Introduction

1.1 The Department of Veterans’ Affairs (DVA) develops and administers programs to provide support to veterans and their families. The department has three outcomes: Compensation and support; Health; and Commemorations.³

1.2 DVA delivers a wide range of veteran support services, including:

• Rehabilitation — medical, mental health and return to work support;
• Treatment — health care, pharmaceutical, and counselling services;
• Payments — regular income support, compensation for injuries or disease related to service or for permanent impairment, and for economic loss due to the inability (or reduced ability) to work;
• Housing — subsidised loans and home and contents insurance;
• Transport — services and assistance with the modification of vehicles; and
• Commemoration — projects and activities that highlight the service and sacrifice of Australia’s servicemen and women in wars, conflicts and peace operations.

1.3 In 2019–20, DVA employed approximately 1780 permanent staff throughout Australia, and approximately 1200 contracted staff. Offices are located in each state and territory capital, as well as regional areas.⁴

DVA clients

1.4 Veteran clients are: serving members of the Australian Defence Force (ADF); those transitioning from the ADF; and those no longer serving. Clients also include the families of veterans.

1.5 In 2018–19, approximately 5600 ADF members transitioned to civilian life. In 2019–20, DVA supported 225,546 veterans and 103,806 dependants. DVA estimates there are about 450,000 veterans in the Australian community with which it does not have contact.

1.6 In 2017, the veteran client population was expected to decline by 14.2 per cent by 2022. However, in 2020 the population is projected to steadily increase by seven per cent by 2025. The population of younger clients aged 25 to 40 years is forecast to increase by 44 per cent from 2020 to 2025.⁵

1.7 Claims and services administered by DVA are underpinned by three main legislative instruments: the Military Rehabilitation and Compensation Act 2004 (MRCA); the Safety, Rehabilitation and Compensation Act (Defence-related Claims) 1988 (DRCA); and the Veterans’ Entitlement Act 1986 (VEA).⁶ DVA clients usually have entitlements across more than one Act, depending on types of service and the dates during which service occurred.

1.8 The number of claims and the average number of injuries per claim has trended upwards in recent years.⁷ While the number of veterans receiving benefits under the VEA is declining⁸, MRCA and DRCA claims are increasing. In 2018–19, there was an 83 per cent increase in the overall number of claims lodged under MRCA and DRCA Initial Liability and Permanent Impairment, and VEA Disability Pension and War Widows Pension, over the previous year, with a further 15 per cent increase in these claim types in 2019–20.⁹

1.9 The estimated value of future payments associated with claims has also risen over this period. From 2018–2019 to 2019–2020, the value of personal benefits and health care claims increased by 35 per cent and 64 per cent, respectively.¹⁰ The rate of increase has been influenced by a range of reform measures, as well as the use of computer-based decision-making enabling claims to be processed more quickly.¹¹ The projected number of claimants under the MRCA, DRCA and VEA Acts is shown at Appendix 2.

Impetus for reform

Review findings

1.10 Reviews and audits of the veterans’ support system over the past decade have recommended reforms to DVA’s provision of services, business processes and ICT systems. A 2019 Productivity Commission Inquiry into the veterans’ compensation and rehabilitation system concluded that the current system was not fit for purpose and ‘failed to focus on the lifetime wellbeing of veterans’.¹²

1.11 The Productivity Commission described the system as:

• legislatively and administratively complex, contributing to lengthy and inconsistent claims determinations and levels of support;
• difficult for clients to navigate because of the large number of benefits with different eligibility criteria and rates; and
• poorly administered by DVA, placing stress on claimants.

1.12 It also noted a growing dissatisfaction, particularly among its younger clients, with DVA’s impersonal, transactional and slow service.¹³

1.13 A timeline and information about key reports and Budget measures are provided in Figure 1.1 and Table 1.1.

Figure 1.1: Timeline of key reviews and Budget measures

Source: ANAO analysis of public information and data provided by DVA.

Table 1.1: DVA VCR timeline — key reviews

Note a: Australian Public Service Commission, Capability Review: Department of Veterans’ Affairs [Internet], APSC, Canberra, 2013, available from https://www.apsc.gov.au/capability-review-department-veterans-affairs [accessed 28 October 2020].

Note b: Senate Foreign Affairs, Defence and Trade References Committee Inquiry, Mental health of Australian Defence Force members and veterans [Internet], Australian Senate, Canberra, 2016, available from https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Foreign_Affairs_Defence_and_Trade/ADF_Mental_Health/Report [accessed 9 October 2020].

Note c: Senate Foreign Affairs, Defence and Trade References Committee Inquiry, The Constant Battle: Suicide by Veterans [Internet], Australian Senate, Canberra, 2017, available from https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Foreign_Affairs_Defence_and_Trade/VeteranSuicide/Report [accessed 9 October 2020].

Note d: Productivity Commission, A Better Way to Support Veterans No. 93 [Internet], Productivity Commission, Canberra, 2019, available from https://www.pc.gov.au/search?collection=productivity-commission-web&form=site-search&query=veteran [accessed 9 October 2020].

Source: ANAO analysis of DVA and public information.

1.14 A number of other review activities were conducted between August 2016 and May 2020, primarily focused on mental health and services relating to the transition of military personnel to civilian life. Further detail about these reviews is provided at Figure 1.1 and Appendix 3.

Digital capabilities

1.15 In 2019, 56 per cent of claimants aged 18 to 34 years of age submitted their claim online, compared with 16 per cent using paper forms.¹⁴ In 2016, before the implementation of reforms, the department had a limited ability to provide online services.¹⁵

1.16 A 2016 review of DVA’s operations concluded that its multiple claims IT systems did not support efficient claims management, record keeping, and payment monitoring. It recommended that its compensation and income support systems be redeveloped by Services Australia using whole-of-government ICT infrastructure.¹⁶ The ANAO found in 2017–18 that manual interventions and poor controls contributed to inaccuracy in claims determination processes and appeals against decisions.¹⁷

Veteran Centric Reform

1.17 DVA was provided funding of $18.7 million in the 2016–17 Budget to commence planning to significantly improve its provision of services.¹⁸ Since 2017–18, further funding measures have enabled DVA to implement changes to its policies, services and ICT infrastructure. These funding measures form part of a comprehensive set of reforms, termed the Veteran Centric Reform (VCR) program.

1.18 The VCR program is currently in its fourth year of a planned six years of implementation. A business case for funding to support a further two years of implementation is planned for the 2021–22 Budget.

1.19 Budget measures to date have provided funding totalling $653.7 million to DVA and Services Australia for the implementation of the VCR program.¹⁹ DVA has been allocated $375.5 million, with $277.8 million allocated to Services Australia to develop new ICT capabilities. Over this period, DVA is required to deliver savings of $367 million. This results in net DVA funding of $6.1 million.

1.20 The Government has allocated funding for the implementation of the VCR program through three Budget measures from 2017–18 to 2019–20. These measures are:

• 2017–18 Budget — $166.6 million over four years for the first year of VCR program implementation, under the Veteran Centric Reform Budget measure²⁰;
• 2018–19 Budget — $111.9 million over four years to continue the VCR program under the Delivering Australia’s Digital Future — Veteran Centric Reform — Continuation Budget measure²¹; and
• 2019–20 Budget — continuation of the VCR program under the Veteran Centric Reform — Putting Veterans and their Families First Budget measure, funded through departmental and administered savings.²²

1.21 On 6 November 2020, the Minister for Veterans’ Affairs received authority to put forward a bid for further funding in the 2021–22 Budget.

1.22 Funding provided to DVA and Services Australia through each Budget measure is shown in Figure 1.2. These are net figures which include amounts distributed over the forward estimates, and savings requirements for each Budget measure. A breakdown of DVA departmental and administered funding allocations and savings over this period is provided at Appendix 4.

Figure 1.2: VCR Budget departmental and administered funding measures

Notes: Figure 1.2 excludes funding of $0.4 million over four years allocated to the Department of Finance to conduct regular assurance reviews of the VCR program.

Capital funding has been allocated to Services Australia for cyber security and ICT systems development. In 2017–18, DVA was allocated $2.4 million in capital funding to mitigate extant cyber security risks.

DVA’s total allocation of $18.6 million for 2016–17 shown in the graph differs from the total cited in paragraphs 1.17 and 2.13 due to rounding.

Source: ANAO analysis of data provided by DVA.

Reform objectives

1.23 The overarching goal of the VCR program is to ‘improve the experience of veterans and their families by ensuring they are no longer exposed to unnecessary complexity in their dealings with DVA’, and that they have earlier and easier access to services.²³ Reform is intended to enable the department to ‘better know, connect, support and respect veterans who serve or have served Australia’.²⁴

1.24 DVA defined a veteran-centric approach as one that ensures ‘the client is at the centre of the department’s philosophy, operations and ideas’. A principle of reform is that services are designed with veterans, and that this process builds trust and confidence.

1.25 The VCR program is aimed at delivering service improvements through changes in organisational culture and capability. Key reform outcomes described in the original and subsequent business cases are shown below in Figure 1.3:

Figure 1.3: VCR business case reform outcomes

Source: ANAO analysis of data provided by DVA.

1.26 Key initiatives to achieve these outcomes under the VCR program include:

• improved access to online services (via DVA’s MyService portal) and communication with the veterans’ community via telephone and the DVA website;
• cooperation with the Department of Defence to engage military personnel separating from the ADF; and
• use of advanced data analytics to inform the development and review of policies and programs relating to veterans’ services.²⁵

1.27 The PC Report recommended establishing a model of service provision focused on ‘wellness and ability (not illness and disability)’ over the lifetime of a veteran.²⁶ Principles emphasising early treatment and rehabilitation underpin a number of VCR initiatives, including strengthened case management to support vulnerable clients. Further information about VCR reform measures and the status of their implementation is provided at Appendix 5.

1.28 An early intervention policy approach is also reflected in amendments to legislation made since the commencement of the VCR program. These have authorised certain determinations to be automated, payment for mental health services before a claim is determined, and requirements for claims for liability and permanent impairment to be processed within 90 days. Legislative changes associated with VCR reforms are detailed in Appendix 6.

1.29 The VCR business cases also outlined a longer-term operating model that envisaged DVA becoming a smaller entity, primarily focused on policy design and the commissioning of services, and supported by digital and data analytics capabilities.

Rationale for undertaking the audit

1.30 The provision of services to veterans and their families is a subject of interest to the Parliament and the public. The VCR program is the most comprehensive set of reforms undertaken by the department in decades. Audit assurance about VCR program implementation provides transparency about whether sufficient progress is being made against reform objectives.

Audit approach

Audit objective, criteria and scope

1.31 The objective of the audit was to examine the effectiveness of DVA’s planning and management of the VCR program. To form a conclusion against this objective, the following high-level criteria were adopted:

• Was DVA planning for veteran-centric reforms effective?
• Did DVA establish fit for purpose arrangements for implementing the VCR program?
• Does DVA appropriately monitor, evaluate and report on the implementation of reform measures?

1.32 As the VCR program is still in progress, this report is a point in time assessment of DVA’s implementation of the program, and does not conclude on whether the Government’s full objectives for reform are likely to be achieved.

Audit methodology

1.33 The ANAO examined documentary evidence from DVA, Services Australia and the Department of Finance. The audit team also considered evidence from key management personnel within DVA, stakeholder entities, representatives of veterans’ organisations, and public submissions.

1.34 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of $394,145.

1.35 The team members for this audit were Judy Lachele, Dr Cristiana Linthwaite-Gibbins, Jess Kanikula, Cherise Reed and Alex Wilkinson.

2.1 Major government funding proposals are required to be supported by a business case.²⁷ Business cases demonstrate the need for and the benefits of investment, and provide the Government with policy and funding options for addressing its priorities. Costings are to reflect consideration of value for money and risks to the delivery of benefits over the life of the investment through proposed approaches to implementation.

2.2 Following approval of a First Pass Business Case on 27 April 2016, the Government tasked DVA and Services Australia with developing reform options for improving services, and addressing DVA’s limited ICT capability.

2.3 On 12 April 2017, the Government approved the Second Pass Business Case, establishing a high-level framework for the implementation of reform initiatives. Funding bids for the continuation of the VCR program beyond the first year were supported by two further business cases in 2018–19 and 2019–20. The process of business case development for the VCR program is shown below in Figure 2.1.

Figure 2.1: Government decision-making on the VCR program

Source: ANAO analysis of Department of Finance guidance and Budget information.²⁸

2.4 The ANAO assessed whether the VCR program businesses cases provided the Government with appropriate information to support its consideration of investment in reform, including suitable options for meeting reform objectives.

2.5 The ANAO also examined whether the department developed an appropriate high-level plan to guide implementation, and a coordinated program of work to achieve the outcomes detailed in its business cases.

Did DVA’s proposal for reform activities align with the Government’s objectives?

DVA’s business case for the Veteran Centric Reform Program

2.6 The 2016–17 First Pass Business Case set out current and emerging pressures on the department’s operations, and the risks of not addressing these. Key risks to effective and efficient operations were:

• fragmented and obsolete ICT infrastructure which did not support service delivery to a standard expected by the Government, within acceptable timeframes and costs;
• a high level of manual intervention in claims processing, resulting in errors and inconsistencies in the determination of claims, particularly those made under multiple Acts²⁹;
• a ‘catastrophic’ risk of ICT failure which could disrupt pension payments to veterans;
• the department’s inability to meet the expectations of younger veterans for online access to services, and to respond to increasing demand for mental health services; and
• expenses and risks associated with storing and handling paper files, and maintaining extant systems.

2.7 Drawing on reviews of DVA service provision, the business case outlined key principles for the development of reform options. These included a focus on: simpler and faster veteran access to services, including through online services³⁰; the use of a common government ICT service delivery platform; and commercial off the shelf solutions, wherever possible.³¹

2.8 The business case stated a commitment to cultural change in the design and delivery of services. It detailed a five month process of consultation with the veteran community in 2016 on the department’s provision of services. Around 210 current and former members of the Australian Defence Force (ADF) were consulted through workshops and interviews. DVA also engaged with specific groups of veterans to identify the diverse needs of its clients. An example of this was the establishment of a new forum called the Female Veterans and Families Forum.³²

2.9 In June 2016, DVA established an Interdepartmental Committee, chaired by the department’s Chief Operating Officer, to consult with relevant entities across government on the development of the business case and design of the VCR program.³³ It included representatives from: Services Australia; the Digital Transformation Agency; the National Disability Insurance Agency; and the departments of Defence, Employment, Prime Minister and Cabinet, Finance, and Treasury.

Options provided to Government

First Pass Business Case

2.10 A First Pass Business Case allows for the initial consideration of options for achieving government objectives and the costs and benefits of each.³⁴

2.11 The 2016–17 First Pass Business Case proposed two high-level options (A and B) for further development in the 2017–18 Second Pass Business Case, as well as the option of no change (option C). Options A and B envisaged extensive ICT redevelopment, with the difference in costing reflecting a choice between comprehensive reform of DVA’s service provision (option A, put forward as preferred), or an ICT upgrade with only minimal reform of the department’s culture and business operations (option B).³⁵

2.12 ICT modernisation was to involve the transfer of key DVA ICT functions to Services Australia. The business case outlined the advantages of the department’s existing ICT services relationship with Services Australia, and how it would leverage commonality between DVA and Services Australia’s benefit and payment functions, and its scale, capabilities and reliability.³⁶

2.13 On 27 April 2016, the Government provided authority and $18.7 million in funding for DVA to develop a Second Pass Business Case, building on option A.³⁷ The decision supported a shift from claims processing to delivering integrated services, tailored to the needs of veterans and their families, supported by contemporary ICT.

Second Pass Business Case

2.14 The Second Pass Business Case was first considered by the Government on 4 April 2017.³⁸ It set out three detailed options, each underpinned by full ICT redevelopment by Services Australia. The options provided differing levels of improvement in service provision, and financial return to government in the form of savings.³⁹ The Government requested the development of two further lower-cost options (options 4 and 5) for consideration at a later meeting. These options did not alter the proposed direction of reform.

2.15 On 12 April 2017, the Government agreed to option 5 which presented option 2 of the 2017 business case at a lower cost. This resulted in funding of $166.6 million over four years for the first year of VCR program implementation, under the Veteran Centric Reform Budget measure.

Business outcomes and benefits

2.16 To support the Minister’s preferred proposal for ICT and business modernisation, DVA identified key features of a new service approach. These aligned with key business outcomes outlined in DVA’s First Pass Business Case, and are set out below.

• Simpler and faster access — Use of whole-of-government online portals for payments and connecting clients with government and provider services. Use of automated claims determinations when set conditions are met. Self-management online, with support for those needing assistance.
• Tailored and coordinated support — A whole-of-life approach to ensuring veterans and their families could access support, when needed. Systems to enable clients with complex needs to be supported in a timely and effective way.
• Seamless transition from the Australian Defence Force (ADF) — Veteran payments and services in place before separation from the ADF. Proactive provision of services using automated registration and transfer of data from the time of ADF enlistment to separation.
• Circumstances-driven services — Consolidated client information to ensure clients are provided payments and services, when needed and without the need for a claim. Use of ADF service records and risk profiles to automate the determination of payments and services.
• Efficient partnering — An integrated framework of government and partner organisations to deliver services. Co-location of service delivery to increase effectiveness and reduce costs.

2.17 A key reform initiative was to improve the department’s ability to support vulnerable clients, through ICT and business process improvements and cultural change:

• consolidating client files into a single digital record, capturing biographical, service and medical data, all interactions with DVA, and information about eligibility and entitlements; and
• enabling staff to access relevant information about a veteran and their circumstances on a single screen, and to act as a single point of contact.⁴⁰

2.18 The ability of staff to view integrated client information was implemented in June 2020. Full access to client records depends on the digitisation of existing paper records, a separate VCR initiative still in train.⁴¹ This initiative is discussed in Chapter 3 of this report (see paragraph 3.66).

Funding structure

2.19 The Second Pass Business Case proposed a six year reform program to be delivered in two main tranches.

• Tranche 1 (Years 1 to 3) was to focus on establishing foundational ICT⁴², new business processes, pilots, and changes in service delivery not dependent on significant policy and legislative reform.
• Tranche 2 (Years 4 to 6) was to complete the ICT build, deliver capabilities for client self-management, simplify access to DVA, and make use of data analysis and modelling to target services. It also flagged the potential transfer of functions to other delivery partners.

2.20 The approach was intended to provide the Government with flexibility to consider the outcome of pilots, reviews and future government decision-making on Services Australia’s WPIT program.

2.21 The Government elected to consider future funding more frequently, requesting updated business cases after the first and second year of implementation. These have outlined the scope of work that was proposed to be funded, and identified instances where work previously committed to had not been fully delivered.⁴³

Business Case updates

Year 2 business case

2.22 On 7 March 2018, the Government considered an updated business case to support the continuation of the VCR program for a second year. The business case presented two options — to extend funding for reforms, or to maintain capabilities developed in Year 1 only.

2.23 The preferred option of continuing the VCR program proposed a ‘test and trial’ approach, emphasising pilots to inform the planning of longer-term reforms. It stated that Year 2 would enable the department to provide government decision-makers with evidence and implementation plans to support a longer-term funding commitment.

2.24 The Government elected to continue the program for one year, at a cost of $111.9 million distributed over four years, under the Delivering Australia’s Digital Future — Veteran Centric Reform — Continuation Budget measure. Savings proposed in the 2018–19 Veterans’ Affairs Portfolio Budget Submission were to be used to offset the cost of implementing Year 2.

Year 3 business case

2.25 The Revised Business Case for Year 3 proposed two further years of funding to support the continuation of reform in tranches. The four options presented differed in terms of the amount and distribution of funding over the forward estimates.⁴⁴

2.26 Options 1 and 2 outlined an implementation approach focussed on income support and client management ICT capabilities in the first year, with the second year to potentially respond to recommendations of the Productivity Commission’s review of compensation and rehabilitation services.^{45 46} This would include market testing for appropriate ICT solutions. The department assessed that the yet to be delivered PC recommendations were likely to align with the objectives of the VCR program.

2.27 The department’s preferred option (option 1) involved the transfer of DVA staff to Services Australia for the delivery of ICT functions, offering the highest level of savings.⁴⁷ Option 2 deferred a decision on this to the 2021–22 Budget and excluded some ICT functions, and the decommissioning of obsolete DVA systems from scope. This carried a risk that the overall cost of option 2 would be higher than option 1 due to the need to fund decommissioning at a later stage of implementation.

2.28 On 15 February 2019, the Government approved option 2 enabling the continuation of the VCR program for two years.⁴⁸ It also requested that the Minister report back to the Government in the 2020–21 Budget with an update on savings achieved by the department.⁴⁹

Benefits and risks

2.29 While the Second Pass Business Case proposed a benefits-realisation framework, benefits were not explicitly linked to VCR business outcomes. The benefits of reform were broadly defined in terms of better client experience, health and well-being, more effective departmental operations, and savings for the Government.⁵⁰

2.30 Key Performance Indicators, benchmarks or targets specific to the proposed areas of service improvement were to be developed once the scope of the VCR program had been decided, however this did not occur. As at December 2020, DVA had commenced establishing measures of success, baselines and targets for tracking the benefits identified in its benefits-realisation framework for Year 4. This is discussed at paragraph 4.11.

Analysis of risk

2.31 When key risks are realised the delivery of business outcomes and benefits is likely to be compromised.⁵¹ It is therefore important the Government is provided with relevant information about key areas of risk and proposed actions for mitigating these.

2.32 The First Pass Business Case identified risks associated with each reform option. These included risks relating to resourcing, partnering arrangements for the delivery of ICT, schedule and budget, potential legislative constraints, and possible staff and stakeholder resistance to change.

• For option A, all risks were rated low to medium, except for the risk of catastrophic ICT failure before work was completed. This was rated as very high.⁵²
• Similar risks were identified for option B, however an additional risk rated as high was included — stakeholder criticism of investment in ICT without addressing the need for better service delivery.
• Risks associated with a government decision to not pursue reform (option C) were all rated very high.

2.33 All options presented as part of the Second Pass Business Case were assessed as carrying an overall medium level of risk following mitigation. The 2019–20 updated Business Case revised VCR program risks and ratings, identifying a high risk that ICT changes would be delayed or not fit for purpose.⁵³ DVA’s management of program risk is discussed further at paragraphs 3.25 to 3.32.

Savings projections

2.34 The cost of new funding proposals is generally required to be offset by savings identified within the portfolio.⁵⁴ These may relate to administered or departmental funding, or both.⁵⁵ Savings commitments are reflected in Budget decisions through adjustments to the entity’s appropriation.

Savings through the avoidance of costs

2.35 Proposed partnering with Services Australia for the use of whole-of-government ICT platforms and systems has been a core component of each VCR business case.⁵⁶ In 2017, the department advised the Minister that an estimated 96 per cent of VCR business applications could be delivered using existing or planned standard Services Australia capabilities.⁵⁷

2.36 The use of Services Australia’s capabilities was estimated to save the Government up to $500 million.⁵⁸ This figure represented costs which could potentially be avoided by the Government, based on the difference between estimated ICT costs of using all WPIT components and estimates for a ‘greenfield’ DVA project.

2.37 DVA advised the ANAO in September 2020 that this level of saving is unlikely to be realised, due to greater differences between DVA and Services Australia business requirements and functions than originally identified. Efficiency savings expected from the retirement of DVA systems have also not been fully realised due to delays in implementation and the decommissioning of obsolete functions.

Departmental and administered savings

2.38 Funding for the VCR program was to be partially offset by departmental efficiency savings identified in the 2016 Functional and Efficiency Review of DVA.⁵⁹ These related to the automation of certain functions, the digitisation of paper records and more efficient business processes. The bulk of Budget savings were to be realised from 2019–20 to 2022–23.⁶⁰

2.39 The Second Pass Business also identified a range of savings in government administered spending through more cost-effective contracting or provider arrangements, including for the provision of health care. The profile of savings commitments is detailed at Appendix 4.

2.40 Not all the planned savings have been fully realised. DVA assesses that the majority of savings will be achieved, but not as scheduled for 2019–20. As funds intended to be saved through increased efficiency are withdrawn from an entity’s annual operating budget, shortfalls in the achievement of savings can impact on its operating position. In 2019–20, the department recorded an operating loss of $35.85 million. Significant growth in specific claims types contributed to an operating loss of $28.3 million, the major component of the overall loss.^{61 62}

2.41 DVA has not yet reported back to the Government on its achievement of savings. DVA’s achievement of savings is discussed further at paragraphs 4.15 to 4.20.

Liability payments

2.42 The Government incurs liability for payments to veterans from the point at which an entitlement to rehabilitation, compensation and healthcare services is determined under the Military Rehabilitation and Compensation Act 2004 (MRCA) and/or the Safety, Rehabilitation and Compensation Act 1988 (Defence-related Claims) (DRCA). As costs are incurred into the future, liability reflects future payments over the lifetime of claimants and are a cost to future budgets.⁶³

2.43 The Second Pass Business Case stated that investment in reforms would help to reduce the costs of care over the lifetime of veterans and their families. This was based on assumptions that early and targeted provision of services would improve veteran well-being and significantly reduce reliance on compensation payments.⁶⁴ Consequently, the Government’s associated liability would decline.

2.44 The Second Pass Business Case detailed rising costs associated with rehabilitation and compensation obligations, particularly in relation to veterans of recent conflicts.⁶⁵ Their more complex needs would require more time and resources in the management of cases.⁶⁶ DVA assesses that the per unit cost of processing a claim under the MRCA or DRCA Acts (which generally apply to younger cohorts of veterans) is two to three times that of processing a claim under the VEA Act.

2.45 In 2015–16, the level of liability had increased by $2.5 billion over the previous year to a total of $9.9 billion. This was projected to increase to $14.4 billion in 2025. Liability costs for 2019–20 were estimated at $21.5 billion, well over the previous projection.⁶⁷

2.46 Liability payments, following the introduction of proposed reforms, were estimated to reduce by $127 million over six years, with benefits evident from the first year of VCR implementation. Reduced liability was put forward as a source of administered savings which would contribute to offsetting the cost of VCR implementation. Reductions in departmental processing costs were also expected as a result of fewer claims over the life of the veteran, however the estimated level of departmental saving was not assessed.

2.47 The Second Pass Business Case stated that without investment in reform, administered and departmental spending would continue to increase. The VCR program would mitigate this growth, with reductions in expenditure evident soon after its commencement. However, actuarial modelling commissioned by the department as part of the development of the business case indicated it could take two to three years before any financial benefits were realised. Total savings of between $500 million and $1 billion were estimated to be realised over a period of 50 years.

2.48 DVA advised the ANAO that savings relating to the payment of liability are likely to be realised later than outlined in the Second Pass Business Case. This is due to a number of factors, including:

• significant growth in the number and size of claims lodged with DVA since the commencement of the VCR program;
• a greater number of claims being positively determined⁶⁸; and
• the use of automated decision-making which has increased the rate at which certain types of claims are processed.⁶⁹

2.49 DVA is expected to deliver legislated entitlements and benefits to veterans quickly through efficient and effective claims handling. However, DVA’s backlog of claims has grown, with a majority of targets relating to claims processing in 2019–20 not met, despite the increased use of automatic determinations.⁷⁰ The department has required financial supplementation for claims processing each financial year following the approval of the Second Pass Business Case.⁷¹ This correlates with the upward trend in the number of claims lodged, but may also reflect delays in establishing a more efficient claims processing function.

2.50 The department did not establish the full base of evidence needed to support informed decision-making by the Government on investment in reforms. This would have required the modelling of likely increases expected in the volume and value of accepted claims, and the rate at which determinations would be made, against an estimation of the time needed for the benefits of reform to be realised.

2.51 The business case should also have assessed the likely short to medium increase in claims processing workload for the department and put forward clear proposals setting out options for managing this.

2.52 The department did not clearly set out how its operations would be impacted by a strong policy emphasis on proactive and early intervention, facilitated through easier and faster means of lodging and processing claims. Future funding submissions should provide options for managing the volume and type of claims and associated liability, and other risks, arising from changed settings.

Has DVA’s implementation planning established a sound basis for achieving the Government’s reform objectives?

Implementation planning

2.55 DVA has planned and implemented longer-term reform measures iteratively. The first two years of VCR program implementation set out initiatives aligned with the outcomes from the original business case.⁷² In addition, for the first and second years of the VCR program, planning emphasised the use of pilots to inform longer-term development of services.⁷³

2.56 The major delivery work streams and their objectives established by the Second Pass Business Case are shown in Table 2.1.

Table 2.1: Second Pass Business Case VCR work streams and objectives

Note a: As at November 2020, 29 per cent of all Initial Liability claims via MyService have been ‘straight through processing claims’ or computer-based decision claims.

Note b: Longitudinal data sets are to be used to identify veterans most likely to benefit from targeted strategies, and to enable policies to be evaluated and adjusted. In 2019, DVA held 133 million records relating to client interactions with the department in relation to claims under MRCA, DRCA and the Veteran Entitlements Act 1986 (VEA).

Source: ANAO analysis of data provided by DVA.

2.57 High-level planning and program implementation processes have been managed by an Enterprise Program Office (EPO).⁷⁴ Planning for the establishment of the EPO outlined its intended functions, including:

• establishing the VCR program, and managing resourcing and funding for projects;
• identifying and managing program level risks, issues dependencies, quality and the realisation of benefits;
• management of a ‘master schedule’, milestones and integration with Services Australia; and
• the management of suppliers, including contract management.

2.58 The EPO does not have a mandate to performance manage the delivery of projects or initiate corrective action. It does not have a role in monitoring the achievement of savings commitments.⁷⁵

2.59 Implementation of the VCR program has been supported by:

• a change management unit to support business areas and staff to implement organisational change;
• a business process improvement unit with a focus on identifying opportunities to increase DVA’s operating efficiency⁷⁶; and
• initiatives to conduct workforce planning and develop ‘a DVA operating model’.

2.60 DVA retained its framework of major work streams for Years 1 and 2. Following this, elements of work streams were re-organised in Year 3 into a new framework of five ‘focus areas’. The Year 4 framework comprises 12 delivery streams. Changes to the organisation of work in Years 3 and 4 reflect the department’s use of a different project methodology. This is discussed in Chapter 3 of this report (see paragraphs 3.44–3.50). A diagram showing changes to work streams across Years 1 to 4 is provided below in Figure 2.2.

2.61 DVA’s reorganisation of work streams in Years 3 and 4 reduces its ability to demonstrate coherence and continuity in program planning. Without consistent reference points, it is difficult to track the evolution of the program and to determine whether sufficient progress in delivering outcomes is being made, when assessed against time and funds expended.

Planning and coordination

2.62 Following Budget decisions, DVA has undertaken detailed planning to determine the scope of each work stream for the year, and to identify component projects and key milestones. The EPO has supported a co-ordinated approach to program planning. At the beginning of each year, DVA has undertaken prioritisation processes to determine the projects (or work packages) that can be supported within the funding allocated. In 2017–18, the VCR work streams encompassed 67 projects. This increased to 91 in 2018–19 and 88 in 2019–20. There are 116 projects or work packages scheduled for 2020–21. Completion of work under the program is discussed in the Implementation chapter of this report (see paragraphs 3.51–3.66).

2.63 A yearly ‘dossier’ provides an overview of deliverables within the scope of the VCR program and contains information about outputs, assumptions and risks. In Years 3 and 4, work stream activity has been planned in quarterly ‘increments’. Program schedules set out at a high-level the program’s key deliverables and milestones and dependencies.

2.64 Iterative funding decisions have created opportunities for review and adjustment. DVA has identified risks associated with the year by year approach to funding and implementing reforms, including:

• a requirement to conduct detailed planning of work following government funding decisions, while also completing the previous year’s scope of work;
• a focus on the rapid implementation of ‘demonstration’ projects, and insufficient focus on the completion of longer-term work; and
• a need to ensure staff throughout the department are sufficiently aware of, and engaged with reform activity, and committed to the timely delivery of reform elements.

2.65 DVA’s approach to managing these risks, including through oversight arrangements established for the VCR, is discussed in Chapter 3 of this report (see paragraphs 3.25–3.32).

2.66 DVA’s planning has taken appropriate account of the Government’s policy priorities. It has adjusted reform activities to support the Government’s consideration of the Productivity Commission’s report on Australia’s military rehabilitation and compensation system. In April 2020, the COVID-19 pandemic prompted the redeployment of DVA and Services Australia staff to response teams. The consequent reduction in project resources has impacted the delivery of some components of the VCR program for 2019–20. This is discussed further at paragraphs 3.58 and 3.66.

Use of contracted resources

2.67 Since August 2017, DVA has procured services to assist with the design and implementation of the VCR program. Following the evaluation of quotes sought from a panel managed by the Department of Finance, PriceWaterhouseCoopers (Australia) (PwC) was issued a contract valued at $8,048 million from 8 August 2016 to 18 August 2017 to act as the primary strategic partner for DVA in developing the VCR Second Pass business case.⁷⁷

2.68 On 9 October 2017, DVA approached eight suppliers from a panel managed by the Department of Home Affairs with a request for proposal (RFP) for consultancy services.^{78 79} These services were to assist the department to design, establish and provide ongoing management of specific organisational units to support implementation of the VCR program.⁸⁰ Following the evaluation of proposals received, a Deed of Standing Offer was entered into with PwC. KPMG was also engaged through this RFP process.

2.69 Contracts with a total upper limit of $73 million have been issued to PwC under the original arrangement and 12 extensions (as at November 2020, $58.5 million had been expended).⁸¹ Contracts totalling $7.3 million have been awarded over the same period to KPMG for VCR-related services, including for assurance activities (as at November 2020, $7.1 million had been expended). Additional contracts of lesser value have been issued to other providers. DVA advised the ANAO in February 2021 that approximately $58 million was expended on these contracts between 2017–18 and 2019–20.

2.70 Additional costs to the program include the salaries and on costs of personnel allocated to implement the VCR program. The VCR Business Case did not include departmental funding for staff. In 2019, around half of the staff resources needed to implement the VCR program in 2019–20 were proposed to be contracted. DVA staff transferred to reform-related roles were to be backfilled by contracted staff. Contracted staff were estimated to represent 89 per cent of the total VCR staff complement in 2019–20, and 77 per cent in 2020–21.

3.1 Achieving the objectives of reform on time, on budget and to expectations requires entities to manage key implementation processes. Clear frameworks for program delivery, consistent quality control and effective relationships provide the foundation for meeting commitments made to government.

3.2 The ANAO examined whether the implementation of the VCR program is supported by:

• fit for purpose governance arrangements;
• an appropriate project management approach; and
• effective relationships with key partner agencies and appropriate engagement with staff.

3.3 As implementation of the VCR program is not complete, ANAO has not assessed DVA’s effectiveness in delivering all outputs and outcomes detailed in VCR business cases, which envisaged six years for the full achievement of the Government’s objectives. This audit report mainly addresses opportunities for DVA to improve its arrangements and processes for the delivery of reforms.

Has DVA established fit for purpose governance arrangements for the implementation of the reform program?

3.4 Effective governance ensures direction and control are exercised over the implementation of program activities, so that objectives are achieved effectively and efficiently, while taking appropriate account of risk.

3.5 In order to assess whether DVA’s governance arrangements for the implementation of the VCR program are fit for purpose, the ANAO examined whether the department has established:

• accountability for implementation;
• effective high-level decision-making processes; and
• appropriate risk and assurance processes.

Accountability for the implementation of reform

3.6 Effective and sustained organisational improvement requires leadership at all levels. Gateway Reviews of the VCR program have commented positively on DVA’s executive team which has been seen as setting the tone for reform implementation and organisational culture change.⁸² Veteran representatives interviewed by the ANAO described improvements in how DVA staff interact with clients (see Appendix 7).

3.7 The first year of the program was delivered through centralised arrangements. Primary responsibility for implementation was assigned to business areas in the following year to promote greater engagement with the reforms across the organisation.

3.8 In subsequent years, individual responsibility at senior levels for achieving VCR program objectives has been defined through the use of a Senior Responsible Officer (SRO) model.⁸³ A SRO at the Senior Executive Service (SES) Band 3 level has responsibility for the VCR Program as a whole.⁸⁴

3.9 In August 2020, DVA’s Enterprise Program Office (EPO) engaged with SROs to identify the specific benefits of VCR reform and strengthen accountability for monitoring their realisation. Accountability for VCR outcomes is now shared between senior officers responsible for reform activity and business area owners.

3.10 Senior roles with responsibilities for VCR program elements are:

• Work stream SROs at the SES Band 2 level with overall responsibility for delivering a work stream and authority to make specific decisions;
• Transformation Owners at the SES Band 1 level who provide leadership to delivery teams; and
• Business Outcome Owners at the SES Band 1 level who are accountable for adopting change and ensuring benefits are realised.

3.11 Below SES level, Transformation Delivery Leads are responsible for the successful delivery of project milestones within set timeframes.

3.12 A hand-over checklist is used to transfer a VCR project to business as usual operations following its completion.⁸⁵ This requires the project manager to provide evidence of SRO and business owner acceptance of the transfer of the project and their commitment to realising benefits.⁸⁶

High-level decision-making processes

Committees

3.13 Executive committees provide advice and assurance to the Accountable Authority of an entity in relation to the proper use of resources in delivering outcomes. Oversight of the VCR program occurs through the following arrangements, and as shown in Figure 3.1 below:

• DVA Executive Management Board (EMB), the department’s most senior executive body;
• Portfolio Investment and Implementation Committee (PIIC), which oversees all major investment projects, including the VCR program and Budget proposals⁸⁷;
• Transformation Program Board (TPB) — the main committee responsible for overseeing the implementation of the VCR program; and
• a project-level governance board established to oversee the Students and Income Support stream of work.⁸⁸

3.14 In 2017 and 2018, the department provided briefings on the VCR program to a Ministerial Oversight Committee comprising the Minister for Veterans’ Affairs, the Minister for Government Services and the Assistant Minister for Cities and Digital Transformation. Future meetings were to be scheduled in accordance with major deliverables. The occurrence of these meetings has lapsed.

Transformation Program Board

3.15 The TPB has primary responsibility for ‘ensuring the successful implementation of the DVA VCR Program’.⁸⁹ It was established in June 2017 to:

• oversee the realisation of benefits and dependencies of projects across the VCR program;
• act as the key forum for ensuring the integrity of design for the transformation plan throughout implementation; and
• be responsible for approval of change requests with impact on quality of program outcomes.

3.16 In 2019, its mandate was updated to allow for the consideration of non-VCR projects that may have a direct or indirect impact on deliverables or outcomes of the program.

3.17 At inception, the TPB was chaired by a SES Band 2.⁹⁰ From late 2018, the Board was chaired at the SES Band 3 level.⁹¹ DVA and external entities are represented at the Band 1 and 2 level. DVA members include business areas responsible for reforms, with external membership reflecting the involvement of other entities in the VCR program. External entities are Services Australia, the Digital Transformation Agency, and the departments of Defence and Health. An external adviser was appointed as a member in October 2017.⁹²

3.18 To oversee the performance of the VCR program, TPB members require regular and appropriate reporting.⁹³ The Board has received monthly updates on the implementation of the VCR program.⁹⁴ These provide information about:

• program planning, including schedules and interdependencies;
• the status and performance rating of work streams, as well as of VCR program overall, using a ‘traffic light’ framework⁹⁵;
• budget allocations and overviews of expenditure against forecast budgets;
• program and project risks and issues;
• change management processes, (for example, transition to business activities and impacts on staff and the department); and
• specific issues briefs.

3.19 Year 3 and 4 monthly reports contain information limited to those work streams being actively progressed within a three month period, referred to as a Program Increment.

3.20 In December 2017, a joint project board was established at senior executive level for the Student and Income Support ICT work stream. Members are drawn from DVA and Services Australia, with DVA providing the Chair. The project board’s role is to advise the TPB and to ensure business requirements, ICT planning and resourcing are aligned.

DVA higher-level committees and reporting to the Minister

3.21 The PIIC was formed in June 2019 to support DVA’s highest-level committee, the EMB.⁹⁶ Its role is to support the department’s management of all major programs, including the VCR and Budget priorities. It decides on the priority of VCR work elements, taking into account the department’s available funding.

3.22 While the PIIC’s terms of reference also require it to monitor program outcomes and benefits, this has not occurred in relation to the VCR until recently. In February 2020, the PIIC agreed on the need for better project finance and benefits tracking, including for the VCR, and for this to be a standing item. The EMB has received briefings on the status of the VCR program.

3.23 Meeting agendas indicate that the Secretary and other departmental officers have verbally briefed the Minister for Veterans’ Affairs on the VCR and given presentations on program achievements. There are no minutes of these meetings. DVA has not provided regular written briefs on implementation delays and risks.

Risk and assurance processes

3.24 In addition to its program management role, the EPO is responsible for promoting good governance and standard approaches to implementation. Each year of the VCR program, it has issued a guide which provides information about VCR program roles and responsibilities, mandatory risk and assurance activities, and project planning and management requirements. The extent to which the EPO monitors the conformance of project areas with requirements of the guide is unclear, as documents are not filed in accordance with departmental guidance, and are not checked for completeness.⁹⁷

Risk management

3.25 Under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), entities are required to establish and maintain systems and internal controls for the oversight and management of risk.⁹⁸

3.26 The VCR program risk register for 2020 identifies 14 strategic risks relating to: on-going support for reform; implementation resourcing; unauthorised changes in scope; the transitioning of projects to business owners; availability of data; and project management capability. The EPO issues guidance to assist project areas to implement risk management and reporting.⁹⁹

3.27 Mandated procedures for managing program risks include:

• a requirement for project managers to maintain a Project Management Log to record emerging risks and actions taken to treat these; and
• the use of escalation mechanisms to allow project-level risks to be elevated for higher-level resolution. All risks with a rating of high or above are to be considered by the TPB.

3.28 Project risks and controls have been identified for each work stream and project. TPB papers and minutes indicate it is provided with detailed information about point in time or on-going risks associated with the implementation of specific projects.¹⁰⁰ However, project managers could also identify risks common to a number of projects (for example, a lack of skilled project staff). This may indicate a root cause of underperformance and point to the need for a program level solution requiring consideration at a higher level.

Shared risk management

3.29 Under the PGPA Act, entities are required to put in place arrangements for understanding and managing shared risks.¹⁰¹ The VCR risk register reflects the joint nature of the program and DVA’s and Services Australia’s risk perspectives.

3.30 DVA and Services Australia share responsibility for managing the risk that the VCR program ‘will be unsuccessful in the realising benefits (identified in the business case) as they relate to government, clients and the organisation in the lifetime of the program’.¹⁰² Further shared risks include:

• loss of stakeholder support;
• unforeseen project delays or complexities;
• failure to adhere to a client-centric approach; and
• service delivery partners not prioritising or sufficiently resourcing VCR commitments.¹⁰³

3.31 Shared risks do not include the potential failure of DVA’s ICT systems before the completion of new systems, despite this being identified as a very high risk in the Second Pass VCR business case.

3.32 DVA and Services Australia have joint responsibility for the implementation of controls for a number of shared risks. Where responsibility for managing a risk is shared between entities and/or individuals, control measures should be assigned to specified individuals to avoid ambiguity and maintain clear accountability for risk mitigation.

Assurance

3.33 The role of assurance is to provide decision-makers with information about the quality of program and project execution. DVA assurance activities have involved a range of processes.

3.34 From 2017 to 2019, DVA had a Quality Management Plan in place setting out internal and external assurance processes.¹⁰⁴ When evidence of implementation of the plan was requested by the ANAO, DVA advised that the EPO works with project managers to support best practice project management, as needed. The current assurance policy and processes for the VCR program are not documented.

Internal assurance

3.35 DVA advised the ANAO that during the early stages of the VCR program the EPO held twice weekly meetings with delivery areas to review the progress of projects against schedule and to address problems in implementation.

3.36 Between October 2018 and January 2019, the EPO conducted a detailed ‘Health Check’ of VCR work streams and projects. The report provided information about the status and performance of each project, the effectiveness of the first year of program implementation and risks for the next year, and conformance with governance requirements.¹⁰⁵ There is no evidence the report was provided to the TPB, or subsequently used by the EPO to improve program and project management.

3.37 Health checks were not conducted for Year 3 of the VCR program. Instead, the TPB requested that ‘return to green plans’¹⁰⁶ be provided for projects tracking red for two consecutive months. Project areas have not developed these plans, but there has been ad hoc reporting to the TPB on actions to address red ratings. There would be value in DVA using proactive assurance processes to identify the need for early action before projects experience significant difficulties.

External assurance — Gateway Reviews and Wave reporting

3.38 The VCR program has been subject to the Department of Finance’s Gateway Review process.¹⁰⁷ This process provides assurance over complex Australian Government programs and projects.¹⁰⁸ Reviews of the VCR program have been conducted each year, commencing 2017.

3.39 Each report provides a point in time assessment of the likelihood that the program will be delivered in line with the Government’s expectations of schedule, cost, quality and benefits. Traffic light ratings indicate the urgency with which identified issues should be addressed. The program was rated green/amber in 2017¹⁰⁹, green in 2018¹¹⁰, and green/amber in 2019 and 2020. As part of the Gateway process, DVA has reported on actions taken to implement recommendations.¹¹¹

3.40 The Digital Transformation Agency (DTA) collects data as part of its monitoring of significant ICT and digital investments. Quarterly reporting by entities is mandatory for ICT projects valued over $10 million. DVA reports provide a high-level view about the extent to which expected benefits are being delivered to veteran clients, stakeholders and staff.

3.41 DVA has drawn on Gateway Review assessments to rate the prospects of successful delivery as medium/high, defined as ‘probable, with constant attention needed to ensure risks did not become major issues threatening delivery’. High-level project status information has been provided to DTA about delays in the implementation of major initiatives, such as the income support payment system.

Is DVA’s project management approach effective in ensuring delivery against the Government’s objectives?

3.42 Reform programs made up of many individual projects require effective project management to ensure work is completed to expectation. To assess whether DVA has established an effective project management approach to implementing the VCR program, the ANAO assessed whether the department:

• uses fit for purpose project management processes to implement the VCR program; and
• is delivering the results expected at the current stage of program implementation.

3.43 The ANAO also examined possible reasons for any instances of program underperformance. As most VCR work streams are still being implemented, the audit presents a point in time view.

Project management processes

3.44 In the first quarter of each year of the VCR program, the EPO has produced a yearly overview (termed ‘dossier’) of planned VCR projects. This provides high-level information about the scope and intended outcomes of projects; risks; dependencies; key stakeholders and team structure. Endorsement of the dossier by the TPB allows projects to be initiated. Detailed project management plans are then required to be developed for all work streams.¹¹²

3.45 DVA governance policy prescribes the use of project management frameworks. DVA has used two project management frameworks to support the delivery of the VCR program.¹¹³

• Years 1 and 2 — the waterfall methodology which requires end deliverables to be determined during project planning. Projects are controlled through set timeframes, milestones and resources.¹¹⁴
• Years 3 and 4 — the agile methodology which involves iterative planning and implementation, allowing for frequent adjustment.¹¹⁵

3.46 Detailed project planning has not always occurred in a sufficiently timely manner.¹¹⁶ The Year 2 joint DVA-Services Australia project management plan and baseline for the Students and Income Support work stream were not in place for several months after the commencement of the year. While there is sometimes a lag between when a project commences and the project plan is formally endorsed, this did not occur until the third quarter of the year of intended delivery (March 2019).¹¹⁷

3.47 For periods of time, project plans have also been absent for a website project; an operational improvement work stream; the development of DVA’s operating model and workforce planning projects; and the data and analytics work stream. The Year 2 Health Check was unable to determine from project documentation whether a significant number of Year 1 outputs had been delivered when intended or removed from scope. The absence of project baselines reduces an entity’s ability to track changes to scope, schedule and the use of resources, and to make controlled adjustments.

3.48 Use of the agile method from Year 3 has aligned DVA more closely with Services Australia’s preferred approach to ICT development. This involves planning iteratively within three to 12 month windows, enabling the project manager to make adjustments in response to unexpected constraints and other factors.

3.49 In 2019, DVA established tolerances for project parameters to make changes transparent. When tolerances are exceeded, and these are likely to have a high impact on the program’s performance, project managers are required to submit a Project Change Request (PCR) to the TPB for approval.¹¹⁸

3.50 The PCR process is an effective mechanism for controlling variations to project planning and understanding the consequences of changes for project outputs and outcomes, or for other business objectives. However, project tolerances can only be triggered if a project plan and baseline are in place. As the agile method involves adjusting baselines in line with emerging priorities within three month periods, there is a risk that the line of sight to approved project objectives may become obscured over time.

Performance against program objectives

Reform initiatives delivered to date

3.51 DVA has implemented initiatives under the VCR program to date which align with the high-level reform objectives and broad business outcomes outlined in the VCR business cases.¹¹⁹ These initiatives are shown at Figure 3.2 below. The timeframes for implementation indicated in Figure 3.2 reflect actual, rather than planned dates for implementation. Paragraphs 3.56–3.66 and Appendix 5 provide further information about the implementation of key initiatives.

Performance against expectations

3.52 DVA has undertaken annual stocktakes of work completed under the VCR program. These identify projects or specific deliverables within projects (‘scope items’) and assess whether these have been delivered, not delivered, or delayed. Stocktakes record over 240 deliverables between Years 1 to 3 of VCR program implementation.

3.53 In Year 1 (2017–18), approximately 20 per cent of projects/scope items were not delivered, which increased to around 35 per cent in Year 2 (2018–19) and 45 per cent in Year 3 (2019–20).¹²⁰ At the end of Year 2, the TPB was advised that several projects/scope items had not yet achieved their objectives. While this work was planned to continue, funding for Year 3 was not allocated. The delivery of work in each year is shown in Figure 3.3 below.

Figure 3.3: Annual delivery of work under the VCR program

Source: ANAO analysis of data provided by DVA.

3.54 The ANAO analysed DVA’s monthly reporting to the TPB to determine trends in program and project performance and possible reasons for underperformance.¹²¹

3.55 DVA uses a ‘traffic light’ reporting framework to report the status of the VCR program each month to the TPB. The performance rating of the program depends on the rating of each major work stream.¹²² This, in turn, reflects the performance status of the component projects within a work stream. Traffic light ratings for the VCR program from its beginning to October 2020 are shown below in Figure 3.4. Amber and red ratings indicate tolerances have been exceeded.

Figure 3.4: VCR Program monthly traffic light ratings

Source: ANAO analysis of information provided by DVA.

Green rated work streams

3.56 Updates on the status of individual work streams provided to the TPB in Year 1 indicate around 85 per cent of these were rated green. Reporting to the TPB does not include ratings for each work stream each month across all years. The number of work stream ratings provided has varied from two to 22.¹²³

3.57 The following six delivery work streams were consistently rated green in TPB updates between Years 1 and 4: Digital Client Experience (22 ratings); Cyber Security (five ratings); Provider Ecosystems (five ratings); Strengthening the relationship with members from enlistment to transition (three ratings); Build online messaging for clients (two); and Client Experience (CX) Standards (two). As of October 2020, the Single View of Client work stream had been rated green in 13 of 14 reports.

Ratings trend

3.58 Overall, the ratings profile for the program over three years shows a trend from green to red. Program amber ratings over a total period of 19 months are attributable to 58 instances when work streams were rated amber. There were also 17 red ratings in this period.¹²⁴

3.59 Nine months of red ratings for the VCR program in Year 3 are due to approximately two thirds of the work streams for that period having been rated red or amber. Of 78 ratings reported, 33 work streams were rated red and 20 were rated amber. This trend has continued into the fourth year.¹²⁵ DVA attributes recent adverse ratings, in part, to impacts of the COVID-19 pandemic on the department’s operations (see paragraphs 2.66 and 3.66).¹²⁶

3.60 The main drivers of amber and red monthly VCR program ratings from Years 1 to 4, as of October 2020, have been projects associated with the following work streams¹²⁷:

• Students and Income Support — 19 amber and 16 red (90 per cent);
• Proactive Interventions/Data and Analytics — 12 amber and 15 red (69 per cent) ¹²⁸;
• Channel Transformation — nine amber and two red (61 per cent); and
• Digitisation work streams — nine amber and four red (54 per cent).¹²⁹

3.61 These work streams are discussed below, with further detail provided at Appendix 5.

3.62 Planning for the release of Students and Income Support (S&IS) work stream envisaged a ‘Go Live decision’ in June 2018.¹³⁰ However, there has been slippage against the implementation schedule due to delays in allocating staff and technical risks. In 2020, the release was deferred three times, before taking place on 21 November 2020.¹³¹ As of December 2020, the S&IS work stream was rated amber.¹³²

3.63 In 2017–18, funding of $31.7 million was provided over four years for the Proactive Interventions measure under the VCR program to improve the health of specific groups of veterans, reducing reliance on benefits. Full implementation was delayed due to difficulties in accessing specialised personnel and infrastructure. The team commenced in February 2019, with the program transitioning to business as usual, as part of DVA’s Data and Insights Branch in July 2020. Actuarial data to support the management of liability was expected to be available in July 2019, but is now expected to be delivered in late 2020–21.

3.64 There have been delays of 12 to 18 months in providing data deliverables under the VCR program. From 2017 to the end of 2018, the Data and Analytics work stream was mainly rated amber due to delays in accessing data sets, the diversion of resources to other tasks, and funding allocations. It has been rated red since March 2020.

3.65 Measures to make it easier for clients to communicate with the department under the Channel Transformation work stream experienced a number of milestone slippages. In Years 3 and 4, telephony, client hub, and face to face projects have been reported as being on track.

3.66 As at 30 September 2020, the Digitisation work stream had managed the conversion of client records equal to 80 million digital pages. The primary reason cited by DVA for adverse ratings in Year 2 was insufficient funding to meet set targets and savings. The department advised the ANAO in February 2021 that the original funding decision was based on incorrect planning assumptions. In 2019–20, changes in archiving policy and COVID-19 pandemic restrictions contributed to longer digitisation processing times and slippage against targets.¹³³ DVA expects the savings to be achieved over a longer timeframe.¹³⁴

Reasons for adverse ratings

3.67 The ANAO reviewed relevant Project Change Requests (PCRs) and monthly reporting to the TPB to identify the most common reasons, set out below, for adverse ratings across the program¹³⁵:

• Delays due to a need to clarify scope and/or obtain ministerial approvals.¹³⁶ The requirement for sign-off on scope changes and cyber risks contributed to adverse ratings in 2020;
• Delays in delivering ICT solutions due to a high level of defect and/or non-acceptance of solutions. This has delayed the release of functions, adding to costs due to the need for project staff to be retained and for DVA staff to use manual processes;
• Technical and other factors affecting data projects. Delays have occurred due to unexpected difficulties in transferring data from an extant to a new system, or lack of DVA legal access to data held by another entity¹³⁷;
• Delays in the release of funds and allocation of project staff because of delayed forward program planning and prioritisation processes. Insufficient staffing in 2020 is partly due to the redeployment of some DVA and Services Australia staff to the COVID-19 pandemic response; and
• Lack of appropriately skilled project staff. This has been a cause of delay across all years.¹³⁸

3.68 A PCR is intended to address poor performance against threshold criteria, and provides a mechanism for a new project baseline and performance parameters to be approved. However, the use of PCRs has not led to sustained improvement in work stream ratings. Generally, ratings have deteriorated within two months due to the persistence of specific issues, or because other project elements have encountered difficulty.

3.69 With the exception of the Year 2 Health Check, the EPO has not conducted a review of PCRs or other documentation to identify whether issues affecting the performance of projects have been correctly identified, or there are other underlying causes.¹³⁹

Role of the Transformation Program Board

3.70 Briefing provided to members of the TPB should support members to fulfil their responsibility to ensure the success of VCR program implementation.¹⁴⁰ Over time, reporting to the TPB has expanded to include a significant amount of technical detail relating to project activities. Elements within projects are given a traffic light rating, however explanations do not always provide a clear reason for the rating.

3.71 Excessive detail can have the effect of obscuring important matters or shifting the focus of the Board to operational matters. The TPB should encourage reporting appropriate to its mandate of ensuring the success of the overall program. This would reduce the volume of briefing presented each month, and allow members to focus on information relevant to the Board’s authority, including strategic risks and the analysis and removal of systemic impediments to project progress.

3.72 There would be merit in DVA reviewing the TPB’s role, relationship and communication with other higher-level committees, as well as the support provided by the EPO, to ensure all elements of the governance system are working together effectively. Periodic self-assessment of the Board’s functioning against its terms of reference would assist in maintaining its strategic role and value in relation to the performance of the reforms.

Project closure

3.73 DVA guidance states project managers should complete project closure and evaluation reports. However, the department advised the ANAO that these are no longer required for the VCR program. Instead, two processes are used.

• A project closure checklist requires project managers to file documents relevant to transferring the project to a business as usual status, (including assets, risk registers, change management documents and lessons learnt). However, the checklist does not require evidence that the objectives and outputs of the project have been delivered.
• An annual program summary lists projects that have been completed and handed over to business areas, or transitioned to the next year.¹⁴¹ Around 70 per cent of projects in Year 1 were transitioned to a business as usual status, followed by 14 per cent in Year 2, and 38 per cent in Year 3.

3.74 In the absence of project evaluation processes, project closure reports could be used to inform a broader understanding of issues affecting performance. There would be benefit in formally capturing this information across the program. While the department and Services Australia have investigated specific underperforming projects, there would be benefit in conducting regular program assessments to identify and address root causes of underperformance. These assessments could be provided to the TPB to gain advice and agreement to strategies for remediation.

Is DVA managing relationships with key partner agencies and its staff effectively?

3.77 Accountable authorities are obliged under section 17 of the PGPA Act to encourage cooperation with others to achieve common objectives.¹⁴² To assess whether the DVA is effective in managing relationships with partner agencies and staff, the ANAO examined its strategies for:

• partnering with key partners to manage risk and to ensure reforms meet the Government’s expectations; and
• engaging with staff to ensure reforms are fully embedded.

DVA’s engagement with key partner agencies to achieve VCR objectives and value for money

Services Australia

3.78 Several major VCR projects are jointly designed and implemented with Services Australia. The ANAO examined the effectiveness of DVA’s partnering arrangements for the delivery of ICT capability.

3.79 Services Australia has been directly appropriated funding for ICT development to act as DVA’s sole provider of services. As DVA is not required to source commercial services, the Commonwealth procurement rules and contract management framework do not apply. However, in receiving ICT services and products, DVA is accountable for determining whether these represent value for money.¹⁴³ While Services Australia is not subject to contractual terms, it is required to meet agreed performance standard at an appropriate price.¹⁴⁴

3.80 The importance of effective arrangements between DVA, as a commissioning entity, and Services Australia, as its delivery partner, has been recognised since 2010, when Services Australia became its provider of ICT infrastructure under a Memorandum of Understanding.¹⁴⁵ In 2015, the Secretaries of DVA and Services Australia signed a Statement of Intent which expanded the scope of cooperation. They agreed on a set of principles for managing the partnership.

• DVA will leverage Services Australia’s technological capability to modernise business operations.
• Standard solutions will be used to leverage technology, frameworks, processes and platforms, unless there is a strong business case not to do so, for example, unacceptable client or financial impacts.
• DVA will adjust business processes to the fullest extent possible to take advantage of Services Australia’s technologies and processes.
• Services Australia and DVA will work closely to minimise service delivery impacts on DVA clients with the intent of improving the delivery of services.

3.81 The VCR Second Pass Business Case reiterated these principles as relevant to managing eight of the 13 program risks identified. The majority of these risks centred on the provision of timely and appropriate ICT builds, assessed as presenting a medium level of risk.

Value for money in partnering arrangements

3.82 It is important that entities take steps to ensure value for money¹⁴⁶ and risks to the achievement of this are managed throughout the life of a project. The ANAO reviewed DVA’s strategies and actions for ensuring value for money, and its adherence to the agreed principles governing the partnership. An overview of audit findings is provided below, with further detail and evidence provided in Appendix 8.

Design

3.83 There has been a need to better align business operational requirements with ICT development planning. Despite the use of joint planning or co-design processes, delays have occurred as DVA and Services Australia have not always established a common understanding of requirements, business solutions or acceptable levels of risk.

3.84 The extent to which projects have been designed using standard solutions has been less than originally envisaged by the business case. Some assumptions made by DVA and Services Australia about the ability to transfer DVA functions (including their underlying business rules) to Services Australia systems were incorrect.

3.85 In December 2019, DVA established a Requirements Management Office to set standards for, and to support staff in, developing appropriate requirements within scheduled timeframes.¹⁴⁷ In March 2020, DVA also reached agreement with Services Australia on a formal costings process.

Implementation and the management of risk

3.86 DVA business areas have not been consistent in signing off projects following user acceptance testing. DVA has had a lower appetite for risk in the delivery of ICT solutions than Services Australia. This is particularly the case when there is a risk that a new system or system component may not deliver the level of performance that may be expected by DVA or its clients.¹⁴⁸ The unanticipated complexity of transferring DVA functions to newly built Services Australia systems has contributed to DVA’s risk sensitivity.

3.87 As a client of Services Australia, DVA business areas should ensure that solutions are fit for purpose, conform with legislative requirements, and take into account the well-being or vulnerability of clients, before making a ‘go live’ decision and agreeing to project closure. However, there may be scope for DVA to adjust its expectations of service to avoid the need for customisation, and to enable Services Australia to provide standardised and cost-effective solutions, at acceptable levels of risk. This would align with the principles set out under the Bilateral Statement of Intent.

3.88 While DVA and Services Australia have worked closely together to deliver suitable solutions, bilateral processes have not sufficiently addressed differing tolerances for risk across DVA business areas. While assurance assessments of VCR projects with major ICT components have identified common risks¹⁴⁹, there are no agreed risk thresholds that would assist decision-makers to be consistent in judging acceptable risk.

Monitoring and evaluation

3.91 Progress reports are provided regularly to governance forums, however corrective actions have generally not led to sustained improvement in performance. A DVA-Services Australia risk plan for Year 3 identifies shared responsibilities for management of risks to ICT delivery. However, there is limited evidence of active monitoring, updating or management of these risks by the TPB or the S&IS Project Board.

Preventing the erosion of value for money

3.92 While funding for ICT development is allocated to Services Australia, the consequences of project delays and additional costs are borne by DVA. Costs arise from an on-going need to maintain extant systems and the opportunity cost of not realising efficiencies from new systems.

3.93 Savings associated with the transfer of functions to Services Australia’s systems supported the case for government investment in reform. In the first three years of the VCR program, no planning was undertaken to decommission superseded systems. Planning for the decommissioning of some systems from 2021–22 commenced in October 2020, however implementation is contingent on future government approvals and funding.¹⁵⁰

Project management performance standards

3.94 The VCR Business Case stated that governance arrangements would detail obligations, service level agreements and costing models between the two agencies.¹⁵¹ The Statement of Intent allows for projects to be implemented in accordance with agreed project plans, aligned with Services Australia’s project management framework.¹⁵² However, there are no overarching project management criteria or metrics, against which Services Australia performance can be measured. In November 2020, DVA advised the ANAO that it had commenced a discussion with Services Australia on establishing a project assurance framework.

3.95 A performance framework governing the delivery of all ICT projects should include processes for managing instances when DVA expectations differ from the standard offered by Services Australia, as well as promote consistency and efficiency in making risk-based decisions.¹⁵³

Department of Defence

3.96 DVA and the Department of Defence (Defence) engage with members of the Australian Defence Force (ADF) during their careers and in their transition from service, and both are responsible for providing support services.¹⁵⁴

3.97 The 2019 Productivity Commission review noted a history of ‘government silos…gaps and duplication, and both Defence and DVA losing sight of what is needed to improve veterans’ overall wellbeing’.¹⁵⁵ Closer cooperation with Defence was a key focus of the VCR business case. It described an ‘Early Engagement Model’ as an approach and set of initiatives aimed at ‘reaching as far back into Defence as possible’ to access information relevant to future claims, and to deliver health and rehabilitation services as close to the time of an injury as possible.

3.98 In 2016, the Government established a Joint Transition Taskforce to engage current and former ADF members, family members and caregivers in identifying barriers to successful transition. Recommendations were to: make better use of data to improve the veteran support system; integrate services of DVA and Defence; address barriers created by privacy requirements; and enhance career and employment assistance.

3.99 Under the VCR program, measures include having payments and services in place before separation, using automated registration, and transferring data from Defence to DVA from enlistment to separation.¹⁵⁶ DVA now receives notification of serious and very serious injury to current serving members on occurrence.

3.100 DVA requires access to records held by Defence to enable the determination of claims by separating members. This involves issuing individual requests under administrative arrangements agreed in 2011.¹⁵⁷ In 2019–20, DVA issued close to 33,000 requests for information to Defence.

3.101 Proposals for a more efficient system of automated and real-time transfer of Defence information to DVA have been regularly discussed between DVA and Defence for over a decade. The DVA-Defence Electronic Information Exchange (DDEIE) initiative underway since 2017 is due to be completed in June 2021.¹⁵⁸ It will encompass all serving personnel. Further to this, the Government’s interim response to the 2019 Productivity Commission report in October 2020 announced Stage 1 funding of $0.5 million for the development of a platform to bring together Defence and DVA de-identified data in one place to better understand the cost of service injuries and to inform prevention strategies.¹⁵⁹ Other initiatives include:

• the introduction of the White Card for Mental Health in January 2019, issued by DVA, after an ADF member has completed at least one day of continuous service.¹⁶⁰ This has supported automatic registration of veterans with DVA¹⁶¹; and
• a Special Operations Forces Pilot conducted in Year 1. The pilot introduced a single point of contact for members on Defence bases, and informed the implementation of a national service model.

3.102 While the VCR business case included a focus on promoting veterans’ employment, work to date under the program has been limited.¹⁶² DVA has not measured progress against this objective which forms part of its benefits realisation plan (sub-benefit 2.2: ‘Higher return to work rates’).

3.103 DVA-Defence initiatives are not consolidated in a single work stream. Reporting on progress in implementation is therefore distributed across several work streams. The ANAO identified two Key Performance Indicators for the Early Engagement Model — the total number of welcome emails to newly enlisted ADF members, and new registrations which are automatically processed.¹⁶³

3.104 There would be merit in DVA establishing regular, consistent and comprehensive reporting to assess the effectiveness of joint transition initiatives, and to provide a clear line of sight to the business case objectives of supporting a seamless transition from the ADF.

DVA engagement with staff

3.105 Poor management of organisational change can pose significant risk to realising the benefits of reform. To address these risks, DVA has undertaken a range of activities to support cultural change. These initiatives include:

• establishing a cultural vision in 2016 and dedicated change management unit to direct and coordinate change activities;
• engaging with delegates in 2018 to promote a client focus and greater standardisation in making claims determinations¹⁶⁴;
• leadership development and team-based training programs; and
• regular communication with staff, including fortnightly briefings to middle management staff, and all staff showcases of new capabilities and services.

3.106 Reform planning and implementation are supported by change management strategies and change plans for VCR work streams. In 2019, program reporting to the TPB detailed how the introduction of new systems or business processes were likely to affect business areas.¹⁶⁵ In Year 4, reporting on the expected impacts of changes form part of individual project reports.

3.107 As of February 2021, the department was revising its approach to delivering change management support to VCR and non-VCR projects to more effectively align resourcing with different levels of need. Reporting on change activity to the Portfolio Investment and Implementation Committee is to occur via a quarterly Change Snapshot which sets out key upcoming project milestones and requirements for change management support. VCR projects receive priority in the allocation of resources.

3.108 DVA has used specialist change managers to prepare business areas for the implementation of workplace changes.¹⁶⁶ It has also established two staff-based support networks. These are a Staff Reference Group, which provides input to a weekly update to staff by the Secretary, and a Transformation Champion Network made up of staff who are motivated to promote reform activities.

3.109 An 2019 internal review of DVA’s change management capabilities identified a number of on-going reform challenges:

• a large number of projects with technology components requiring staff to work differently;
• staff confidence in the management of change and sufficient communication about DVA’s longer term workforce strategy; and
• change support not effectively targeted to priority areas.

On-going attention is needed to build and maintain staff confidence that reform will fully deliver against commitments.

4.1 The VCR program is seeking to significantly improve its provision of services to veterans and their families. The Public Governance Performance and Accountability Act 2013 (PGPA Act) provides the basis for the Commonwealth performance framework. Performance information should allow an account to be given of how reform activities are meeting program and broader government objectives.

4.2 The ANAO examined whether DVA uses a suitable performance framework to monitor and evaluate its achievement of reform objectives, and to strengthen program implementation. It also reviewed whether the department’s engagement with the Parliament, the veterans’ community and the public on the VCR program is effective in communicating progress in implementation and the delivery of outcomes.

Does DVA appropriately monitor and evaluate the outcomes of veteran centric reforms?

VCR performance framework

4.3 As part of its 2017 business case to the Government, DVA committed to putting in place a performance framework to demonstrate the results of investment in reform. A benefits realisation plan was to capture key areas of benefit to clients and the Government, as well as provide a base of evidence to support future Budget submissions.

4.4 In its early planning of the VCR program, the department identified the steps it would take to develop and implement the benefits realisation plan. This included:

• documenting the expected benefits of work streams, and establishing success measures, baselines and targets;
• assigning responsibility for the achievement of targets within defined timeframes; and
• establishing regular monitoring, evaluation and reporting of benefits.

This approach aligns with principles of effective performance measurement.¹⁶⁷

4.5 DVA’s high-level framework identifies two categories of benefit:

• non-financial benefits — benefits for veterans and their families; and
• financial benefits — mainly benefits to government, including departmental efficiency savings, reduced expenditure on programs, and reductions in liability expenditure over time.

4.6 Five key areas of program benefit, comprising 16 sub-benefits, are expected to arise from program implementation, as outlined in Table 4.1 below. These benefit descriptions have been retained across the three years of VCR implementation.

Table 4.1: VCR benefits overview

Source: ANAO analysis of data provided by DVA.

4.7 The framework was outlined in the 2017 VCR Second Pass Business Case, with subsequent VCR funding submissions reiterating a commitment to capturing benefits. Some initial targets were identified in 2017. By the beginning of 2018, some baseline data, targets and timeframes had been identified by project managers.

4.8 Reporting to the Transformation Program Board (TPB) between February 2018 and May 2019 focused on three performance measures: number of files digitised and reduction in mail costs; reduction in the number of telephone lines; and time taken to determine claims. Progress against these was measured against baselines and with reference to targets. In May 2020, these measures were related to the benefits realisation framework and strategic business outcomes.¹⁶⁸

4.9 Following a recommendation of the 2019 Gateway Review, DVA commissioned a review to strengthen its tracking and reporting of outcomes and benefits. The review identified that of 77 active measures, 28 had no target and no baseline, 31 had a baseline and no target, ten had a target and no baseline, and only eight had both. Where measurable indicators had been identified, there was often a lack of reliable data to support assessments.¹⁶⁹

4.10 While some indicators for measuring project outputs and outcomes have been established, these are not clearly linked to the benefits outlined in the program level performance framework. Changes to the organisation of work within and across years has reduced the department’s ability to demonstrate clear and consistent links between work undertaken and longer-term outcomes. See paragraphs 2.55 to 2.70 for more information on DVA’s planning and coordination of implementation processes for the VCR program.

4.11 As at December 2020, DVA had commenced a process of revising its approach to capturing and reporting benefits. Programs involving significant reform sometimes use ‘logic models’ or ‘theories of change’ to develop performance measures.¹⁷⁰ Strategic benefits can then be shown as resulting from specific activities that have been measured and monitored. These principles are being applied to DVA’s revision of its benefits-realisation framework.¹⁷¹ DVA could consider using a logic model approach to cogently explain the relevance and impact of individual measures under the VCR program.

Delivery of benefits

4.12 Planning for Year 4 noted that an inability to demonstrate benefits would limit the scope to identify savings to offset future funding submissions. The status of individual VCR projects has been reviewed at the conclusion of each year, and updated business cases have provided examples of program achievements. However, these stocktakes have not been undertaken with reference to the VCR benefits-realisation framework.

4.13 The Second Pass VCR Business Case stated that benefits (including savings) would be monitored regularly against targets to gauge progress, and where necessary, allow for policies and activities to be adjusted to maximise the value of reform for veterans and government.¹⁷²

4.14 Without a framework clearly linking project activity to strategic benefits, the department has a limited base of evidence for adjusting priorities and spending. There is a risk that decisions will be made primarily with reference to implementation activity rather than a broader view of reform outcomes.

Financial benefits

4.15 VCR savings measures are given effect through reductions in DVA’s annual appropriation. The department is required to ensure it delivers savings equivalent to those anticipated by the Budget decision.¹⁷³ Failure to meet saving commitments results in added pressure on the department’s budget (see paragraph 2.40).

4.16 Some financial benefits have been realised. The department advised the ANAO in February 2021 that of five administered measures with savings forecast for Year 3, two have been achieved.¹⁷⁴ Savings from the remaining measures were not achieved.

4.17 Workforce savings included in the Year 3 business case were determined after consultation with DVA executives. However, some executives did not have direct responsibility for making necessary changes, and accountability for implementation was unclear following organisational and staffing changes. In Year 3, the EPO did not receive updates on the achievement of savings by business areas. The finance branch also did not monitor the progress of business areas in achieving savings.

4.18 A 2018–19 financial savings target relating to work undertaken by an ‘operational improvement’ team, proposed by the Second Pass Business Case, was reduced from $9.2 million to an estimate of $1 million.¹⁷⁵ The work of this team has ceased, in addition to that of an enabling services team, also intended to deliver savings.

4.19 Increased revenue is stated as a sub-benefit in the VCR benefits framework, however DVA has not identified measures relevant to delivering revenue benefits.

4.20 The 2019 Gateway Review recommended on-going reporting to governance bodies on progress and actions in delivering departmental and administrative savings. In November 2020, regular, standardised reporting on the performance of savings measures was in development.¹⁷⁶

Program improvements

4.21 When revising its financial and non-financial performance framework, DVA should:

• more clearly show how key VCR investments, process improvements and capabilities contribute to changes intended by reform;
• establish information and continuous data collection methods to enable it to assess whether investments are performing to expectation;
• consider measuring qualitative or efficiency improvements through a consistent mix of proxy measures, if necessary, to ensure completeness in reporting¹⁷⁷; and
• ensure appropriate records are maintained to demonstrate accuracy and reliability in reporting.

4.22 It is sometimes necessary to invest resources in order to realise savings from the implementation of reforms. Benefits should be recorded as net benefits within the context of the department’s overall financial performance.¹⁷⁸

4.25 Both the positive and negative effects of reform on processes of service delivery are relevant factors in evaluating the benefits of investment in reform. As an example, easier access to services may lengthen the time taken to process claims if this capability is not increased also, creating an unintended dis-benefit. In monitoring the realisation of benefits the costs and impacts of not transitioning to a business as usual status should also be taken into account.

Veterans’ experience of the VCR program

4.26 DVA veteran representatives interviewed by the ANAO indicated they have seen improvements in DVA’s ability to meet the needs of the veteran population.¹⁷⁹ Appendix 7 sets out specific improvements cited by interviewees.

Does DVA appropriately report on the progress of its reform activity to the Parliament and the public?

4.27 Under the PGPA Act, Australian Government entities are required to demonstrate to the Parliament and the public that the Government’s objectives are being met, and that public investments represent value for money.¹⁸⁰

4.28 The ANAO examined whether the department is effective in providing assurance through public information that the intent and full scope of VCR benefits are being delivered.

Reporting to the Parliament

4.29 A key means by which a Commonwealth entity provides regular and complete information about its performance is through the Commonwealth Performance Framework.¹⁸¹ DVA’s outcome is articulated in its Corporate Plan¹⁸² and Portfolio Budget Statements.¹⁸³ The Corporate Plan sets out high-level criteria against which DVA’s performance will be measured. KPIs relate to core activities it undertakes to achieve its purposes.

4.30 DVA’s Corporate Plans and annual reports provide some information about the VCR program. It is referred to three times in its 2019–23 and 2020–21 Corporate Plans, as part of a broader discussion of ‘changing needs and expectations of veterans and their families’.¹⁸⁴ Annual reports have included updates on improvements, but do not provide an account of program performance, or detail whether benefits have been delivered, as intended by the Government. The narrative text does not, therefore, provide a complete view of performance.

4.31 The VCR program aims to significantly improve the efficiency and effectiveness of the department’s operations. There would be merit in the department assessing how progress in the implementation of reforms is likely to contribute to the entity’s overall operating performance.

4.32 DVA has supported its Minister in providing information to the Parliament about the VCR program through ministerial statements, explanatory memoranda as part of introducing proposed amendments to legislation, and responses to parliamentary inquiries and other reviews.¹⁸⁵

4.33 The department has made submissions to inquiries and the Secretary has provided opening statements to Senate Estimates Hearings. The main focus of this reporting has been the Government’s reform objectives and initiatives aimed at addressing the concerns of the veteran community.

Communicating with the veterans’ community

4.34 DVA provides regular information to the veterans’ community through well-established communication processes. These communication mechanisms include the:

• National Consultation Framework — veteran and ex-service community organisations, and the Repatriation and Military Rehabilitation and Compensation Commissions;
• an Ex-services Organisation Round Table (ESORT); and
• Female Veterans and Veterans’ Families Forum.

4.35 In 2017, DVA developed a Stakeholder Engagement and Communication Strategy to promote awareness of the reform program and provide information about new services. The strategy envisages the use of established communication channels, including conferences, DVA and Defence websites, Services Australia shopfronts, newsletters and social media.

4.36 Some veteran representatives interviewed by the ANAO indicated that DVA has become more receptive to using forums to ‘solve problems’, rather than simply for the one way presentation of information.

Appendix 1 Department of Veterans’ Affairs response

Appendix 2 Projected numbers of claimants under the MRCA, DRCA and VEA Acts

Source: ANAO analysis of data provided by DVA.

Appendix 3 Key reviews addressing veterans’ mental health issues

Source: ANAO analysis of public information.

Appendix 4 VCR funding and savings commitments

Figure A.1: Total departmental and capital funding allocations and savings

Notes: Figure A.1 excludes funding of $0.4 million over four years allocated to the Department of Finance to conduct Gateway Reviews of the VCR program.

Services Australia has been allocated a total of $46.6 million in capital funding for VCR ICT systems development. In 2017–18, DVA was allocated $2.4 million in capital funding to mitigate extant cyber security risks.

Source: ANAO analysis of data provided by DVA.

Figure A.2: Total administered funding and savings

Source: ANAO analysis of data provided by DVA.

Appendix 5 Status of key VCR work streams

Source: ANAO analysis of data provided by DVA.

Appendix 6 VCR-related legislative changes

In 2018–19, a number of VCR measures were enacted via amendments to legislation to support more efficient claims processes.

• Veterans’ Affairs Legislation Amendment (Veteran-centric Reforms No.1) Act 2018
• Veterans’ Affairs Legislation Amendment (Veteran-centric Reforms No.2) Act 2018
• Veterans’ Affairs Legislation Amendment (Omnibus) Act 2018
• Treatment Benefits (Special Access) Act 2018
• Treatment Benefits (Special Access) (Consequential Amendments and Transitional Provisions) Act 2018
• Australian Veterans’ Recognition (Putting Veterans and their Families First) Act 2019 is a new Act

VCR measures were also implemented by legislative instruments made by the Repatriation Commission or the Military Rehabilitation and Compensation Commission (MRCC):

• Veterans’ Affairs (Treatment Principles — Veteran Suicide Prevention Pilot) Amendment Instrument 2018
• Military Rehabilitation and Compensation (Catastrophic Injury or Disease) Determination 2018
• Safety, Rehabilitation and Compensation (Defence-related Claims) (Catastrophic Injury) Rules 2018
• Safety, Rehabilitation and Compensation (Defence-related Claims) (Full time Study) Instrument 2018
• Veterans’ Entitlements (Provisional Access to Medical Treatment) Amendment Determination No. 2 2020

Appendix 7 Improvements to veterans’ services cited by veteran representatives

Note: The ANAO interviewed nine members of veterans’ organisations. These interviews were facilitated by DVA. The information presented in this table may not reflect the views of the broader veteran community.

Source: ANAO analysis of information provided in interviews conducted by the ANAO.

Appendix 8 DVA’s management of value for money and risk in partnering with Services Australia

Table A.1: Conditions for managing value for money and risk

Source: ANAO analysis of information provided by DVA.