The objective of the audit was to assess the effectiveness of the Department of Human Services' (DHS) administration of the shopfront co-location of DHS services.
1. The co‑location of the Department of Human Services’ (DHS) shopfronts is one of the most visible components of the Australian Government’s Service Delivery Reform (SDR) agenda. The co‑location of DHS shopfronts was also one of the first SDR measures, commencing in early 2010.
2. The SDR agenda foreshadowed major structural and service delivery reforms within the Human Services portfolio, to be implemented over a 10 year period. SDR has three objectives1:
- to make people’s dealings with government easier through better service delivery and coordination of services;
- to achieve more effective service delivery outcomes for government by contributing to the achievement of government policy objectives; and
- to improve the efficiency of service delivery by integrating and automating service delivery and creating a flexible and agile system.
3. When the Co‑location Program commenced in early 2010, there were 313 Centrelink and 240 Medicare shopfronts.2 At March 2013, DHS advised that 344 shopfronts were offering co‑located services. DHS has committed to co‑locating all shopfronts by mid‑2014.
4. The Co‑location Program is being implemented in a dynamic organisational and service delivery environment. The program was affected by the integration of Medicare and Centrelink into DHS and technology is opening up more options for delivering services to DHS customers. New technology also offers an opportunity for achieving greater administrative efficiencies and influences the way customers prefer to access services. In this regard, the proportion of patient claims for Medicare transactions made over‑the‑counter in DHS shopfronts has declined from 50 per cent in 2009–10 to less than 10 per cent in 2012–13.3
Types of co‑locations
5. DHS is implementing two types of shopfront co‑locations:
- consolidations—merging two shopfronts into one; and
- service extensions—putting additional services into an existing shopfront.
Co‑location through consolidation
6. Co‑location through consolidation involves merging two existing shopfronts that are in close proximity (one providing Medicare services and the other providing Centrelink services) to provide co‑located services. This results in one less public point of entry and potential savings from reduced property costs. The trigger for this type of co‑location is usually a property event such as the expiry of a lease or the possibility of leasing more space at an existing site. At March 2013, DHS advised that 100 co‑locations had been completed through consolidation.
7. The logistical complexities of consolidating locations are significant, particularly in the period prior to the integration of Centrelink and Medicare into DHS. A large number of arrangements have to be managed and coordinated while also ensuring minimal interruption to customer services. Most consolidations have involved the closure of a Medicare shopfront and the re-location of Medicare services and staff into a nearby Centrelink shopfront. Approval for each proposed consolidation is sought from the Minister for Human Services (the Minister), prior to its public announcement.
Service extension co‑location
8. Service extension co‑locations involve providing additional services in an existing shopfront, for instance, placing Medicare services into an existing Centrelink shopfront or vice-versa. Service extension co‑locations do not result in shopfront closures. At March 2013, DHS advised that 244 service extension co‑locations had been completed.
9. There are two types of service extension co‑locations:
- Face‑to‑face service extensions—the addition of face-to-face services in a shopfront, generally by the redeployment of staff from another office. For instance, the redeployment of an employee from a Medicare shopfront into a shopfront offering Centrelink services.
- Self‑service extensions—the addition of self-service facilities in existing shopfronts. For instance, self-service Centrelink services into a shopfront offering face‑to‑face Medicare services.
10. The logistics of service extension co‑locations are generally less complex than consolidations, and the introduction of self‑service facilities is less complex again.
Objectives of the Co‑location Program
11. DHS has stated that the objective of the co‑location of services is to improve ‘the way people deal with the Australian Government by providing convenient, easy to access, coordinated services from a single point of contact’.4 Another objective of co‑location by consolidation is to achieve savings from the reduction in lease costs associated with the closure of shopfronts. The 2011–12 Budget forecast savings of $14 million over four years from around 61 consolidations. In addition, the savings from a further 615 consolidations scheduled from 2012 onwards are forecast to be $2.7 million in 2012–13.6 A longer term ambition of the Co‑location Program is for co‑located shopfronts to become a platform for the co‑location of a broader range of other services offered by federal and state governments and community organisations.7
The evolution of the Co‑location Program
12. The Co‑location Program has evolved significantly over the three years of its operation, reflecting the changing environment in which it has been implemented. The anticipated proportion of co‑locations by consolidation has varied over time, showing both increases and decreases. Early in the life of the program it was anticipated that 18 per cent of all co‑locations would be consolidations. This fell to 12.5 per cent during 2011 because of practical difficulties encountered with consolidations, such as the security requirements associated with cash refunds for Medicare transactions and the different ICT and management systems in place prior to the integration of Medicare and Centrelink into DHS. By April 2012, however, the proportion of total co‑locations expected to be by consolidation had increased to 28.5 per cent as the previous difficulties had been removed or ameliorated and additional consolidations were scheduled as part of DHS’ plans to find savings to fund the higher Efficiency Dividend in 2012–13.
13. Early in the life of the Co‑location Program it was anticipated that all service extension co‑locations would involve the co‑location of face‑to‑face services. However, there has been a significant change in thinking about the nature of service extension co‑locations. After mid‑2011 there was a shift away from face‑to‑face extension co‑locations to self‑service co‑locations, reflecting difficulties in redeploying staff and the broader strategy of reducing costs by transitioning customers to self‑service. By April 2012, it was anticipated that of the 71.5 per cent of co‑locations that were expected to be service extensions, 13 per cent would be face‑to‑face service extensions and 87 per cent would be self‑service extensions.
Audit objectives, criteria and scope
14. The objective of the audit was to assess the effectiveness of DHS’ administration of the shopfront co‑location of DHS services.
15. To address the objective, the audit examined the Co‑location Program against the following criteria:
- sound guidelines/criteria have been developed and applied to co‑location decisions; and
- DHS effectively monitors, achieves and reports the benefits to customers and the cost savings from the shopfront co‑location of DHS services and uses this information to improve the co‑location processes.
16. The audit scope did not include consideration of:
- co‑locations that occurred prior to the announcement of the SDR agenda in December 2009;
- the privacy issues surrounding customer data associated with co‑location and SDR;
- current co‑location initiatives involving non-DHS services such as Local Connections to Work and co‑location with the Australian Taxation Office; and
- the achievement of savings from the decision to implement additional consolidations to contribute to meeting the increased Efficiency Dividend that applies in 2012–13.
17. The Co‑location Program is one of the most visible components of the Government’s decade‑long Service Delivery Reform agenda, which among other things, aims to make people’s dealings with government easier through better service delivery and coordination. DHS has committed to providing co‑located services (that is, both Medicare and Centrelink services) in all of its shopfronts by mid‑2014.
18. DHS is implementing different types of shopfront co‑locations. By mid‑2014 DHS anticipates that 28.5 per cent of all co‑locations will be co‑locations by consolidation (involving the merging of two shopfronts into one, resulting in one less public point of entry) with the remaining 71.5 per cent of co‑locations being service extension co‑locations (involving the addition of services into an existing shopfront but not the loss of a public point of entry). Of the service extension co‑locations, 13 per cent are anticipated to involve the addition of face‑to‑face services, with the remaining 87 per cent involving the addition of self‑service.
19. Over the three years of the Co‑location Program’s operation, DHS has generally administered the program effectively, and has made good progress with co‑locating shopfronts in the context of a rapidly changing service delivery environment driven by new technology, the goal of achieving administrative efficiencies, and changing customer preferences. The department has changed aspects of the program to address implementation issues as they arose, including the practical challenges presented by the different ICT and management systems and the separate workforces in Medicare and Centrelink prior to their integration with DHS. Over the life of the program, DHS’ timeframe for implementing co‑locations has changed from around 40 shopfronts to be consolidated by 2012 (with no publicly announced timeframe for the co‑location of the remaining shopfronts) to a timeframe which envisages the co‑location of all shopfronts by mid‑2014. To meet evolving timeframes, and address implementation challenges, DHS has varied the balance between consolidations and service extension co‑locations. Further, within service extensions, the department has moved from the addition of face‑to‑face services to the addition of self‑services. This approach has also reinforced a broader strategy of transitioning customers with less complex transactions and needs to self‑service, contributing to efficiencies in service delivery.
20. DHS has also put in place an effective performance monitoring and reporting framework for the Co‑location Program, which has evolved to reflect changes to the program. The department actively monitors both the outcomes of the additional consolidations implemented as part of its plans to find savings8, and the level of customer satisfaction with the changes. While co‑location decisions can affect members of the local community, customer satisfaction data indicates that convenience and accessibility have improved in co‑located shopfronts. In particular, the majority of customers recently surveyed by DHS agreed that co‑location has made it more convenient to access Centrelink and Medicare services, with a minority of customers, particularly older customers accessing Medicare services in newly consolidated shopfronts, expressing dissatisfaction. There is scope for DHS to further improve the convenience and accessibility of services by monitoring the uptake by relevant staff of training to assist customers using self‑service facilities to access the range of online DHS services. This is particularly important in self-service extension co‑located shopfronts. It would also assist customers to access the most convenient shopfront, if the DHS website was to provide more information on co‑located shopfronts including the face‑to‑face services and the assisted self‑service facilities available in each shopfront.
21. Improved coordination of services, both in terms of processes (for instance having both Centrelink and Medicare transactions dealt with by the same staff member) and around the customer’s individual circumstances (such as only having to tell your story once), is an objective of the Co‑location Program. In a minority of co‑located shopfronts customers still have to queue separately if they need to access both Centrelink and Medicare services, while in other shopfronts varying degrees of coordination are apparent. While this variation is not unexpected given the barriers to greater coordination (including different ICT and management systems prior to the integration of DHS9 and the security requirements associated with Medicare cash refunds10), most of the potential gains relating to improved coordination for customers are yet to be realised. Continued effort in this respect has the potential to deliver benefits for both customers and the department.
22. Co‑location through consolidation is intended to deliver $14 million in savings over four years to the government from reduced lease costs11, and DHS has advised that the savings target is on track to be achieved. Given the Government’s decision to harvest these savings upfront from the DHS budget, the department’s management will need to continue to carefully plan and monitor implementation to ensure that actual savings are realised as the consolidations occur. An inability to achieve actual savings will create the risk of resource pressures affecting other aspects of DHS services and operations.
23. The progress achieved to date with the co‑location of shopfronts has laid solid foundations for future service delivery reforms and the co‑located shopfronts have the potential to be leveraged further by DHS to the mutual benefit of customers and the department. For instance, the results of recent trials of integrated service delivery processes and the cross‑portfolio training of staff have the potential to improve the department’s capacity to deliver coordinated services across its network through more flexible work design and multi‑skilled staff. Further, the lessons learned in implementing the Co‑location Program, a major structural component of SDR, can usefully inform the wider service delivery reform process within DHS.12
24. The audit has made two recommendations aimed at improving the effectiveness of co‑location and the services offered to customers, including by monitoring whether staff in self-service extension co‑locations are better able to assist customers to access DHS services online and for the DHS website to provide more information on the services provided in co‑located shopfronts.
Key findings by chapter
Co‑location Decision‑making Processes (Chapter 2)
25. When implementing a program such as the co‑location of Centrelink and Medicare shopfronts it is expected that there will be clear and well documented processes for the selection, prioritisation and resultant scheduling of the shopfronts to be co‑located. Having well defined criteria for the selection of shopfronts assists in prioritising effort and improving the prospects of the successful implementation of the co‑location.
26. Overall, the criteria that were used by DHS for selecting shopfronts for consolidation or extension co‑locations were soundly based. However, there was little documentation available on the selection and prioritisation of shopfronts for service extensions. While the selection of shopfronts for consolidation was better documented, only around 45 per cent of all consolidation decisions had sufficient documentation to assess how the criteria had been applied. There was some inconsistency apparent in the application of the criteria.
27. Future decisions on shopfront locations would be improved by better record keeping practices and the more consistent application of established criteria. In this context, DHS has advised that the Co-location team has developed a high level process map to promote decision-making based on the application of criteria and is reviewing DHS’ record keeping practices.
Performance Monitoring and Reporting Framework (Chapter 3)
28. It is important that agencies have performance monitoring and reporting frameworks that measure a program’s progress towards meeting relevant objectives. Such frameworks should include performance measures that cover both the outputs being delivered and the outcomes being achieved, as they relate to the overall objective(s).
29. DHS’ monitoring and reporting framework for the Co‑location Program has evolved to reflect the changing circumstances of the program. The range of performance measures for the program have been kept up to date in the changing environment and overall, the set of performance measures established by DHS are relevant, objective, clear and measurable. The performance framework for the SDR package of measures funded in the 2011–12 Budget, of which the Co‑location Program is a component, was assessed favourably in a 2012 Gateway Program Review of SDR.13
Performance Outcomes (Chapter 4)
30. A key objective of the co‑location of services is to improve service delivery for DHS’ customers. Another objective of the Co‑location Program is to achieve savings from co‑locating by consolidation.
31. Evidence indicates that there have been positive outcomes for customers from the Co‑location Program. Specifically, a recent survey of customers visiting co‑located shopfronts indicates that over three‑quarters of customers agreed that the one stop shop made it more convenient to access Centrelink and Medicare services. Also, the number of complaints relating to co‑location has been relatively small.
32. However, consolidations, where one shopfront (generally a Medicare shopfront) closes can require adjustment by members of the local community. A minority of customers, particularly aged customers using Medicare services, have experienced some dissatisfaction related to, amongst other things, finding the new shopfront location less convenient and new queuing systems confusing. Staff and stakeholders reported that the dissatisfaction of some of these customers has abated over time as they became accustomed to the new location and queuing systems, or took advantage of alternative service channels.
33. There is scope for DHS to improve the convenience and accessibility of services by monitoring the uptake by relevant staff of training to assist customers using online facilities to access the full range of DHS services. This is particularly important in self-service extension co‑located shopfronts. It would also assist customers to access the most convenient shopfront, if the DHS website were to provide more information on co‑located shopfronts including the face‑to‑face services and the assisted self‑service facilities available in each shopfront.
34. The extent to which services have been coordinated varies considerably across co‑located shopfronts, both in terms of coordinated processes (for instance only having to queue once to access both Centrelink and Medicare services) and in terms of coordination around the circumstance of the customer (such as only having to tell your story once). While this is not unexpected given the barriers to greater coordination over the three years of the Co‑location Program (for instance, the different ICT and management systems and the difficulties in training staff in cross‑portfolio processes while Centrelink and Medicare were separate agencies and the security requirements associated with Medicare cash refunds) it means that most of the potential gain is yet to be realised. In some shopfronts customers still have to see more than one staff member if they have both Centrelink and Medicare transactions and in a minority of shopfronts they have to queue separately to do so. Further, while the services to customers are generally well coordinated in consolidated shopfronts where there has been a death of a family member, there is scope to adopt a similar approach to coordination in a broader range of circumstances faced by individual customers. However, the progress with the co‑location of shopfronts has laid a solid foundation and the results of DHS’ 2012 trial of integrated service delivery processes have the potential to accelerate the benefits to customers.14
35. DHS has advised that the $14 million target for the savings from the SDR consolidations is on track to be achieved over the four years to 2014–15. While a higher number of consolidations than initially planned occurred in 2011–12, there was a shortfall in savings for that year of $0.4 million. However, DHS has advised that it expects this to be fully recovered in 2012–13.
Summary of agency’s response
36. The proposed report was given to DHS for formal comment. DHS provided the following summary response, with its full response at Appendix 1.
DHS welcomes this report and considers that implementation of its recommendations will further increase the benefits of the shopfront co‑location of DHS services. Making DHS services more convenient to access and allowing people to understand the service options available and how to use these, enables them to choose the option best suited to their needs.
Extending self‑service facilities and empowering staff with the skills and confidence to show customers how to use these, enables customers to learn to use these facilities and access a greater number of DHS program services in locations where they previously had no access. Additionally, once customers have the skills to use this service channel, they have the option of doing so in locations outside of DHS service centres, for example from their own homes.
Enhancing the DHS website to provide more information about co‑located shopfronts, including advice on the face‑to‑face services and the assisted self‑services available in each shopfront will make it easier for customers to identify the most convenient location to do their DHS business. This includes being able to identify the business that can be completed using self‑service options without the need to attend a service centre.
DHS agrees with the recommendations outlined in the report.
Recommendation No. 1
To improve services for customers in self‑service extension co‑located shopfronts, the ANAO recommends that DHS monitors the uptake by relevant staff of training intended to assist customers to access the full range of DHS online services and transactions.
DHS’ response: Agreed
Recommendation No. 2
To improve the effectiveness of co-location and the services offered to customers, the ANAO recommends that the DHS website provides more information about co‑located shopfronts, including advice on the face‑to‑face services and the assisted self services available in each shopfront.
DHS’ response: Agreed
 Department of Human Services, Service Delivery Reform,Transforming government service delivery [Internet]. DHS, Canberra, 2011, p.5, available from <www.humanservices.gov.au/spw/corporate/about-us/resources/service-delivery-reform-overview.pdf> [accessed 4 July 2012].
 Hansard, Senate Finance and Public Administration Legislation Committee, Additional Estimates, Human Services Portfolio – Answer to Question on Notice (HS8), from 9 February 2010. Some co‑locations of shopfronts were undertaken prior to SDR—as at December 2009, Centrelink and Medicare were already co-located at 15 sites.
 ANAO analysis of patient claiming data provided by DHS. The data only includes patient claiming and therefore excludes bulk billing or simplified billing claims which comprise the majority of Medicare claims (over 80 per cent). A rapid decline in over-the‑counter patient claims followed the decision in April 2012 to phase-out cash refunds for Medicare transactions. The data for 2012–13 is based on the months of July 2012 to March 2013 only.
 Department of Human Services, Service Delivery Reform, op. cit., p. 8.
 The number of additional consolidations to assist in achieving savings to fund the additional Efficiency Dividend is 67. However, six of these are consolidations of the same face‑to‑face service (for instance, consolidating two Medicare shopfronts) so do not involve the co‑location of services.
 The additional 61 consolidations are part of DHS’ response to the increased Efficiency Dividend in 2012–13. The Efficiency Dividend is an annual reduction in Australian Public Service agencies’ departmental funding. It was introduced in the 1987–88 Budget and has generally been set between 1 per cent and 1.5 per cent annually. In two years (2008–09 and 2012–13) an additional 2.5 per cent reduction has been imposed.
 A number of non‑DHS services have already co‑located in DHS shopfront sites. For instance, ATO services are offered in seven Centrelink shopfronts, and in 12 Centrelink shopfronts state housing authorities have some presence as part of the response to the Australian Government’s White Paper on Homelessness. The 2010 report Ahead of the Game: Blueprint for the Reform of Government Administration recommended that state offices of Australian Government agencies in regional areas co‑locate (page 36).
 As part of its response to the additional Efficiency Dividend announced in November 2011, DHS undertook to increase the number of consolidations, thereby achieving further savings of $2.7 million in 2012‑13.
 For instance, the different ICT and management systems prior to the integration of Medicare and Centrelink into DHS in July 2011 were key reasons why early attempts to train staff in cross‑portfolio processes in shopfronts co‑located by consolidation were unsuccessful.
 Medicare cash refunds were a significant barrier to greater coordination of processes prior to the Minister’s announcement in April 2012 to phase out cash refunds over the second half of 2012.
 In the 2011-12 Budget, the Government announced net savings from co-locations of $14 million over four years and the department harvests the annual savings target upfront during its internal budget allocation process. The $14 million does not include the savings from the additional consolidations implemented in response to the higher Efficiency Dividend in 2012–13. The Efficiency Dividend savings are out of scope for the audit.
 For instance, the Co‑location Program is creating a potential platform for further co‑location of other government and non‑government services as envisaged under Phase 3 of SDR. Some of the lessons learned in consolidating shopfronts when Medicare and Centrelink were separate agencies could usefully inform this process.
 Gateway Reviews involve short, intensive reviews at critical points in a project/program's lifecycle by an independent team of reviewers. Reviewers are selected by the Department of Finance and Deregulation from the public or private sectors for their expertise in relation to a particular review.
 DHS implemented a trial in the second half of 2012 to test a set of integrated business processes for use in co‑located shopfronts.