Introduction

The Department of Foreign Affairs and Trade (DFAT) is responsible for implementing the Australian Government's foreign and trade policy objectives. It does this through its head office in Canberra, its State and Territory offices and its network of 91 overseas diplomatic posts.¹

Some 548 Australia-based (A-based)² DFAT staff work in the overseas posts, with 1491 locally engaged staff (LES) supporting and facilitating their work. Overall, LES comprise 41 per cent of total DFAT staff and 73 per cent of DFAT's overseas staff.

LES have long been recognised as playing an important role in the day-to-day work of Australia's diplomatic posts. Their knowledge of the local culture, language and physical environment, and their local contacts and corporate memory of events through a succession of A-based staff rotations, enhances the capacity of the posts to achieve Australia's overseas objectives.

With pressures to reduce the cost of overseas representation, the roles and levels of responsibilities given to LES have expanded since the 1990s. LES now undertake a wide range of duties—from drivers to accountants. Many are tertiary qualified and perform high-level functions, such as providing consular services to Australians travelling overseas.

While LES generally cost less to employ than A-based staff, there is a limit to the tasks that they can perform. Duties requiring first-hand and extensive experience of Australia, and those involving government-to-government representations, need to be undertaken by accredited (A-based) Australian Government representatives.

DFAT seeks to provide remuneration, conditions of service, and a working environment that enables its overseas posts to attract and retain high quality LES. In this regard, its policy is to be a competitive and fair employer, requiring all LES conditions of service to meet or exceed local labour laws.

The contribution LES make to the achievement of Australia's overseas objectives underlines the importance of providing effective management. This includes recruiting staff with the necessary skills and capabilities, training those staff to perform the tasks required, and managing those staff on a day-to-day basis for effective performance.

The audit

The objective of the audit was to assess the effectiveness of DFAT's employment and management of its LES at Australia's overseas missions. In particular, the audit examined arrangements for: planning and risk management; guidance and training; recruitment, engagement and employment of LES; and performance management.

The audit fieldwork was undertaken at DFAT in Canberra and at four selected overseas posts: New Delhi, Bangkok, Cairo and Stockholm.

The audit focused on LES employed by DFAT. It did not examine LES being managed by other Australian Government agencies operating at the posts (attached agencies) and local staff employed in a domestic capacity by the Heads of Mission and other senior A-based staff.

Overall audit conclusion

The management of LES by DFAT is a complex undertaking involving the employment of some 1491 people from culturally diverse backgrounds in 91 operationally distinct posts around the world. The effective management of these LES requires sound departmental policy and procedural guidance to facilitate a planned and consistent approach across posts, but with sufficient flexibility to accommodate cultural sensitivities and to enable posts to comply with local labour laws.

The ANAO concluded that, overall, DFAT effectively employs and manages its LES. DFAT undertook a major review of LES management in 2000 which resulted in fundamental changes to improve the way LES are managed. In addition, DFAT provides helpful LES policy and administrative guidance to posts; posts are focused on developing and training LES; post conditions of service are adequately documented and salaries regularly reviewed; recruitment and selection processes are generally sound; and performance management systems are in place.

Notwithstanding this overall conclusion, the ANAO identified a number of improvements that would strengthen the employment and management of LES. These include: strengthening LES review and oversight arrangements; developing standard LES training material for posts; facilitating a more consistent approach by posts to LES health checks; and monitoring outcomes from LES performance appraisal rounds.

Key findings

Planning and risk management (Chapter 2)

DFAT undertook a major review of LES management in 2000—the first wide-ranging review for more than 15 years—which resulted in fundamental changes to improve the way LES are managed. Changes included devolving greater responsibility for managing LES and setting conditions of service to Heads of Mission; increasing the use of fixed-term contracts; and introducing performance management arrangements.

While DFAT has reviewed various aspects of LES management since that time and monitors LES issues reported by posts, more systematic monitoring and the periodic evaluation of LES workforce initiatives would help DFAT assess the scope for enhancing the arrangements relating to the employment and management of LES.

Effective planning processes rely on an agency's ability to access accurate and timely information about the demographic characteristics, skills, capabilities and qualifications of its staff. DFAT collects demographic information on its LES workforce through a live database known as the Overseas Staff Profile. However, the ANAO found a range of errors in the database which undermines its usefulness for planning purposes and as a reporting and monitoring tool. DFAT advised that this issue will be resolved in 2008–09.

DFAT also has a range of risk management plans that identify and treat common risks across the department and its network of overseas posts, including those relating to the employment of LES. These agency-wide plans and related control processes are well-established and represent a sound and logical approach to identifying and systematically managing common LES-related risks across posts. The plans were well-understood by the posts visited.

Guidance and training (Chapter 3)

The key formal DFAT guidance document is the LES Better Practice Guide (BPG). While the BPG is well written and easy to understand, the ANAO identified a number of areas where additional specific guidance would be beneficial. There is also a need to more clearly identify the BPG's mandatory elements so that posts do not overlook important processes or minimum requirements. DFAT advised that it will do this in 2008.

DFAT provides ongoing support to posts via a Helpdesk arrangement, which provides timely and useful advice to posts. There would be benefit in monitoring the number and the nature of enquiries to help identify and authoritatively brief the Senior Executive on any emerging management issues. DFAT has agreed to provide the Senior Executive with statistics on LES management issues on an annual or biannual basis, and brief it on any emerging management issues or trends.

All posts visited by the ANAO provided new starters with security briefings and information on the post's conditions of service and code of conduct. However, inadequate briefings were provided on: the role and structure of DFAT; the operation and function of the post; performance management arrangements; probationary arrangements; training and career development opportunities; and financial and fraud awareness issues. Clear guidance to posts on the need to adequately brief new LES in these areas is warranted. DFAT advised that it will remind posts of the importance of providing oral briefing on these issues for new starters.

Much of the training that should be delivered to LES is common across posts. It would be simpler and more efficient for the training material to be prepared and maintained centrally. Given that DFAT has intended to provide this type of training assistance, including via electronic-training modules, since at least 2004, active management of the project—which DFAT advise is occurring—will help ensure a timely outcome.

Posts facilitate ongoing training through LES participation in local and regional training, regional management conferences, and leadership and development training in Australia. Participation in these activities is keenly sought and well regarded by both post management and LES attendees.

There would be merit in DFAT reminding posts that the performance appraisal context provides a good opportunity for regularly identifying, discussing and documenting LES training needs. DFAT has indicated that it will remind posts of this opportunity.

Recruiting and engaging LES (Chapter 4)

All four posts visited considered that they had high quality LES and generally reported that it is not difficult to attract and retain such staff.

While most LES vacancies at the posts visited were externally advertised, one post was concerned about receiving too many applications and instead filled some jobs by selecting from a group of unsolicited general expressions of interest that it maintained, or through word of mouth. It would be timely for DFAT to remind posts of its better practice requirement to advertise jobs. DFAT has agreed to do this, while noting that the instance identified is likely to be unusual.

The selection arrangements at the posts visited were generally sound. However, two recruitment processes at one post did not use selection criteria. Drawing the attention of posts to the importance of selection criteria underpinning all selection processes would help strengthen these arrangements. DFAT advised that it will remind posts of its requirement to use selection criteria.

DFAT expects posts to undertake pre-employment medical examinations/health checks of LES appointees, but only two of the four posts did so. The provision of advice to posts on the minimum requirements for health checks, and requiring all posts to review current practices against those requirements, should facilitate a more consistent approach by posts to this important issue. DFAT advised that it will direct posts to review local practice to ensure mandatory health checks are undertaken where allowable under local law, and will amend its LES BPG to reflect this requirement.

Since 2001 DFAT has required all new LES to be engaged—where feasible under local labour laws—on fixed-term contracts. However, the ANAO found that one post continued to engage DFAT LES on a permanent basis, although a large attached agency employed its new LES on contract. There would be merit in DFAT Canberra clarifying the circumstances in which posts can exercise discretion over the use of fixed-term contracts. DFAT has indicated that it will remind posts to use fixed-term contracts wherever local labour laws allow.

DFAT requires LES conditions of service to be competitive in the local labour market and meet or exceed local labour law requirements. A requirement for annual reviews is not observed in practice and there is no common understanding of how frequently reviews should take place. Providing guidance to posts on the frequency of reviews, and regularly monitoring the currency of post conditions of service, would help strengthen the review process.

The task of reviewing LES salaries can be burdensome on posts, with the review effort varying substantially from post to post and year to year reflecting, in part, the resources and internal expertise available to the post at the time. It would be timely, noting that responsibility for LES salaries has been devolved to posts since 2001, for DFAT to review the effectiveness of the arrangements, particularly for larger posts where the associated workload can be significant. It would be beneficial if an outcome of this review is the development of additional guidance for posts on how to go about the task. DFAT advised that it will conduct a review and provide additional guidance to posts.

Managing LES for effective performance (Chapter 5)

All four posts visited had established their own probationary arrangements for new staff. However, the arrangements would be strengthened by requiring all posts to clearly set out the factors to be taken into account during the probationary period, and briefly record the feedback provided to LES. DFAT advised that it will remind posts of the importance of providing feedback to LES.

All posts visited had established compulsory performance management arrangements for LES. Three posts rate a significant proportion of LES—that is, 62 per cent, 39 per cent and 33 per cent—at the top rating. This contrasts with DFAT's system for its A-based staff, where the highest rating—Outstanding—is limited to the top 10 per cent of staff. Over-rating LES performance has the potential to reduce the incentive for LES to perform beyond the level for which they are normally paid.

Given that LES performance management systems have been in place for at least five years and LES appear to be generally comfortable with the process, it would be timely for DFAT to monitor the spread of post ratings. Depending on the findings, the introduction of targets at the larger posts, similar in principle to the ones used for A-based staff, should also be considered.

During the audit the ANAO suggested that DFAT enhance accountability and transparency by requiring posts to formally brief their Heads of Mission on the outcomes of annual LES performance appraisals. DFAT advised that it will issue instructions requiring Heads of Mission to be consulted in determining ratings and to formally approve the payment of bonuses/increments.
The ANAO found that consultative arrangements with LES had been established at each post visited. However, the arrangements varied in form and effectiveness. This is an area that warrants more active and ongoing monitoring by DFAT. This could be undertaken as part of a regular LES staff attitude survey. DFAT has indicated that it will remind posts of the importance of good consultative arrangements with LES. It also advised that staff satisfaction surveys of A-based or LES would require additional resources.

Recommendations and DFAT's response

The ANAO made four recommendations aimed at improving the arrangements for the employment and management of LES. DFAT agreed or agreed with qualification to all four recommendations.

DFAT's summary response to the audit is as follows:

DFAT welcomes the performance audit as a comprehensive and detailed review of the employment and management of locally engaged staff. DFAT welcomes in particular the findings of the report which acknowledge that, overall, DFAT effectively employs and manages its locally engaged staff in a complex and diverse overseas operating environment. It is encouraging that the ANAO concludes that DFAT provides sound policy and guidelines which allow flexibility to accommodate the differences in labour law, local economic conditions, currencies, work/performance norms and cultural/religious environments. DFAT also appreciates the ANAO conclusion that it is not necessary for each post to develop a formal LES workforce plan, given that about half of Australia's overseas posts have ten or fewer DFAT locally engaged staff and most posts have no difficulty in recruiting and retaining staff. DFAT agrees, with some qualifications, with the recommendations and suggested improvements in the report.

Footnotes

^{1  Post is a generic name given to Australian missions abroad. Missions include embassies, high commissions, consulates and multilateral missions.}

^{2  A-based staff are appointed to the mission from the departmental head office in Canberra.}