in Table 4.2), this work was not progressed until 2017 and, as at the time of audit, none of the documents or reports outlined in Table 4.2 have been finalised.

4.6 A number of reviews over aspects of the program have stated that there was no evidence a benefits management framework had been implemented as outlined in Table 4.3.

Table 4.3: Benefits management: review report comments

Source: ANAO from review reports.

4.7 In October 2017, the ANAO sought the department’s advice about the status of the benefits management framework. The department advised:

While much has been achieved, it is a work in progress and as such I expect that processes will mature over the coming year. At this point, we have established benefits for each of the Programmes and all bar one has provided the detailed Benefit Profile information.

4.8 Notwithstanding this advice, the Benefits Realisation Plan included in the Integration Business Case and approved by government has not been implemented.

Measures of Success and Future Operating Model

4.9 On 22 September 2017, the Department advised the ANAO that it was moving from a benefits realisation model to an ‘outcomes measurement model’ and provided two related documents: the Measures of Success and the Future Operating Model.

4.10 The executive summary of the Measures of Success document states that:

A content-driven view of the business outcomes to be delivered by reform and integration is critical for ensuring that benefits are realised over time:

• focusing on outcomes will build on existing input and output focused reporting by articulating how programmes contribute to strategic objectives;
• this in turn will enhance programme prioritisation and decision-making by tying programmes of work to tangible business changes and impacts.

4.11 The Measures of Success notes that the Future Operating Model will ‘identify critical impacts and business changes to be delivered over a range of time horizons’ and that there should be ‘close alignment between the two streams of work.’

4.12 As noted in Table 4.3, the November 2014 Gateway Review had recommended that the department complete the detail of the overarching program level benefits management plan. The 2016 Gateway Review recorded the ‘action taken’ by the department in response to this recommendation, which was:

The [Gateway] report acknowledges the work done to identify benefits at an individual work package level. A Benefits Management Approach has been released for the integrated DIBP. The Strategic Reform Group has developed an Outcome focussed view of Strategic Reform and have drafted Measures of Success…The Investment Programme is based on integrated delivery and governance structures to focus more on delivering business outcomes and less on original ACBPS Reform structure.

4.13 However, the February 2016 Gateway Review noted that ‘the draft Measures of Success has yet to be signed off’. Consequently, the ANAO enquired further about the status and progress of the Measures of Success and the Future Operating Model. The department advised that both documents had been developed in April 2016 but that ‘the MOS [Measures of Success] was not put into effect, but was used in development of the Organisational Health and Reform dashboard’ and in relation to the Future Operating Model, the department advised:

In terms of FOM implementation, it was never officially rolled out to the broader Department. Key SROs [Senior Responsible Officers] received a copy however feedback was that the document was too long and difficult to digest.

4.14 The Measures of Success and the Future Operating Model were the ‘deliverables’ of a contract that the department entered into with a consultant (the Boston Consulting Group). The contract value was $4.7 million and the Boston Consulting Group was actually paid $3.7 million. This contract was not evaluated at its completion as required.

4.15 Despite the department’s advice (see paragraph 4.9) which indicated that the department was moving from a benefits realisation model to an outcomes measurement model, the Future Operating Model and the Measures of Success (even had they been adopted and implemented) would not have provided a basis for assessment of the strategic benefits of integration as intended by the Benefits Realisation Plan. In its Assessment of the consolidation of ACBPS and DIBP, the RAND corporation said:

The current 20 measures of success developed by the Boston Consulting Group—referred to as the “measures of success”—are largely operational metrics, and as such do not consider the full strategy-to-resources continuum… As none of the measures being developed can be considered to be strategic, assessing strategic outcomes will likely be problematic. Furthermore, with such measures, assessing whether the overarching strategy of the DIBP is being achieved will also likely not be possible.

4.16 At the time of the audit, the department has not provided the government with any assessment of the benefits of integration. Additionally (as noted in Chapter 3), while the efficiency savings to which the department committed were delivered through reductions in its base funding, the department cannot identify specifically what efficiencies have been delivered and in what areas.

Appendix 1 Entity response

 

 

 

 

Appendix 2 Status of capability reform projects

1. In the tables below:

• original budget is as approved by government in the Integration Business Case;
• expended is the amount expended on each project as at 31 December 2017;
• original start and end date are as stated in the Integrated Business Case; and
• forecast end date is as revised by the department as at 31 December 2017.