Services Australia’s activities and payments

1.1 Under the Administrative Arrangements Order of 29 May 2019, Services Australia was responsible for:

• design, development, delivery, co-ordination and monitoring of government services, social security, child support, students, families, aged care and health programmes (excluding health provider compliance), and Australian Hearing Services;
• whole-of-government service delivery policy;
• whole-of-government information and communications technology; and
• information and communications technology procurement policy and services.

1.2 From 1 February 2020, Services Australia was established as a new Executive Agency within the Social Services portfolio with the following functions:

• design, develop, deliver, co-ordinate and monitor government services and payments relating to social security, child support, students, families, aged care and health programs (excluding health provider compliance);
• provide the Government with advice on the delivery of government services and payments;
• collaborate with other agencies, providers and businesses to deliver convenient, accessible and efficient services to individuals, families and communities; and
• undertake other relevant tasks the Minister may require from time to time.

1.3 In 2018–19, Services Australia delivered payments and services across the following key program areas:

• social security and welfare — Centrelink payments and services;
• aged care — payments to residential aged care, home care and flexible care services;
• health — Medicare, the Pharmaceutical Benefit Scheme, Private Health Insurance Rebate, Australian Immunisation Register, National Bowel Cancer Screening Register, Australian Organ Donor Register, and services for eligible veterans; and
• child support — Child Support Program.¹

1.4 Services Australia administered approximately $182.5 billion in payments in 2018–19, the majority of which (94 per cent) were on behalf of the Department of Social Services and the Department of Health. Table 1.1 sets out the total payments administered in 2018–19.

Table 1.1: Payments administered by Services Australia, 2018–19

Source: Services Australia Annual Report 2018–19.

1.5 Services Australia is primarily funded through direct appropriation in the annual Budget cycle but also receives service-related revenue from other Australian Government entities, as well as from some state and territory agencies.

1.6 In 2018–19 Services Australia’s total income was $4.8 billion, of which $4.5 billion was Australian Government appropriation and $277.5 million was from own source revenue and gains (see Table 1.2). This revenue is primarily provided through cost recovery arrangements under section 74 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act).²

Table 1.2: Services Australia own source revenue, 2018–19

Source: Department Human Services Annual Report 2018–19.

Bilateral agreement arrangements in Services Australia

1.7 Services Australia delivers services on behalf of other entities across four areas:

• delivery of payments and services on behalf of another entity, for example income support payments;
• delivery of services to another entity, for example corporate shared services such as payroll or ICT shared services;
• provision of shared premises arrangements; and
• exchange of data or information.

1.8 Figure 1.1 shows the proportion of the four types of Services Australia’s bilateral arrangements in place in 2018–19 with other Australian Government entities. These arrangements are underpinned by bilateral agreements between Services Australia and each entity.³

Figure 1.1: Proportion of bilateral arrangements by type

Source: ANAO analysis of 126 bilateral agreements on the Services Australia Bilateral Agreements Register as at July 2019.

1.9 The key purpose of Services Australia’s bilateral agreements is to provide a robust basis for service delivery expectations and establish clear deliverables, performance measures (service levels) where required, and risk/issues management and resolution processes. Effective agreements can also limit ambiguity in terms of roles and responsibilities and establish clear governance and controls.

1.10 A critical factor in a service delivery bilateral relationship is accountability. For its appropriated funding, Services Australia is directly accountable to the Australian Government and Parliament for delivering payments and services to the Australian community and for prioritising that service delivery within its funding budget. The policy entities retain policy responsibility for their programs and therefore a bilateral agreement is required so the entities have oversight that programs are being effectively delivered by Services Australia. For services provided under section 74 of the PGPA Act (cost recovery), Services Australia is required to deliver services to entities to the agreed expectations and service levels set out in the bilateral agreement, and demonstrate value for money for those services. The entities are responsible for monitoring the services provided by Services Australia to ensure they are meeting the agreed requirements and expectations.

1.11 Accordingly, within these two types of bilateral relationships, there are separate accountabilities for Services Australia and the other entity. There are also shared risks — that is, risks common to both entities that must be mitigated to enable each entity to effectively discharge its responsibilities. While the risks are common or shared, the two entities can have different risk tolerances and organisational priorities, so the responses to managing the risks are quite different. The primary vehicle to mitigate those risks is the bilateral agreement.⁴

1.12 Services Australia’s bilateral arrangements are supported by its Bilateral Agreement Framework, which provides high-level guidance to Services Australia staff on how to negotiate and prepare a bilateral agreement. The Framework has been in place since 2012 and a revised Framework was released in July 2017. The Framework is discussed in detail in Chapter 2.

1.13 As mentioned in paragraph 1.4, the majority of administered payments delivered by Services Australia fall under the social services and health portfolios. The Bilateral Management Arrangements for the Department of Social Services and the Department of Health are long-standing arrangements that underpin the delivery of payments and services by Services Australia on behalf of the two departments. While these arrangements align in some way with the Bilateral Agreement Framework, they are bespoke agreements with specific inclusions not found in other agreements.⁵

1.14 Overall, Services Australia had bilateral arrangements with 42 Australian Government entities, as at December 2019 (see Table 1.3).

Table 1.3: Service Australia’s bilateral agreements with Australian Government entities, December 2019

Note a: Includes letters of exchange and memoranda of understanding.

Note b: The Department of Home Affairs has two head agreements that are being transitioned into one statement of intent.

Notes: This table does not include multilateral agreements but does include eight agreements (in italics) where an entity provides a service to Services Australia.

The names and functions of some of the entities have changed following changes to government departments announced on 5 December 2019, effective 1 February 2020.

Source: ANAO analysis.

1.15 To provide coverage of the four types of services delivered by Services Australia, three entities were included in this audit: the Department of Veterans’ Affairs (DVA), the Department of Agriculture, Water and the Environment (Agriculture), and the National Disability Insurance Agency (NDIA). Collectively, these entities represent the full span of the types of services that Services Australia either delivers on behalf of other entities or provides to entities.⁶

Department of Agriculture, Water and the Environment

1.16 Agriculture develops and implements policies and programs to ensure Australia’s agricultural, fisheries, food and forestry industries remain competitive, profitable and sustainable, and supports the sustainable and productive management and use of rivers and water resources.

1.17 Services Australia delivers the Farm Household Allowance on behalf of Agriculture, which is a payment introduced in 2014 as part of the Australian Government’s contribution to the 2013 Intergovernmental Agreement on National Drought Program Reform. It is available to eligible farmers or their partners, and consists of an income support payment, other financial supplements and advice. The program has assisted more than 12,000 recipients since 2014 and provided payments of more than $343.4 million.⁷ Agriculture is responsible for the development, administration and review of policy for Farm Household Allowance.

1.18 Services Australia is responsible for the delivery of the Farm Household Allowance payment and support services to eligible recipients, including assessing claims, processing payments, reviewing cases and providing support through Farm Household Case Officers. Funding for administering the Farm Household Allowance is included in Services Australia’s departmental Budget appropriation (of $4.5 billion in 2018–19).

Department of Veterans’ Affairs

1.19 DVA provides support and information for: veterans and their dependants; Australian Defence Force personnel; war widows/widowers; Australian participants in British Nuclear Tests in Australia; members of the Australian Federal Police; and students, teachers and historians. Some of the services DVA provides are pensions, health care, rehabilitation, counselling, and home care.

1.20 Services Australia has been a long-term provider of support for DVA programs, including processing payments. Bilateral arrangements have been in place between Services Australia and DVA since 2010 for information communications technology (ICT). This initially consisted of ICT hardware previously contracted to a private provider, and in October 2017 was expanded to include all ICT functions. The corporate shared services elements, which are limited to payroll and support services to facilitate payroll, transitioned to Services Australia in May 2018. DVA paid Services Australia $48.1 million for these services in 2018–19 noting that a direct budget appropriation is also provided for Services Australia’s delivery of the Repatriation Pharmaceutical Benefits Scheme.

1.21 As Services Australia receives an appropriation for the Repatriation Pharmaceutical Benefits Scheme but provides all other services under PGPA Act section 74 cost recovery arrangements, two types of relationship occur under the bilateral agreement arrangement (as discussed in paragraphs 1.10 and 1.11). For delivery of the Repatriation Pharmaceutical Benefits Scheme, DVA is accountable for policy but Services Australia is accountable (to Government) for service delivery. For all other programs and services under the bilateral agreement, DVA is accountable for determining the service that is required, ensuring the Services Australia is delivering to the agreed services levels, and paying for those services.

National Disability Insurance Agency

1.22 The NDIA is a corporate Commonwealth entity established in 2013 to implement the National Disability Insurance Scheme (the Scheme), which aims to support a better life for hundreds of thousands of Australians with a significant and permanent disability and their families and carers.

1.23 The NDIA is responsible for managing the Scheme, administering access to the Scheme and approving the payment of individualised support packages.⁸ The allocated budget for Scheme participant expenses increased from $5.3 billion in 2017–18 to $16.3 billion in 2019–20.

1.24 Since 1 July 2016, Services Australia has been responsible for providing corporate shared services, ICT shared services, digital access verification, and shared premises to the NDIA. Previously, the Department of Social Services provided corporate and ICT services to the NDIA. The NDIA paid Services Australia $90.5 million for these services in 2018–19. The NDIA is the largest financial contributor to Service Australia’s own source revenue (see Table 1.2) — over 30 per cent since 2016–17.

1.25 During 2018–19, the suite of services provided by Services Australia to the NDIA changed, with further changes being considered. In October 2018 the NDIA National Contact Centre transitioned from the then Department of Human Services to a private third-party contractor. In May 2019, the NDIA commissioned an external review of the corporate shared services arrangements with Services Australia. In August 2019, the NDIA advised Services Australia it was considering alternatives for the record-keeping and procurement services that Services Australia was providing.

Rationale for undertaking the audit

1.26 Services Australia is responsible for whole-of-government service delivery policy, ICT and ICT procurement policy and is expanding service delivery for other entities, particularly shared services and ICT. An audit of Services Australia’s bilateral agreements provides a baseline for the effectiveness of existing arrangements and identifies areas for improvement at a time when Services Australia is reviewing its bilateral arrangements with other Australian Government entities.

Audit approach

Audit objective, criteria and scope

1.27 The audit objective was to examine the effectiveness of bilateral agreement arrangements between Services Australia and other entities.

1.28 To form a conclusion against the audit objective, the following high level criteria were adopted:

• Were the bilateral agreements effective in supporting the delivery of the payment or service objectives?
• Were effective arrangements in place to support the successful implementation of payments and services under bilateral agreements?

Audit methodology

1.29 The audit methodology involved:

• analysing the primary agreements that Services Australia has with each entity it delivers payments or services to or on behalf of — that is, the head agreements or statements of intent (not every services schedule under those);
• undertaking a detailed analysis of the bilateral agreement arrangements between Services Australia and a selection of other entities;
• reviewing relevant documentation including the Bilateral Agreement Framework, performance reports, correspondence, meeting records and other documents; and
• interviewing staff from Services Australia and the other entities.

1.30 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $416,000.

1.31 The team members for this audit were Renina Boyd, Anne Kent, Sonya Carter, Christine Sherman and Andrew Morris.

3.1 In delivering services on behalf of or to other entities, Services Australia is accountable for effective service delivery and meeting agreed requirements and expectations. However the entities themselves are accountable for the services they purchase and/or are delivered on their behalf by Services Australia. Accordingly, it is important that governance arrangements for bilateral relationships support the management of accountabilities, shared risks, monitoring of performance, resolution of contentious issues, and value for money.

Are effective approaches in place in Services Australia and the other entities to manage the bilateral arrangements?

3.2 As discussed in Chapter 1, to assess Services Australia’s bilateral relationships with other Australian Government entities, the audit examined three entities that collectively provide a comprehensive view of the range of services that Services Australia delivers: Agriculture; DVA; and the NDIA.

3.3 This section assesses the effectiveness of approaches in place to implement those arrangements by examining for each arrangement the: bilateral agreements; governance committees; risk management; issues escalation; and continuous improvement processes.

Appropriateness of bilateral agreements

Department of Agriculture, Water and the Environment

3.4 The delivery of Farm Household Allowance by Services Australia, and Agriculture’s oversight of the program, is underpinned by a bilateral agreement that primarily²¹ consists of a head agreement and a services schedule specifically for Farm Household Allowance. Table 3.1 provides an assessment of the head agreement and schedule against the key elements expected to be included in a bilateral agreement (discussed in Chapter 2, paragraph 2.26).

3.5 The head agreement and services schedule between Services Australia and Agriculture are comprehensive and include all key elements required of an effective bilateral agreement.

3.6 Examples of better practice include the issues escalation process and definitions of roles and responsibilities.²² For the latter, the relevant sections provide clear explanations of each entities’ responsibilities so that both parties have a shared understanding of their respective responsibilities within the bilateral relationship. Some examples from the head agreement are set out below:

Agriculture is responsible for:

• development, administration and review of government policy;
• establishing agreed policy positions with those departments and agencies with overlapping policy responsibilities. Agriculture will involve Human Services in relevant discussions where appropriate;
• providing advice on business requirements to Human Services in respect to new or amended legislation or policy guidelines relevant to the delivery of Services and agreement on costings parameters.

Human Services²³ is responsible for:

• providing the Services as specified in the Service Schedules;
• providing feedback to Agriculture on service delivery aspects that might affect policy development and review if requested;
• continually improving the quality, effectiveness and efficiency of the Services and their delivery.

3.7 The head agreement and services schedule were reviewed in September 2019, with the next annual review scheduled for 2020.

Department of Veterans’ Affairs

3.8 Services Australia’s bilateral arrangements with DVA comprises a statement of intent and five services schedules.²⁴ These schedules cover:

• ICT services (all ICT functions including infrastructure and support for older systems). DVA uses 28 service offers²⁵ provided by Services Australia;
• corporate shared services: payroll, human resources and shared premises²⁶;
• program delivery, for the Repatriation Pharmaceuticals Benefit Scheme (provided through the Pharmaceuticals Benefit Scheme system), Child Dental Benefits Scheme (automatic data extraction and sharing) and Treatment Account Processing (13 services including manual, online and electronic claims lodgement for health services for veterans);
• data exchange; and
• myGov capabilities.

3.9 Table 3.2 provides an assessment of the DVA statement of intent and five schedules against the key elements expected to be included in a bilateral agreement.

3.16 Only the ICT services schedule contained all of the elements, and the remaining documents primarily had issues with risk management, issues escalation, performance measures for corporate shared services, and roles and responsibilities. Renegotiation of the statement of intent and the three services schedules is due by August 2020 and the agreement would be strengthened if these elements are improved in the updated versions. The shared premises agreement also needs to be signed by the NDIA.

3.17 In terms of defined roles and relationship responsibilities, the objective in the statement of intent is for the two entities to work collaboratively to support the effective rollout of the Scheme, primarily through the NDIA utilising Services Australia’s expertise and capability in service delivery, and in the delivery of shared corporate and ICT services. Despite the inclusion in the agreement of high level guidance in the ‘relationship responsibilities’ and ‘partner principles’ sections of the statement of intent, both entities confirmed different cultures have contributed to relationship challenges. Acknowledging that the agreement is due for renegotiation in 2020, setting clearer expectations of each entity’s roles and responsibilities as the purchaser and provider should assist to strengthen the bilateral arrangement. Services Australia and the NDIA should also develop underpinning issues notification/escalation procedures at the operational level, to support the high-level processes set out in the bilateral agreement.

Governance committees

3.18 To support effective bilateral arrangements, relevant governance committees should discuss key aspects of those arrangements on a regular basis to ensure proactive management and oversight of the program/service. Arrangements regularly discussed can include: risks; issues escalation and resolution; performance and reporting; funding, budget or payment issues (where applicable); and any continuous improvement or upcoming changes.

3.19 The audit examined the governance arrangements in place between Services Australia and the three entities by reviewing the terms of reference and a selection of committee papers, and conducting interviews with key staff from the entities.

Department of Agriculture, Water and the Environment

3.20 Two forums are in place to manage the Farm Household Allowance: the Governance Committee and the Services Schedule Contact Officers Forum. For the Governance Committee, the meeting minutes were analysed for the four meetings held in 2018–19, and for the Contact Officers forum, the action item lists were analysed for the 13 meetings in 2018 and the seven meetings held from January to July 2019. Table 3.4 provides the analysis of the two forums.

Table 3.4: Services Australia and Agriculture governance forums

Source: ANAO analysis.

3.21 The Governance Committee and Contact Officers forum are effective in overseeing the Farm Household Allowance and bilateral relationship between Services Australia and Agriculture. There is evidence in the meeting minutes of regular discussion of performance, collaboration and general risks. Any specific discussion of risk planning and management should be recorded in the minutes to confirm that the entities are being proactive in managing issues and monitoring potential threats to the effective delivery of Farm Household Allowance.

Department of Veterans’ Affairs

3.22 Six forums are in place (with two more being established) to manage the DVA–Services Australia bilateral agreements. A summary of the analysis of these arrangements is at Table 3.5.

Table 3.5: Services Australia and DVA governance forums

Notes: The statement of intent also lists the Transformation Programme Board, which meets monthly and provides specific operational oversight of the Veteran Centric Reform program. The Transformation Programme Board reports to and advises the DVA/Services Australia Partnership Forum.
The myGov Member Service Forum is mentioned in the myGov schedule, but not the statement of intent. As it is a multilateral committee with members from various entities, rather than a joint Services Australia–DVA committee, it has not been reviewed as part of the analysis.

Source: ANAO analysis.

3.23 The governance committees are effective in overseeing the bilateral arrangements and managing the relationship between Services Australia and DVA. They regularly discuss issues escalation, performance and funding.

3.24 In addition, none of the strategic governance committees regularly discuss items related to data exchange and program delivery agreements, and the operational governance committees to cover issues or performance of the program delivery is not in place. In February 2020, DVA advised that the Data Exchange and Program Delivery operational committees were being combined, and would meet every six months.

National Disability Insurance Agency

3.25 The governance arrangements established to manage the Services Australia–NDIA bilateral agreement include Board committees, a Secretary/CEO-level committee and three joint committees. A summary of the analysis of these arrangements is at Table 3.6.

Table 3.6: Services Australia and NDIA governance forums

Note a: Shared Services Strategic Governance Committee meetings were held quarterly between July 2018 and May 2019.

Note: The Business Services Operational Committee was established with responsibility for managing the Business Services schedule, and ceased in October 2018 following cancellation of two of the three schedule services that were no longer required. In November 2019, Services Australia advised: regular updates are provided directly to the NDIA; and issues related to Business Services Schedule (PRODA Services) can be discussed at the monthly Strategic Governance Committee meetings.

Source: ANAO analysis.

3.26 The governance committees are effective in overseeing the bilateral arrangements and managing the relationship between Services Australia and the NDIA. They regularly discuss issues escalation and performance.

Risk management

3.27 Management of risk is an intrinsic part of delivering services and overseeing bilateral arrangements. Risk management plans should be in place at the appropriate level (depending on the types of services being delivered by Services Australia) and risk and key issues²⁷ considered on a regular basis at governance committees.

Department of Agriculture, Water and the Environment

3.28 The services schedule for the delivery of Farm Household Allowance references risk in three key areas: governance; assurance of services; and risk planning.

3.29 Services Australia has two risk management plans in place for the delivery of Farm Household Allowance:

• a payment integrity plan with four risks associated with payment accuracy, claims processing, overall program integrity (including systems), and processing Financial Improvement Agreements; and
• a program plan with five risks associated with the application of the relevant legislation²⁸, governance and performance reporting, information management, and overall achievement of payment integrity. ²⁹

3.30 The plans utilise the Services Australia risk management plan template. This is comprehensive and covers the key aspects of risk assessment and planning including risk identification, causes, consequences, controls, risk ratings and final risk level. The two plans relating to Farm Household Allowance were comprehensively completed noting that the treatment sections were not required to be completed because the risk assessment deemed (endorsed by the National Manager SES Band 1) that the controls were adequate to accept the risk.

3.31 Agriculture has mandated risk plans at the divisional level that collectively form the department’s overall enterprise risk framework. The risk plan for Farm Support Division (which oversees Farm Household Allowance) identifies eight strategic risks primarily relating to departmental matters such as staffing and advice to government. There is one risk that covers programs such as Farm Household Allowance, however, the information contained in the risk plan is high level and the detail is limited.

3.32 Agriculture does not have a specific risk management plan for Farm Household Allowance and its bilateral relationship with Services Australia. It would be beneficial for Agriculture to develop a risk plan that covers the risks for the department in terms of overseeing — and ultimately having ownership and accountability for — Farm Household Allowance. Services Australia and Agriculture should consider shared risks in the development of their risk registers, noting this is a mandatory part of the Commonwealth Risk Management Policy (discussed at paragraph 2.29).

3.33 Risk was discussed in the general context of program, policy and proposed changes. For example, in the meeting minutes of the Farm Household Allowance Governance Committee for the July and October 2018 meetings, discussion of policy changes, project updates and implementation of an operational framework all included an element of risk identification and management.

Department of Veterans’ Affairs

3.34 As outlined in Table 3.2, no risk statement was included in the statement of intent or the Corporate Shared Services Schedule.

3.35 DVA recognises the risk of outsourcing by including the bilateral arrangements in its enterprise risk assessments. Overall accountability for delivering on its outcomes rests with DVA. DVA’s enterprise risk management plan includes two risks relating the bilateral arrangements between DVA and Services Australia:

• Enterprise risk one — the ability of DVA to deliver programs that improve the health and well-being of veterans and their families, involves a control related to the Services Australia provision of IT services.
• Enterprise risk seven — the ability of DVA to effectively engage and deliver claims processing, entitlements and services to clients, includes a control of having dedicated shared services branches in both DVA and Services Australia to manage the relationship, provide strong governance, and manage issues and risk.

3.36 In addition, DVA’s Fraud Risk Register contains a risk regarding the fraudulent use of, or attacks against, IT systems and data controlled or used by DVA, with recognition that DVA is reliant on Services Australia for controls to be implemented. Treatment includes establishing the provision of ongoing assurance regarding the effectiveness of relevant ICT controls.

3.37 DVA‘s Risk Management Framework indicates that where DVA is involved in implementing projects, programs, policy initiatives or other arrangements with third parties, efforts must be made to understand and contribute to the management of shared risk. DVA’s partnership arrangements with Services Australia is provided as a major example, including DVA’s establishment of a dedicated branch to operate as a centralised, internal administration function to manage the ongoing strategic partnerships with other Australian Government agencies as part of managing shared risk.

3.38 The shared risks within the Risk Management Framework demonstrate how a shared risk assessment should be undertaken, including a joint risk register, clarity of risk ownership that is integrated into agreements, and joint risk review meetings. Consistent with this approach, the Veteran Centric Reform program³⁰ has a shared risk management plan between DVA and Services Australia that identifies risk control owners in Services Australia and DVA.

3.39 DVA has one effective overarching risk plan in place for the bilateral arrangements at an operational level. Further, it has effective risk management plans in the Services Schedule for myGov Capabilities.

3.40 In line with the departmental Risk Management Framework, Services Australia and DVA should consider adopting a shared risk management approach within their bilateral arrangements.

3.41 Services Australia has arrangements to manage risks associated with the delivery of services to other entities, including DVA (and NDIA as discussed in paragraph 3.46). A risk plan is in place for:

• Corporate Shared Services — The Corporate Shared Services branch risk register includes five risks related to service standards, the Enterprise Resource Planning system, internal direction and executive support, and the consumer agency changing direction. Appropriate consequences, controls, and timeframes are documented however, key elements missing include risk ratings, causes, control effectiveness, control owners. Six of the nine treatments listed have been recorded as ‘on hold’ or ‘not commenced’.
• Services associated with ICT and the delivery of ICT — The Chief Information Group comprehensively sets out a risk plan that includes seven risks with description, cause, consequence if risk realised, controls, control owner, control effectiveness, the next review date, treatment, and risk ratings.

3.42 There is no evidence that risk is proactively discussed at any of the operational or strategic governance committees. Both entities should ensure that risk assessments are in place at the appropriate level and that risk is actively managed through regular discussions of the operational and strategic risks to the bilateral relationship and underlying services.

National Disability Insurance Agency

3.43 Following the implementation of the 2017 Services Australia Bilateral Agreement Framework, a statement of intent template was developed that includes a standard section on risk management. The NDIA agreement was developed prior to that template and does not include a section on risk. The three services schedules include limited general guidance on risk.

3.44 Responsibility for oversight and management of risk related to the bilateral agreement is documented in the three joint committees’ terms of reference. A review of the three committees’ papers was undertaken to identify evidence that risk was routinely considered, including reporting upwards to the Shared Services Strategic Governance Committee; however, this was not found.

3.45 The NDIA has arrangements in place to manage risks related to shared service arrangements within the organisation. The NDIA risk management arrangements include an enterprise risk plan, and risk registers managed by the areas responsible for the schedules. The details are summarised below:

• The NDIA enterprise risk management plan, dated July 2019 includes two risks associated with Service Australia’s service delivery — handling of personal information, and the ICT operating environment (applications, network, connectivity and infrastructure). Key aspects of risk assessment are covered in the plan. Appropriate causes and treatments are documented.
• The NDIA risk register for corporate services, dated October 2019 includes two risks related to the bilateral arrangements — management of organisational data, and an inability to deliver critical shared corporate services to the agency. The register covers key aspects of risk assessment and planning including risk identification, causes, consequences, risk ratings and risk level.
• The NDIA Chief Executive Officer Critical and High Operational Risk Heat Map includes a risk about the ability of Services Australia to deliver the NDIA’s priorities, and has been rated as high. Key mitigation activities have been documented with due dates for the activities included. The risk map register includes no detail about causes, controls, consequences or responsible risk owners.

3.46 Services Australia has arrangements to manage risks associated with the delivery of services to the NDIA. As discussed in paragraph 3.41:

• Risks related to the delivery of corporate shared services have been identified with key elements documented. The inclusion of risk ratings, causes, control effectiveness, control owners, and planned dates for implementation of treatments currently listed as ‘on hold’ or ‘not commenced’ would improve the plan.
• The Services Australia Chief Information Officer Group risk plan comprehensively sets out key risks associated with ICT and the delivery ICT to entities including the NDIA.

3.47 Overall, there is documentation of some appropriate risk plans in place within Services Australia and the NDIA, and some evidence of discussion of shared risk at the governance committees. Services Australia and the NDIA would benefit from holding regular joint risk management and planning discussions, as well as developing some shared risks so that shared accountabilities can be identified and managed.

Issues management

Department of Agriculture, Water and the Environment

3.57 The head agreement between Agriculture and Services Australia contains a comprehensive issues/dispute resolution process, which is based on the Services Australia head agreement template. This process is more detailed than the issues resolution section in the new statement of intent template as it states how to determine the seriousness of an issue (impacts and consequences), timeframes for escalation and responsibilities of various officers. The statement of intent template only contains high-level guidance on who issues will be escalated to, for example, committee, Deputy Secretary or Secretary rather than an actual process.

3.58 In terms of enacting the formal process in the head agreement, Agriculture and Services Australia advised that no major issues have arisen over the past two years, and therefore the issues escalation and resolution process have not been activated.

Department of Veterans’ Affairs

3.59 Account managers are appointed for each entity, and have day-to-day responsibility for managing any issues that arise regarding the bilateral arrangements. Activity trackers are in place to manage issues for ICT, and for administering the schedules more broadly. Issues as outlined in the activity tracker (issues log) were discussed at the Corporate Shared Services Operational Committee.

3.60 An escalation process is outlined in the statement of intent. Services Australia has formal escalation processes in place for ICT services and corporate shared services. There was no evidence that similar formal processes are in place for the program delivery and data exchange and myGov schedules. A DVA and Services Australia Partnership Forum review indicated instances of escalation occurring directly up to Secretary level instead of through channels such as the governance committees. There is no operational committee in place as yet for program delivery and data exchange schedules, and no evidence of activity trackers regarding these services.

3.61 As indicated at paragraph 3.23, the governance committees currently in place discuss issues to be resolved, and escalate them where appropriate. Further, Services Australia has modified the terms of reference of the governance committees, including the proposed data exchange operational committee, to help ensure that issues are raised and managed appropriately.

3.62 In terms of tracking issues, a joint Shared Services DVA Activity Tracker is in place (the ANAO reviewed version dated 26 November 2019) — which is a spreadsheet that sets out identified issues, business owners, actions/resolutions, status and date closed. It includes open items (where issues are being addressed) and closed items (which sets out what the end result was). There is no activity tracker, or issues logs are not in place, for the data exchange and program delivery schedules. However, Services Australia advised that issues are often managed in other ways rather than through a shared issues log.

3.63 There is a dispute resolution process is in place to manage potential issues arising from the bilateral arrangement. However, due to inconsistent tracking of activities, it is not possible to give an overall view of how many issues occurred or if the formal process was enacted.

National Disability Insurance Agency

3.64 The NDIA–Services Australia bilateral agreement includes guidance for issues management and dispute. The statement of intent states that dispute resolution will be managed within the governance committee structure. The Shared Services Strategic Governance Committee terms of reference confirms this role as ‘deciding on, and driving actions to help resolve issues while leveraging existing resolution mechanisms where possible’.³¹

3.65 Sections on issues management are included in three services schedules:

• The ICT services schedule includes issues escalation arrangements in the governance section and states that the ICT Incident Management process will address any operational issues and that Services Australia incident management policies and procedures will apply.
• The Corporate Shared Services Schedule includes guidance on issues resolution. Both entities are required to promptly report to the other party an issue, and endeavour to resolve the issue. If this is not achieved within ten business days it is to be referred to the Shared Services Strategic Governance Committee.³²
• The shared premises agreement includes a dispute resolution section requiring the local representatives to initially manage an issue, and refer to executive management if not resolved within 14 days.

3.66 There is no issues management approach set out in the Business Services schedule, which references the Business Services Operational Committee, to manage any escalated issues. However, this committee is no longer operational.³³

3.67 Review of the three committees’ papers found evidence of some operational issues being discussed at each meeting, and updates recorded in decision registers, action item registers and minutes. For the ICT schedule, a report on ICT incident and problem management is used in the ICT Joint Services Management Sub-committee to guide discussions on issues. A Shared Services Tracker (issues register) is used by the Corporate Shared Services Governance Committee to manage issues and includes information about dates, responsibility for issues, actions and resolution. In January 2020, Services Australia advised issues are noted in this register and can be discussed at weekly account manager meetings with NDIA. There is no clear guidance to support this process.

3.68 These documents provide evidence that some key issues discussed at the meetings are being managed or reported to higher committees. Meeting papers for the Corporate Shared Services Operational Committee reflect discussions about issues needing to be followed up on an ad-hoc basis, by both parties, rather than reflecting a systematic approach.

3.69 The NDIA expressed concerns to the ANAO about unresolved issues with Services Australia, and the NDIA was looking at alternative options, for example, for its records management services. Although governance arrangements and procedures are in place on how to advise Services Australia of issues, and a Corporate Shared Services Tracker is in place, analysis of the meeting minutes did not demonstrate that all issues raised at meetings were consistently addressed. If there were clearer expectations set out in the bilateral agreements and clearer operational issues escalation processes, this would provide a vehicle to hold productive discussions on any issues that may arise.

3.70 One example of an unresolved issue was the overarching shared premises agreement between Services Australia and the NDIA, which to date has yet to be signed by the NDIA even though four versions have been released since 2016. As at February 2020 the agreement remains unsigned by the NDIA. The NDIA advised in November 2019 that version four of the agreement was being reviewed internally by its legal team. Services Australia advised that in the absence of the shared premises agreement being signed by the NDIA, it relies on approved agreements for each individual shared premises. Both entities have not identified any consequences of the agreement not being approved, suggesting the risk is low. However the agreement remains unsigned by the NDIA, which effectively means the agreement cannot be relied upon, and the matter has not been managed in reasonable timeframes.

3.71 Not having clear issues notification and escalation processes in place at an operational level between Services Australia and the NDIA raises the risk that not all issues are assessed and prioritised using a standard approach, and escalated to the appropriate decision-making level (within the committee structure or not), in a timely manner and monitored through to resolution. Relying on issues to be escalated to committees can result in significant delays in resolving the issue.

Continuous improvement and better practice

3.72 From the analysis undertaken during the audit, there were some continuous improvement and better practice elements advised or observed in the Services Australia and Agriculture and DVA bilateral arrangements and these are set out in Appendix 2.

Are effective arrangements in place to monitor and report on performance?

Performance measures and reporting

Department of Agriculture, Water and the Environment

3.73 A set of performance measures are included in the services schedule for Farm Household Allowance and the analysis of these measures is at Table 3.7.

Table 3.7: Performance measures and reporting for the delivery of Farm Household Allowance

Source: ANAO analysis

Reporting

3.74 Analysis of the reporting against the measures has revealed some anomalies with the measures. Services Australia provides monthly reports to Agriculture as per the requirements of the services schedule. The reports are amalgamated into quarterly reports, and contain each of the performance measures in the services schedule, with traffic light ratings and some commentary. For the reports produced in 2017–18 and 2018–19 (eight quarters):

• two measures were regularly reported however they consistently did not meet the targets (see paragraph 3.72 below);
• four measures reported on a different performance measure;
• two measures were not regularly reported; and
• two measures were never reported against.

3.75 For the two measures on claims processing, performance was consistently and significantly not at the required standard. In order to improve timeframes, Services Australia advised that it undertook various measures in consultation with Agriculture to improve claim timeframes including: allocating additional staff resources; prioritising Farm Household Allowance claims to meet the increased demand in 2018 and 2019; streamlining the claims process and form; and utilising service centres. Performance timeframes improved in the June and September 2019 quarters.

3.76 As discussed in Table 3.7, there is duplication of one measure and another measure is no longer required. Services Australia and Agriculture are planning to review the performance measures once the next round of legislative changes to Farm Household Allowance are implemented (expected to be in early 2020). This was agreed to by the FHA Governance Committee at the July 2019 meeting. This review should ensure that measures are developed that can be consistently and accurately reported against.

3.77 Agriculture advised that it does not independently verify the accuracy of the performance reports provided by Services Australia. There was also no evidence that the reports are analysed internally within Agriculture or any internal reporting to the Agriculture executive or Secretary.³⁴

3.78 Assurance and analysis of Services Australia’s performance should occur within any entity that Services Australia is delivering on behalf of, as the final accountability for the program rests with the entity.

Department of Veterans’ Affairs

3.79 Performance measures for the bilateral arrangements are typically described in the service levels. DVA’s services schedules and attachments describe service levels in nine of 15 agreement documents.³⁵ For the data exchange schedule, four services include service levels and two do not.

3.80 Table 3.8 outlines the analysis of the performance measures (including against the SMART criteria) and reporting against the five services schedules (and corresponding attachments) where service levels were included.

Table 3.8: Performance measures and reporting included in Services Australia’s bilateral agreements with DVA

Note a: None of the measures contained completeness elements of balanced (efficiency, short medium and long term elements).

Note b: Only the myGov monthly service level reports were analysed as part of the audit as they were more relevant in terms of the bilateral relationship.

Source: ANAO analysis.

3.81 The majority of service levels were not assessed as complete, primarily due to a lack of service levels for customer satisfaction (where relevant), and limited service levels for quality and accuracy. Although four of the schedule met the SMART criteria, the remaining five did not meet at least one of the elements. Reporting was not provided for four of the services.

3.82 The ICT measures outlined in the service offers are mostly about system or platform availability targets (as well as service hours, channels and timeframes of service support). The ICT performance measures are not complete as they do not address the broader quality or performance of the ICT services provided. Therefore, the measures do not adequately demonstrate how well the ICT services area being provided and do not provide entities with a clear view as to whether the ICT services are being delivered to their expectations and requirements.

3.83 Service levels are outlined in the Corporate Shared Services Catalogue. The current version of the catalogue (version six, November 2019) and the previous version five, do not contain service levels or targets for a significant number of services offered. Service levels were previously included for all services in version four of the catalogue. Only 26 of the 44 services that DVA accesses have service levels in the current Corporate Shared Services Catalogue. This is particularly low in payroll and on-boarding elements, where only one out of 15 services have service levels. This is further discussed for the NDIA at paragraph 3.97 below.

3.84 Between July and September 2019, DVA conducted a gap analysis of the ICT services it received, which identified a gap between the service offer documentation available to DVA and the Services/Service Options being invoiced. This included 43 services/options for which DVA was invoiced in 2018–19 but had no corresponding service offer/option. DVA and Services Australia advised that they are working to address any discrepancies. However, Services Australia advised that DVA was billed only for services they had received.

Reporting

3.85 Although regular performance reports are produced by Services Australia for DVA as outlined in the bilateral agreements, there are gaps in this reporting.

3.86 In general, there are limited service levels for corporate shared services that Services Australia delivers to DVA. The one service level relating directly to payroll (end of year financial processing) is not reported on by Services Australia. The remainder of the ancillary corporate shared service levels that support payroll are reported against.

3.87 As outlined in Table 3.8, reporting is not produced for all services under the program delivery and data exchange schedules. Of the nine services under these schedules, only six had service levels. Of those six service levels, Services Australia produced reporting on two of the sets of service levels — Treatments Accounts Processing and one element of the Access to Information Services schedule. These two sets did not report against all service levels included in the schedules. For instance, for Treatment Accounts processing, only six of the 26 levels in the schedules are reported against.

3.88 Where reporting is available, performance against most service levels outlined in the agreements were met. Reporting from Services Australia demonstrates that most service levels for DVA’s corporate shared services are being met (12 out of 14, with 10 services not accessed in the period), apart from two relating to the responsiveness of the people advisory service, which were not met in quarter one, two or three, but were met in quarter four. It should be noted though that the majority of the primary elements required for DVA payroll do not contain service levels, so these levels that are reported on primarily relate to ancillary support services for payroll.

3.89 Service availability, the only service level outlined in the ICT service offers, is included in ICT reporting. Services Australia largely met the service availability targets for applications, network and telephone in the year to October 2019. Other ICT reporting covers total support requests (incidents) and service requests resolved, and the number of support requests within service level timeframe as outlined in the ICT Services Schedule. The reporting on ICT service requests indicates that Services Australia is currently not meeting its targets, with only 55 per cent of service requests resolved within agreed timeframes in September to October 2019. The reporting on ICT incidents demonstrates that Services Australia is also consistently not meeting service levels of timeliness against each priority level, varying from 37 per cent to 62 per cent of incidents resolved within the priority timeframe target for May to October 2019. At the relevant governance committee, these statistics are often noted but not raised as an issue by members, with the exception of May 2019.

3.90 Services Australia reports on the myGov service level regarding service availability and service response. Service availability on a per day basis indicates that myGov was available more frequently than the percentage set out in the service level. The reporting for service response does not clearly address the performance expectation. Other reporting provides limited DVA-specific information, such as total member services links, and total number of navigations to the site in the month.

3.91 The program delivery and data exchange programs lack service levels, and reporting against levels that were present was minimal. Of the nine programs delivered on behalf of DVA and the data exchange services, six had service levels and Service Australia only reported against one of these levels. The treatment accounts processing service contained 26 service levels³⁶, although only six are reported on in the quarterly and yearly reporting provided by Services Australia. In the four quarterly reports examined, targets were generally met, with the yearly reports often providing an explanation for those not met and plan to return to performance levels.

3.92 DVA’s Annual Report 2018–19 outlined DVA’s performance against the expectations stated in its Corporate Plan. The performance statements include the following performance measure in Enabling 4.4: Partner with other Commonwealth agencies including Defence, Health and Human Services. DVA reported that it ‘achieved’ against the following elements: Governance arrangements are established and reviewed in accordance with respective agency agreements—Human Services. However, as outlined in para 3.24, governance arrangements are not yet in place for program delivery, which is inconsistent with the ‘achieved’ result.

3.93 As outlined in Table 3.5, performance reports for corporate shared service and ICT are discussed in the DVA-Services Australia Partnership Forum, Corporate Shared Services Operational Committee and the Joint Services Management Committees. However, no committee currently receives or discusses reporting on any of the program delivery, face to face or data exchange services.

3.94 DVA has recognised a need for internal review and analysis of key concerns, including developing trend data and issues that need escalation. DVA also identified in an internal audit report that it has no visibility of the appropriateness and effectiveness of Services Australia’s internal controls and general management assurance processes for DVA’s payroll. These issues should be addressed to provide DVA with sufficient assurance of the effectiveness of Services Australia’s processes.

National Disability Insurance Agency

3.95 Performance measures are documented in the three services schedules but not in the shared premises agreement. Table 3.9 outlines the analysis of the performance measures (including against the SMART criteria) and reporting against the three schedules where service levels were included.

Table 3.9: Performance measures and reporting included in Services Australia’s bilateral agreements with the NDIA

Note a: The Provider Digital Access System (PRODA) is an online identity verification and authentication system that allows eligible users to securely access government online services.

Source: ANAO analysis.

3.96 Overall, the available service levels were assessed as SMART but only partially complete, primarily due to limited service levels for quality of service (ICT), for customer satisfaction where relevant, and service levels were missing for a significant number of corporate shared services. The ICT performance measures outlined in the service offers are about system or platform availability rather than the broader quality or performance of the ICT services provided.

3.97 As discussed in Table 3.9 and previously at paragraph 3.83, the current version of the Services Australia Corporate Shared Services Catalogue (version six 2019) does not include a significant number of service level targets relating to payroll and human resources. This means that both the NDIA and DVA are unable to hold Services Australia to account for shortcomings in performance or if there is a dispute. Services Australia should develop appropriate and reportable service levels for each service offer in the next version of the Corporate Shared Services Catalogue, in consultation with the NDIA and DVA.

3.98 The Audits of the Financial Statements of Australian Government Entities for the Period Ended 30 June 2019 report noted:

There is an opportunity to strengthen governance arrangements by incorporating greater detail in agreements relating to HR services. It is recommended that agreements clearly articulate roles and responsibilities and require service providers to issue formal certifications improving an entity’s understanding of control effectiveness and unmitigated risks.

Reporting

3.99 Management reporting has been established for the ICT and corporate shared services schedules. In December 2018, a monthly volumes report, quarterly executive dashboard report, and quarterly performance report was agreed by the Services Australia and NDIA Corporate Shared Services Operational Committee. In February 2019, the three reports were first presented to the Shared Services Strategic Governance committee. The NDIA ICT Services Report includes information on the business relationship, incident and problem management, and the top issues for discussion. This report acts as a guide for the ICT Joint Services Management Sub-committee’s consideration of issues.

3.100 Performance reporting targets for the corporate shared services schedule are based on timeliness or the number of tasks completed, and sometimes both, but quality of service provision is not mentioned. Using the NDIA Service Standards Performance Report for the period April–June 2019 as an example, performance reporting included two components:

• a spreadsheet that details the service, the service category (people, financial, other service, or systems/support/maintenance) and each target measurement, as well as the result for each of the previous four quarters, and the target result is coloured green or red; and
• a summary quarterly report that acts as a snapshot of results, summarises the spreadsheet results including: the total service standards met for the quarter (32/32 (100 per cent); previous quarterly results; services standards met by category; Service standards not met; and a general comment (by quarter and year to date).

3.101 Of the 78 services documented in the Corporate Shared Services Catalogue 2019, 40 services include a performance measure and of those 34 were reported on for the NDIA in 2018–19. Of these 34, the majority of measures met their targets.

3.102 Due to the gaps in measures for some corporate shared services, and the lack of measures to assess the performance of the quality of the services, the two reports discussed at paragraph 3.99 above do not provide a comprehensive view of the results.

3.103 The reports provided for the ICT services schedule did not include sufficient information to provide an assessment of performance. They included reporting on incidences but performance measures were not included; however, incident and problem management data was recorded and monitored.

3.104 Overall the performance reporting across the ICT and corporate shared services schedules would benefit from being more comprehensive and consistent, with measures developed against each service offer/deliverable and clear and accurate reporting undertaken regularly. The performance reports should be able to be validated so that a clear view of Services Australia’s performance can be obtained by the NDIA.

Are cost recovery processes effective, accurate and represent value for money?

3.120 The nature of the bilateral relationship between Services Australia and other entities differs when services are being delivered to an entity and costs recovered under section 74 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), as opposed to Services Australia delivering on behalf of another entity and being funded by direct Budget appropriation. The former is more of a purchaser-provider relationship whereas the latter is a partnership arrangement with clear accountabilities and shared risks. Nevertheless, for both types of arrangements, transparency and communication are crucial to maintaining a positive and collaborative bilateral arrangement.

3.121 Services Australia receives a direct Budget appropriation for delivering Farm Household Allowance on behalf of Agriculture, and for providing systems and processing support to the Repatriation Pharmaceutical Benefits Scheme on behalf of DVA. For all other DVA service delivery and provision, as well as all services provided to the NDIA, these are provided under cost recovery arrangements as per section 74 of the PGPA Act.

Costing processes

External costing requests

3.122 Services Australia has an internal Costing Process Document (June 2019) that guides staff in developing costings. The Budget Costings Branch within Services Australia provides the first point of contact for costing requests and is responsible for costing new policy proposals, business initiatives and proposals.

3.123 For all new programs or services (whether funded by direct appropriation or section 74 cost recovery), Services Australia undertakes an External Costing Request process with the relevant entity to determine the necessary requirements for delivering the program or service, such as system/ICT requirements or staff requirements. This process does not focus solely on costs (which is the end outcome) but determines the overall requirements and tries to ensure a common understanding of exactly what needs to be delivered or provided by Services Australia.

3.124 The Budget costings are then reviewed by the Department of Finance (Finance), which communicates directly with Services Australia to discuss the costing assumptions and query any issues or anomalies, prior to providing final agreement. The relevant partner entity is usually not involved in this part of the process.

3.125 The audit analysed one example of an External Costing Request for a Budget-funded measure (a DVA income support payment — Veterans Assistance Payment). It found that suitable detail on service requirements was included in the costing request and there was a line of sight with the final costing agreed to by Finance. Business assumptions, ICT specifications and costing calculations were reviewed by the audit team and were found to be satisfactorily documented in the Veterans’ Assistance Payment Budget costing.

3.126 There was little evidence of additional consultation or liaison with DVA on the final costing for this program, or the underlying cost assumptions. Services Australia advised that this is because the funding for the service delivery component is agreed by Finance and allocated directly to Services Australia. Therefore, there is limited need to include DVA during that phase of the Budget costing.

3.127 The audit also examined a DVA ICT costing for services provided under section 74 cost recovery arrangements for Submariner Special Operations. There was sufficient detail on the service and ICT requirements completed by DVA in the external costing request, and there was some basic information on Services Australia ICT requirement. The two solutions briefs, which should set out the underlying assumptions and the final ICT costing, contained some basic costing variables but generally minimal detail and no clear underlying assumptions.

3.128 Both the NDIA and DVA expressed frustration on the lack of transparency on the costing process, specifically provision of information on Services Australia’s cost assumptions. This makes it difficult to ascertain whether they are getting value for money.

3.129 Services Australia undertook an internal review in 2018 that sought the views of a selection of entities on the quality of Services Australia’s service provision and program delivery. One of the findings was that the entities advised there was limited transparency on Services Australia’s costs and the costing process.

3.130 It is important that Services Australia is transparent in developing costings and service solutions for other entities, and setting priorities. If entities are paying for a service, then they are accountable for determining whether the service cost is efficient and value for money. Services Australia is also accountable to those entities in providing the services to the agreed performance standard and for an appropriate price.

Corporate shared services costings.

3.131 The principles underpinning the Services Australia Corporate Shared Services Catalogue are based on Finance’s Shared and Common Services Program – Funding Guidelines Framework 2016. Finance is responsible for coordinating the shared service program and ensuring agencies have transparent pricing and service offers, and the Framework provides high level guidance to agencies on pricing principles.

3.132 Services Australia developed a Pricing Strategy for Consuming Entities in 2018 (available to entities), which discusses the development of a shared services catalogue and sets out the methodology for an activity based costing model.

3.133 The Corporate Shared Services Catalogue is based on the activity based costing (ABC) model, which forms the basis of the pricing in the Corporate Shared Services Catalogue. The model is reviewed annually and the cost calculations are based on Finance’s Funding Guidelines Framework. The model allocates costs based on prior year actuals, prior year processing volume and average staffing levels to determine the costing price for each item identified in the Corporate Shared Services Catalogue. Once a unit cost is developed, on-costs are added to the services to determine a final service price. From the costing model reviewed, the audit determined that the calculation of costings was sound and in accordance with Finance’s costing model.

3.134 For version six of the Corporate Shared Services Catalogue, negotiations with DVA and the NDIA commenced in January 2019 around proposed changes to reviewing the catalogue, including a three-year rolling program of price reviews for services. This approach resulted in approximately half of the services being reviewed for version six of the catalogue. This primarily consisted of changes in pricing to People and Financial Services offered by Services Australia, with the remaining prices subject to an indexation adjustment to reflect APS salary movement.³⁷ No evidence was provided that indicated DVA and the NDIA were consulted following the pricing revisions. In addition, no documented approval from the NDIA or DVA was provided to the ANAO regarding version six of the Corporate Shared Services Catalogue.

3.135 The costs for Services Australia’s Corporate Shared Services are benchmarked against other hubs in the Shared and Common Services Program (provided by Finance). The benchmarking for 2018–19 used Finance’s benchmark data from 2017–18 as this had yet to be updated. Evidence of suitable pricing was demonstrated in the NDIA review of the shared and common Services arrangements with Services Australia in 2019, which found the following services represented value for money: payroll and travel services; financial services; fleet, security and contact centre; and property services.

ICT shared services costings

3.136 The audit tested two costing proposals for Services Australia’s ICT shared services. ICT services are not in a catalogue but instead are set out in individual service offers known as ‘ICT Service Definitions’. These include the service description, capability, capacity, inclusions, exclusions, vital functions, stakeholders, service levels, options, reporting and responsibilities.

3.137 The service charges are calculated on an individual basis, that is, specific to each ICT Service Definition. From the two costings reviewed, there was evidence that the pricing process was robust and included sufficient detail on the requirements, exclusions and clear cost calculations.

Cost recovery payment arrangements

Services Australia invoicing arrangements

3.138 Services Australia sends invoices quarterly to all entities to which it provides (billable) services. Attached to the invoices are relevant spreadsheets, reports and other supporting documentation that assists the receiving entity to check the quantity and prices of the services received from Services Australia. These prices are applied on a consistent basis between entities and the selection of invoices examined by the audit showed that the approach and pricing was similar for DVA and the NDIA for its corporate shared services and ICT services.

3.139 Testing of the integrity of the invoices was undertaken during the 2018–19 ANAO financial statements audit. A process flow diagram was provided by Services Australia that sets out the accounts receivable process. The ANAO financial audit team tested the end-to-end financial process for raising invoices and found it was consistent with the process flow diagram and met the financial management requirements for Australian Government departments.

Entity assurance of accurate costs and charges

3.140 DVA provided evidence of robust processes for its goods receipting of the Corporate Shared Services and ICT invoices received from Services Australia (quarter four of 2018–19, invoice dated 14 June 2019). DVA performs reasonable and sufficient procedures to verify the completeness and accuracy of the charges in the invoice prior to recommending approval of the payment by the delegate.

3.141 As part of the goods receipting process, the relevant business areas in DVA will request further information from Services Australia. An example of this is the provision of email services (in-boxes) to the department. DVA requested a staff listing from Services Australia and then analysed that against the list of active email inboxes that were in place in DVA. Through this process, DVA was able to identify numerous email inboxes that were no longer required, and therefore was able to make some savings in ICT costs.

3.142 The NDIA has established a process to confirm the accuracy of Corporate Shared services invoices. The audit’s walkthrough of the process identified that the NDIA business areas were requested to check the relevant section of the invoice for correctness and confirm this to the NDIA corporate services area. The invoice in then ‘goods receipted’ in the payment system, and the delegate has provided approval for payment. The NDIA is looking to further refine these assurance processes, to ensure a more robust approach and ownership from the relevant business areas that confirm the charges are correct.

3.143 The NDIA performs limited processes to verify the accuracy of charges by Services Australia for ICT related services. The audit performed a walkthrough of the goods receipting process within the NDIA (for an ICT services invoice). There was some evidence provided by the NDIA, however it was difficult to determine how effective the NDIA’s internal processes are in ensuring the ICT services received from Services Australia are correct. The NDIA provided evidence of authorisation to make payment and the final minute to the delegate but limited documentation of analysis undertaken to substantiate the authorisation of payment (that is, confirmation of correctness).

3.144 The NDIA did provide evidence of a process it undertook with Services Australia in early 2019 to conduct a stocktake of the number of tablet devices and computer monitors in use across the NDIA, and to locate any missing, broken or unused devices. Following completion of the process, the NDIA was able to ascertain how many devices could not be accounted for, and therefore had them disabled from the network.