Wednesday, September 29, 2010

"Suffice it to say, the Minister was not well served by his department" - Our mismanaged crisis

We got the big decisions right. But the small ones...

Extracts from the Auditor General's excoriating findings about Rudd's Green Loans scheme:

"22. The primary cause for the administration problems encountered by the program was, to a very large extent, an absence of effective governance by the Department of Environment (DEWHA) during the program’s design and early implementation. DEWHA had no previous experience in designing and delivering a program with features similar to the Green Loans program. As a multi-faceted ‘greenfields’ program with a fixed budget and variable (and untested) demand, the Green Loans program required greater oversight than the department’s business-as-usual activities. However, this did not occur.

23. From the start of the program, DEWHA assigned day-to-day program management responsibility to sub-executive level officers who had little program delivery experience. As such, program management was devolved to too low a level within DEWHA without sufficient active engagement by executive management. A steering committee was established in November 2008 to oversee the program in response to departmental concerns about the appropriateness of the procurement practices being applied... The committee became inactive at the time the Green Loans program was launched, and was not replaced.

24. The program’s visibility to DEWHA’s senior executives was poor. This was not aided by quarterly status reports providing a false sense of assurance that the program was being managed within an agreed planning framework. In addition, the former Minister received incomplete, inaccurate and untimely briefings on program design features and implementation progress, challenges and risks. Suffice it to say here, the former Minister was not well served by his department in this respect during the period from July 2008 to late 2009 due to the poor quality briefings he received.

25. Key program management plans, including in relation to risk management, procurement, IT and communications, were never finalised and endorsed by executive management. Subsequently, DEWHA encountered difficulties in all these areas. In addition, in the first 18 months of the program there was no accurate costing of the program or monitoring of its budget. An examination of the program’s budget in early 2010 led to the realisation that the program had exceeded its 2009–10 program budget and would require an additional $100 million to fully fund the Government’s policy commitments over the program’s life...

30. Given the considerable volume of transactions for assessments, loans and payments that would be undertaken under the program, appropriate IT support systems were critical to the effective management of the program. However, e-Gateway was procured too late to allow for its smooth introduction from the launch of the program. Consequently, DEWHA had to hastily establish temporary support systems (many of which are now permanent), which required greater manual processing, introduced greater room for error and came at considerable cost...

The unanticipated demand for assessments overwhelmed the temporary support systems in late 2009 and early 2010 leading to the delays experienced by assessors and householders. Alternative workarounds put in place to reduce pressure on the contact centre, did not have the desired impact and created booking backlogs and significant data integrity issues, some of which are yet to be fully resolved. Further, prepayment checks of assessor invoices have either not been completed or sufficiently documented to demonstrate that only valid invoices have been paid. DCCEE is currently undertaking data cleansing and payment reconciliation projects to identify and correct data errors, and has advised that paid invoices that do not meet program requirements will be referred to its compliance area for possible recovery action.

Read the full horrific Audit Office report.

It's making me think Godwin Grech was right.

Here's what Godwin said to an earlier audit inquiry.

"When I returned to Treasury in September 2008, just as the Global Financial Crisis got into full swing, it soon became clear that Treasury officers were being asked to prepare policy option papers on highly complex and economically significant issues at a speed that was, in my view, dangerous.

Policy papers would be commissioned in the morning, usually after a meeting or discussion between the Prime Minister, Treasurer, Dr Henry and a few others, and would then be considered by much the same group either later that day or the following day, with decisions often being taken on measures involving billions in actual expenditure or in contingent liabilities.

There was little, if any testing of alternative options, with often only rubbery estimates or forecasts prepared to support possible approaches.

The normal policy development disciplines had broken down, with many policy options, certainly those that I had exposure to, being developed without any real opportunity by the Department of Finance and Deregulation to undertake proper costings, if at all. Relevant portfolio departments were either not involved in the policy development process or were given very limited information or opportunity to contribute.

The OzCar SPV was developed in this environment. As I was very uncomfortable preparing policy papers which contained options that had not been properly costed and which I could not be sure would even be viable, I began to rely on a small network of 2 or 3 highly experienced former Treasury officers who I had known for the best part of 20 years and who had genuine policy expertise in the areas that I lacked. This was especially in costings and fiscal implications of options, as well as to the political viability of possible approaches.

I saw little point in putting up a policy option to the Prime Minister and the Treasurer if it could not ‘fly’ politically – even if the numbers seemed broadly accurate. I would therefore ‘roadtest’ a few ideas and options with my small trusted network so that the risks of developing half baked policy options involving contingent liabilities of $2 billion or more was reduced.

Although this may not have been consistent with normal practice, the operating environment was hardly normal. It was in many respects chaotic and dysfunctional and suffering from the stress of overload.

By comparison the much-criticised BER was exceptionately well managed.

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