The audit objective was to assess whether agreements between Australian Government (Commonwealth) agencies reflect sound administrative practices. To meet this objective, the audit reviewed current government policy and a range of better practice guidelines, conducted interviews with agencies and examined cross-agency agreements, to formulate suitable audit criteria and subsequently develop better practice principles.



1. Over recent years, Australian governments have advocated a stronger focus on interagency collaboration and whole of government approaches to achieve effective program implementation, seamless service delivery and information sharing. As identified in the 2004 report Connecting Government, ‘the APS should be striving to create a “culture of collaboration” that aids the sharing of research, experience and expertise in addressing intractable problems.'1

2. In this endeavour, a ‘culture of collaboration' has become a growing characteristic of the public sector. On a day-to-day basis, officials from different agencies work across organisational boundaries to deliver government services, or collaborate in the formulation of national policies. Interdepartmental Committees (IDCs), taskforces, and joint working parties are just a few of the mechanisms used to coordinate substantial cross-agency initiatives.

3. While many agencies cooperate successfully on an informal basis, formal written agreements are frequently used to facilitate productive cross-agency relationships. Usually in the form of a Memorandum of Understanding (MOU), each document establishes a foundation for a working relationship, setting out essential roles and responsibilities, and defining agency obligations in terms of governance, performance expectations, and reporting arrangements. The agreements also contain agreed specifications for particular services or deliverables, including quality measures and timeframes.

4. In this audit, 21 agencies reported over 1800 current agreements; an indication of the sizeable commitment to cross-agency activities across the broader Australian Public Service (APS) and the breadth of agency interdependencies.2 The audit examined a cross-section of agreements to determine if they were generally fit-for-purpose and consistent with sound administrative practices.3 A particular aim of the audit was to bring together essential information to inform better practice.

Key principles of cross-agency agreements

5. Cross-agency agreements are diverse in their form and content, each tailored to suit a specific situation and range of requirements. Their purpose ranges from a simple annual exchange of data between two agencies, to clarifying respective responsibilities where programs are interdependent (such as border security), or undertaking research on behalf of another agency. Many agreements cover specifications and performance measures for the delivery of services or products, such as Information Technology services or payments of unemployment benefits, while others support the implementation of complex programs through multiple agencies.

6. An agreement may be represented by a simple Exchange of Letters, a complex MOU, Business Partnership, or a high level Collaborative Head Agreement.4 However, regardless of their name or structure, agreements between Australian Government agencies are typically non-legally binding, as they are between parts of the same legal entity.5 Consequently, the success of cross-agency arrangements is often dependent on relationship management and the good will and cooperation of the respective parties.

7. Although cross-agency agreements are not usually legally binding, the signatories are agreeing to fulfil the obligations and roles therein. There is an expectation that arrangements will be based on sound administrative practices and ethical conduct, with all parties complying with key elements of the Commonwealth's governance frameworks. To assist agencies in meeting relevant goals and outcomes, the content of agreements needs to support key principles of program effectiveness, performance management, transparency and accountability.

8. Key requirements for cross-agency agreements include defining: the objectives of the arrangement, including desired outcomes and timeframes; roles and responsibilities of each party; the goods or services to be provided; implementing suitable governance and communication arrangements; considering risks, and incorporating reporting and review provisions. The development of appropriate guidance material and agency controls can also be of great value to agencies, particularly for ensuring the currency, quality and appropriate terms of agreements.

Public sector administrative reform

9. The report Ahead of the Game: Blueprint for the Reform of Australian Government Administration, released in March 2010, proposes reforms which ‘aim to improve outcomes for citizens, through more integrated services, better policy advice…through changes to systems, structures and practices'. Visions for the future include: an APS-wide focus on capability; effective measurement of the outcomes for whole of government objectives; and consistent quality in the delivery and effectiveness of programs.6

Audit conclusion

10. The audit objective was to assess whether agreements between Australian Government (Commonwealth) agencies reflect sound administrative practices. To meet this objective, the audit reviewed current government policy and a range of better practice guidelines, conducted interviews with agencies and examined cross‐agency agreements, to formulate suitable audit criteria and subsequently develop better practice principles.

11. The audit examined 200 cross‐agency agreements from 21 public sector agencies (the 19 portfolio departments, Centrelink and the Australian Taxation Office).

12. An important focus of the Australian Public Service (APS) in recent years has been to operate more effectively across organisational boundaries, in order to strengthen whole of government policy implementation, service delivery, and sharing of information. To facilitate productive coordination between Australian Government agencies, cross-agency agreements are frequently used to formalise collaborative relationships and define essential business requirements. While such agreements are usually non-legally binding, they need to be administered according to sound governance principles, including accountability, transparency and value for money.

13. Within the current APS environment, cross-agency agreements continue to be important administrative tools. A wide range of well-structured agreements exist across agencies. The negotiation and development of complex agreements can be lengthy and resource intensive, as agencies seek to agree on administrative arrangements. In the majority of cases, agreements provide a useful basis for the function they are intended, and almost always provide adequate specifications for roles and responsibilities, activities, and deliverables. The effort and skill demonstrated by agencies in negotiating, developing and managing cross-agency arrangements is substantial, and has assisted in the successful implementation of many major policy initiatives.

14. Notwithstanding this, there are opportunities to improve several aspects of the development and management of agreements to achieve a more consistent and effective basis for cross-agency relationships and whole of government activities.

15. Individually, a few agencies have developed their own systems, policies and templates to streamline the development and management of agreements. While these steps have been beneficial for producing agreements that are fit-for purpose, current and explicable, inconsistency exists in the overall clarity, quality and completeness of agreements across the 21 agencies. This is generally indicative of the diversity of administrative practices between agencies, but also reflects the limited availability of guidance for developing non-legally binding agreements.

16. In many instances, the agreements provided only a perfunctory basis for building interagency collaboration, overlooking key provisions and important aspects of relationship management, risk management, outcome reporting and review.7 Performance indicators were present in about half the agreements, but these were seldom linked to broader outcomes. The absence of this information can reduce the usefulness of the agreement in providing a clear focus on what is to be achieved. For approximately one third of agreements, the non-legal basis of the arrangement was not made clear. A small percentage included legal clauses of little practical value in agreements between same legal entities.

17. To improve the overall quality, usefulness and management of cross-agency agreements requires each agency to develop a consistent approach, more cognisant of shared risks and accountabilities. To this end, agencies would benefit from developing appropriate and accessible guidance material, and mechanisms for internal scrutiny of agreements, tailored to reflect their particular situation.8 These steps will provide efficiencies by improving common understanding of cross-agency agreements, and help to traverse organisational barriers more effectively. The ANAO has compiled better practice principles to assist agencies in reaching this goal.

Better practice principles

18. Better practice principles, presented at the end of the Key Findings and Chapters 2, 3, 4 and 5, are based on the audit findings and consideration of relevant government policy, guidelines and agency input during the audit. They are not exhaustive, and should be read in conjunction with other relevant guidelines, particularly those referred to in the body of this audit report.

Key findings by chapter

Principles and practice (Chapter 2)

19. In the current Australian Public Sector (APS) environment, cross-agency agreements remain an important device for supporting a whole of government approach to service delivery, program implementation and information sharing. However, the number of agreements that exist across the APS is unknown. In this audit, 21 agencies reported around 1800 current agreements, indicating that the number of agreements in place across the APS is likely to well exceed this.

20. Cross-agency agreements are typically Memoranda of Understanding (MOU) between parts of the same legal entity, and are therefore non-legally binding. However, the diversity and complexity of functions and tasks has led each agency to adopt a range of titles, structures, and principles to tailor cross-agency agreements to their own needs and preferences. This decentralised approach has contributed to inconsistency in the content and context of the agreements, as well as inaccurate perceptions about their legal status, and at times, their legal enforceability. Each cross-agency agreement needs clarity in these areas to avoid misinformation which may unsettle inter-agency relationships.

21. As non-legally binding arrangements, the effective management of many cross-agency initiatives is highly reliant on establishing sound inter-agency relationships, including mechanisms for resolving disputes between agencies (also see Chapter 4). While suitable governance arrangements are defined and implemented in the majority of cases, a substantial number of agreements gave only cursory guidance on the management of disputes, occasionally including options for legal recourse. While there is no need to impose arduous requirements for governance and dispute resolution, cross-agency collaboration can be improved by pre-empting significant problems and having appropriately responsive mechanisms agreed and in place.

Guidelines (Chapter 3)

22. Extensive prescribed guidelines are available on procurement in the APS, in particular the Government's accountability framework and supporting documents (especially the Department of Finance and Deregulation's procurement guidelines), and other guidance material such as ANAO better practice publications. In contrast, there is limited prescribed guidance to help APS officers in developing and managing cross-agency agreements. While many aspects of the government's procurement framework and better practice guides can be aptly applied, specific guidance material is required to improve the overall consistency and quality of cross-agency agreements.

23. In the absence of authoritative guidance, agencies follow a range of information contained in the Government's accountability framework, better practice guides, and internally developed procedures. Established in 2005, the National Collaborative Framework (NCF) has provided useful guidance on aspects of cross-agency agreements, in particular Collaborative Head Agreements. However, there was little evidence during the audit that the NCF templates or procedures are widely used by agencies.

24. Several agencies have established useful internal web-based material, such as procedures and templates, to provide guidance in developing cross-agency agreements. Apart from this, agency sources of information tend to include: previous agreements, local expertise, legal advice, and contract guidelines. Each of these sources has strengths and weaknesses that can affect the accuracy and effectiveness of the agreements. To achieve a more consistent and appropriately informed approach to developing and managing cross-agency agreements, requires agencies to provide an authoritative and accessible resource to guide staff. Ideally, agencies should draw together existing information, such as the NCF and government guidelines, to best reflect individual agency needs as well as broader government requirements.

Key provisions (Chapter 4)

25. Cross-agency agreements are used for a wide range of reasons, and cover a broad spectrum of work across the public sector. Each agreement can be tailored to suit the specific situation and the agencies' defined obligations. There are, however, several key provisions that contribute to the administrative soundness of non-legally binding cross-agency agreements. Inclusion of these provisions helps to bring about sound understanding by all parties of the purpose, responsibilities, and core requirements of the agreement. In particular, the ANAO examined: objectives; roles and responsibilities; performance indicators; resources and budgetary issues; and mechanisms for the management of risks, reviews, and disputes.9

26. An assessment of 200 cross-agency agreements showed an inconsistent application of key provisions across the agreements and between agencies. The majority of agreements contained a cogent explanation of roles and responsibilities, and the objectives were usually stated. However, additional background information to better convey the broader purpose and context of the arrangement, and more consistent linking of the objectives to desired outcomes, would improve the clarity of cross-agency arrangements in many instances.

27. Few agreements featured requirements for risk identification, assessment or mitigation strategies. Establishing an agreement can, in itself, be a useful mechanism for managing and reducing risks in cross-agency arrangements, however, clearer recognition and documentation of potential operational risks, including shared risks, would help agencies in planning for the management and early resolution of any problems.

28. While many agreements mentioned review, few included the review's timing or mechanism. Of the one third of agreements that specified measurable performance indicators, a significant proportion of these would improve their overall performance reporting by better aligning the performance indicators to program objectives and higher outcomes. Where relevant, inclusion of clearer specifications on funding arrangements, particularly the nature and source of funds, would help to convey the significance and materiality of cross-agency arrangements. This additional visibility would assist agencies in focusing monitoring and other compliance activities on more substantial agreements where performance against budget commitments is necessary.

29. Collectively, improvements in these areas will provide greater clarity of the basis of cross-agency relationships, and better position agencies to monitor the performance and overall effectiveness of their cross-agency arrangements. This will become increasingly more important as recently proposed reforms in Australian Government administration move towards the introduction of shared outcomes across portfolios.10

Effective agency coordination (Chapter 5)

30. Cross-agency agreements are frequently used to formalise affiliations between Australian Government agencies. However, at the agency and broader government level, there is limited information about the full extent of their use, or the costs, benefits and consistency of processes employed for such arrangements.

31. To monitor the quality and currency of agreements, some agencies have established central coordination units, using registers to record details of agreements and track progress against key requirements. However, these practices are not consistent or widespread.

32. There are many potential benefits in maintaining an accurate and up to date register. For example, a well managed can be used to aid internal monitoring to improve the quality and consistency of cross-agency arrangements, and for ensuring that deliverables and accountability requirements are met. In combination with periodic monitoring, registers can be used to inform an agency of poor performance under an agreement, its impending succession or the need for review. A well managed register can be a particular asset in agencies that have a large volume of agreements, or where regular review or variation of agreements is required.

33. To improve the overall consistency and transparency of cross-agency arrangements, agencies should consider the effectiveness of their current coordination activities, and strengthen processes as appropriate for their particular situation. This should encompass consideration of the need for formulating guidelines to foster consistency in the development of agreements (also see Chapter 2), as well as taking into account the potential benefits of better monitoring.


1 Management Advisory Committee (MAC) 4, Connecting Government—Whole of Government Responses to Australia's Priority Challenges, 2004.

2 As at March 2010 there were a total of 195 Commonwealth agencies: 103 Financial Management and Accountability Act 1997 (FMA Act) agencies and 92 Commonwealth Authorities and Companies Act 1997 (CAC Act) bodies. Information from <> [accessed 2 March 2010].

3 As defined by various Government legislation and better practice guides (see Table 2.5).

4 In practice, memoranda of understanding are often given different names to reflect the focus of the agreement. For simplicity, the term ‘cross-agency agreements’ is used in this report.

5 Agencies that belong to the same legal entity cannot contract with each other. This does not necessarily apply to agreements between Commonwealth agencies where one or more is established under the Commonwealth Authorities and Companies Act 1997 (CAC Act). ANAO and Finance, 2007, Better Practice Guide. Developing and Managing Contracts: Getting the Right Outcome, Paying the Right Price, p. 24.

6 Department of the Prime Minister and Cabinet, Advisory group on reform of Australian Government Administration, Ahead of the Game: A Blueprint for the Reform of Australian Government Administration, March 2010, pp. 63, 74, and 81.

7 The ANAO assessed 200 agreements as part of the audit.

8 Notwithstanding that some agencies have made progress, to various degrees, in these areas.

9 ANAO, Better Practice Guide—Public Sector Governance, volume 2, Guidance Paper No. 7, 2003, p. 3.

10 Department of the Prime Minister and Cabinet, Ahead of the Game: Blueprint for the Reform of Australian Government Administration, March 2010, pp. 63, 66 and 81. Recommendation 8.2 ‘Introduces shared cross portfolio outcomes in priority areas where more than one portfolio is responsible for achieving government outcomes’.