Management of the Implementation of New Policy Initiatives
The objective of the audit was to examine the effectiveness of the AFP's approach to its management of the implementation of NPIs.
1.The Australian Federal Police (AFP) is the primary law enforcement agency through which the Australian Government enforces Commonwealth law. Established by the Australian Federal Police Act 1979 (the Act), its functions include provision of policing services in relation to Commonwealth laws and property, and safeguarding of Commonwealth interests. The AFP also provides community policing services to the Australian Capital Territory and the Jervis Bay Territory. The AFP's Australian Protective Service is the Australian Government's specialist protective security provider.
2. From its establishment in 1979 through to 1999, the staffing and funding of the AFP remained stable, with real outlays rising by two per cent per annum and staffing falling slowly (less than one per cent a year). During this period, the number and size of Government New Policy Initiatives (NPIs) impacting on AFP operations was modest.
3.From 1999, the emergence of a variety of new external pressures meant that the AFP, and the government's requirements of it, changed dramatically. A rapidly changing security environment required a closer focus on national and international operational activities. The terrorist attacks in the United States in 2001 and Bali in 2002 resulted in rapid growth in counter-terrorism capacity and operations. Additionally, the AFP has been affected by emergent issues such as people smuggling, technologically enabled crime, a growth in drug importation, and an expansion in international peace operations.
4. In response to these events and emerging issues, the government significantly increased funding for the AFP. Between 1999 and 2010, real expenditure on outcomes rose at 12 per cent a year. It is estimated expenditure in 2010–11 will approach $1.4 billion, more than three and a half times (in real terms) the amount spent in 1998–99.
5. While early growth was embodied in relatively few funding initiatives, from 2000 the number and value of NPIs rose dramatically. Since the 2000–01 Federal Budget, the Government has announced more than 140 NPIs impacting on AFP operations, with associated funding approaching six billion dollars. Over much of this period, the funding provided to the AFP for the implementation of NPIs in a given year has exceeded the funding provided to the AFP for ongoing administration and operations.
6. The broad relationship between the NPIs and the AFP's outcomes, programs and ongoing operational activities is illustrated at Figure 1. Essentially, to achieve the outcomes agreed by Government, the AFP manages a number of defined programs; and the delivery of these programs is achieved through the conduct of particular operations. Within this framework, the NPIs introduced by Government generally sought to transform operational capability (by establishing new capability, expanding existing capability or improving support to operations) or to provide support for specific operational deployments. Since 2000–01, around half of the new funding has been directed to transforming AFP operational capability (including in the areas of national security and serious crime), and half to supporting international deployments, (including in the Solomon Islands, Papua New Guinea and Afghanistan).
Source: Adapted by the ANAO from Office of Government Commerce, Business Benefits through Programme and Project Management, 2006, p. 18.
7. The challenge for the AFP in effectively managing the complex development and implementation agenda associated with NPIs became increasingly apparent over the decade. In 2007, responding to both internal and external reviews, the AFP moved to strengthen internal policy development capabilities and began implementing organisational arrangements to strengthen implementation planning, project management and performance reporting in respect of NPIs.
8. The 2009 Federal Audit of Police Capabilities (the Beale Review) considered the Commonwealth's total engagement in policing and examined the growing coordination and interdependence of policing across Australia and internationally. While action to implement the recommendations of the review is in train, consideration of the AFP's management of their implementation was outside of the scope of this audit.
9. The objective of the audit was to examine the effectiveness of the AFP's approach to its management of the implementation of NPIs.
10. Given the number of NPIs, the variance in nature and scale, and the impact they have had on AFP operations, forming an overall view as to the effectiveness of the implementation of particular NPIs is beyond the scope of a single audit. There are a number of NPIs which have, or are likely to, fundamentally impact on AFP operations and capability which would be properly considered through a more detailed examination of the individual AFP programs to which they relate. Provision for audits of this nature has been included in the ANAO's future work plan.
11.Nonetheless, NPI implementation is likely to be more effective when an organisation implements appropriate governance and control arrangements, and provides effective support to, and oversight of, project and program management in the agency. Accordingly, to assess the effectiveness of the AFP's management of the implementation of NPIs, this audit considered whether the AFP had effectively implemented the governance and administrative arrangements necessary to support its expanded responsibilities and to allow it to provide assurance that new policy initiatives were being delivered in accordance with time, quality and cost expectations articulated by government. Without drawing conclusions in relation to the performance of individual policy initiatives, the audit also sought to identify opportunities for the AFP to strengthen organisational performance, institutional transparency and accountability.
12.Over the last decade, the AFP has faced substantial changes to the scope, and scale, of its operations. Funding increased by 250 per cent in real terms and staffing by nearly 140 per cent. The AFP has been transformed into a large, complex agency required to work in close cooperation with other federal agencies, with a range of international and transnational organisations, and with law enforcement and emergency authorities throughout Australia. The AFP has moved to a central role in advising government and is a major agent in the achievement of the Government's national security and policing priorities, both domestically and abroad.
13. The transformation of AFP operations since 2000–01 has been driven by over 140 NPIs, with associated funding approaching $6 billion. These NPIs have transformed the organisation by establishing new capability, expanding existing capability or improving support to operations. They have also provided the capacity for the AFP to undertake specific operational deployments, often in support of broader government policy goals. The scale of the transformation has been such that, for much of the last decade, NPI funding has exceeded core funding and has, at times, approached 75 per cent of total funding.
14. The changes have not only been significant and complex but have also touched most, if not all, areas of AFP operations. Consequently, it is difficult to separate any evaluation of the effectiveness of the additional investment from consideration of the AFP's overall performance. Moreover, when deciding on the appropriate deployment of public resources to guard against potential threats to life and property, judgements will necessarily need to be taken by government. Nonetheless, the Commissioner of the AFP remains responsible for the efficient, effective and ethical use of resources under the control or management of the AFP, and for ensuring that arrangements are in place to promote both transparency and accountability in the use of those resources. While there are challenges in establishing clear and measurable objectives in relation to complex security or policing matters, it is an area which must be addressed to inform decisions on the efficient and effective utilisation of resources and to ensure appropriate accountability.
15. Notwithstanding significant internal reform through the 1990s, the AFP was not experienced in, nor structured to deal with, the management of change of the rate and scale that occurred after 2000–01. Although the AFP sought to evolve its overall internal governance arrangements, independent reviews in 2006 and 2007 identified a need for the AFP to strengthen policy capacity and to provide greater organisational support for NPI development and implementation. The Cabinet Implementation Unit (CIU) also advised the Commissioner at that time that the AFP needed to develop a stronger project management culture and capacity which linked policy development to the delivery of operational outcomes. The AFP subsequently undertook an internal stocktake of NPI administration, identifying significant deficiencies in governance, transparency, implementation planning and reporting.
16. Effective control and oversight of policy implementation is critical if government expectations in relation to the delivery of new or revised capability are to be achieved. In order to better support the effective delivery of expanded operational expectations, and to address the identified shortfalls in NPI administration, the AFP revised its internal governance structures and moved to enhance its policy development and advising capability. In late 2008, the AFP also initiated action to create a dedicated corporate Portfolio, Program and Project Management capability, including a team to provide project support, executive reporting and a centre of project management excellence.
17. Overall, the AFP has been generally effective in updating its broad governance structures and enhancing policy development and advising capabilities. However, while the broad strategy developed in 2008 to improve project management and oversight in the AFP was sound, its implementation has not been effective. As a consequence, the measures taken to improve organisational project management capability have had little effect and the AFP still lacks the processes, controls and structures necessary to provide the Commissioner and the Government with assurance that new policy initiatives are being delivered in accordance with the Government's time, quality and cost expectations. In particular, implementation planning has been generally poor, with no consistent approach to, or clear policy on, project management across the organisation; and coordinated executive reporting on NPI implementation has been neither comprehensive nor rigorous.
18. Organisations without well-structured program and project management arrangements may still, in the short run, deliver the outcomes sought by government, but experience has shown that implementation of individual initiatives will generally be less effective and less efficient, and the risk of significant failure will be considerably higher. In this context, the Government has acknowledged the need to improve the delivery of government services, policies and programs, to give the Government and the public greater confidence that implementation is consistently efficient and effective.
19. The extent and scope of the funding and operational changes experienced by the AFP over the last decade is unprecedented in the organisation's history, and unusual in public administration. These circumstances underline why improved implementation planning, project management and coordinated executive reporting remains a key focus of the AFP's evolving governance framework. Effective performance of these functions is critical if the AFP is to maintain a clear view of the status of various initiatives, and provide assurance to government and other stakeholders that initiatives are being effectively managed.
20. The AFP continues to face significant program implementation challenges and has recently decided to reinvigorate project, program and portfolio management in the organisation. The team established in 2008 to provide project support, executive reporting and a centre of project management excellence will be replaced with a new Portfolio Management Office (PMO) with responsibility for embedding consistent, comprehensive and rigorous governance and support arrangements for project management in the AFP, including for the implementation of NPIs.
21. Having regard to current plans within the AFP to strengthen portfolio, program and project management, the ANAO made four recommendations aimed at supporting more effective management of the implementation of NPIs.
22. In line with the emergence of significant pressures in the external national security environment over the last decade, there has been a continual evolution of the broad structures of governance, both within which the AFP operates and internal to the AFP.
23. The AFP has established a coordinated framework of committees, including the New Policy Proposal Coordination Committee, the Strategic Investment Committee and the Performance and Budget Monitoring Committee, to better control and coordinate the development and implementation of internally and externally funded projects, including NPIs. These committees have been effective in drawing together key stakeholders in project development and implementation at the early stages of project development and have given greater priority to considering NPI implementation as a factor in business performance. These enhancements to internal governance have occurred in conjunction with moves by the Government to strengthen inter-agency cooperation and coordination on national security matters, including the preparation of a coordinated National Security Budget.
24. The revised governance arrangements provide an improved framework for cooperation between stakeholders in determining priorities and ensuring accurate policy alignment. However, there is a lack of clarity around key elements of the new AFP committee structure, with some bodies operating with outdated terms of reference and without clear executive authority for their new roles. The benefits of the new arrangements would be more effectively embedded by formalising the roles and responsibilities of the new and revised committees, with clear executive endorsement of the scope of their responsibilities and powers.
25. Completion of a clearly articulated and documented organisational risk management plan would further strengthen the internal assurance arrangements.
Developing new policy initiatives
26. Since 2006, in response to independent advice, the AFP has taken a number of steps to strengthen its NPI development and policy advising capability. Resourcing has been enhanced and the policy function is better integrated with internal governance and performance management arrangements.
27. A structured policy development process has been implemented, supported by the enhanced internal capacity, and overseen by a New Policy Proposal Coordination Committee that brings together policy development and implementation considerations at an early stage. The AFP's senior leadership group is actively involved at key points in the policy development cycle. In addition, the Secretary of the Attorney-General's Department has introduced arrangements to more closely coordinate NPI development within the portfolio. NPI development within the portfolio occurs within an enhanced whole-of-government governance framework for national security matters.
28. The revised internal and external consultative framework creates considerable engagement between those key stakeholders best placed to identify and address significant implementation issues. Overall, changes to the AFP's formal NPI development process have largely been designed to meet the requirements of the Government's annual budget process and the needs of external stakeholders. However, NPI development has not clearly focused on addressing AFP business needs, including the clear identification of implementation risks and mitigation strategies. An increased focus on the identification and documentation of AFP business requirements, risks and mitigation strategies would constitute improved practice and provide greater assurance to AFP management that projects will be able to be delivered within the time, quality and cost expectations articulated by government.
29. Given the inherently dynamic nature of the national security environment, the AFP will continue to face the challenge of ensuring that good policy development practice is employed when policy responses are required in unusual and urgent circumstances. It will be important for the AFP to embed clear accountabilities and procedures (including arrangements for internal oversight) to reduce the risk of procedural breakdown in such circumstances.
Implementation planning and project management
30. The AFP's decision in 2008 to strengthen implementation planning and introduce coordinated corporate NPI implementation reporting was made following an internal stocktake that identified major deficiencies in project management, and advice from the Cabinet Implementation Unit (within the Department of Prime Minister and Cabinet) that the AFP should act to develop a stronger project management culture. Late in 2008 the initial strategy was expanded to encompass support, training and guidance to project managers in the AFP, executive reporting of progress against time, cost and quality measures, and the establishment of an ‘organisational knowledge repository' on program and project management and NPI management.
31. However, at the time of audit fieldwork in 2010, proposed improvements in implementation planning and management methodologies had not generally been realised. There had been difficulties in sustaining even the modest level of resources originally allocated to project support, executive reporting and the establishment of a centre of project management excellence, resulting in substantial delays in achieving key implementation milestones for improving implementation planning and project management. AFP planning for the implementation of NPIs was inconsistent, with only 30 per cent of implementation plans including clear milestones, success indicators, financial plans and risk management strategies. There was no structured feedback to project managers or other measures aimed at promoting consistency and improving quality.
32. The approach to project management was similarly inconsistent, with less than one third of project managers surveyed by the ANAO indicating that they were managing their projects in accordance with the AFP's preferred project management approach, and an inadequate appreciation of the support and training requirements of project managers. Although adoption of the new arrangements among project managers was limited, the AFP senior executive expressed support for the direction of the change and a view that considerable benefits had been realised when more rigorous project management techniques had been applied to projects.
33. In late 2010, the AFP advised the ANAO of a strategy to reinvigorate corporate project, program and portfolio management in the AFP, with increased resourcing and a new PMO replacing earlier arrangements. The effectiveness of the PMO will be influenced by the extent to which the AFP clearly defines and articulates the policy and procedural foundations supporting the proposed project management framework arrangements. In particular, it will be important for the AFP to clarify the key elements of the methodology, including implementation planning, and to provide improved project manager support. The AFP should also seek to implement effective quality control and organisational learning arrangements.
34. In moving forward with the establishment of the PMO, it will be important for the AFP to provide sufficient, appropriately skilled resources to support this initiative and to communicate both a clear mandate and strong executive support for the new arrangements. Effectively embedding a consistent and rigorous approach to NPI implementation planning and monitoring in the AFP would be an important step in adequately addressing the significant risks to organisational assurance and accountability identified by both internal and external advisers in 2007 and 2008, and which have not been effectively addressed to date.
Executive oversight and developing organisational capability
35. The AFP currently has no clear policy or documentation supporting the arrangements for executive oversight of NPI implementation. At the time of audit fieldwork, coordinated reporting on progress in implementing NPIs had not occurred since a report to the AFP executive for the December 2009 quarter. Reporting up to that time was not comprehensive, with significant NPIs being excluded, and key milestone and financial data treated inconsistently or, at times, omitted. Reporting on project finances and the realisation of key project benefits would benefit from greater guidance for project managers, more rigorous quality assurance and a consistent adoption of implementation planning and project management methodologies.
36. The coordinated NPI reporting undertaken in 2008 and 2009 provided the AFP executive with limited assurance regarding the extent to which the risks associated with the implementation of NPIs were being managed. In progressing current plans to reinvigorate corporate project, program and portfolio management, it will be important for the AFP to strengthen monitoring processes, providing greater consistency, completeness and quality in the information provided to the executive.
37. The ANAO found little progress had been made in implementing strategies to build organisational knowledge concerning project management and NPI implementation. There have also been delays in developing a capacity to improve organisational engagement with AFP project managers and to influence day-to-day project management practice in the AFP. The extent of productive engagement with managers across the organisation and the level of understanding of current organisational practice are likely to be key influences in the AFP's ability to give effect to its intention to build an effective centre of excellence and improve organisational practice over time.
38. Overall, the broad strategy developed by the AFP in 2008 to improve organisational oversight of, and accountability for, the implementation of NPIs was sound, but its implementation has not been effective. Current arrangements limit the extent to which the AFP executive have clear visibility of, and assurance in relation to, the risks associated with the implementation of NPIs and there is considerable scope for the AFP to strengthen monitoring processes. The establishment of the proposed project management centre of excellence should strengthen the AFP's overarching administration of NPIs. However, the successful implementation of this initiative will require the AFP to provide sufficient, expert resources and the establishment of arrangements to build appropriate organisational engagement and awareness.
39. A copy of the proposed report was provided to the AFP. Relevant extracts of the proposed report were also provided to PM&C and Customs. Both PM&C and Customs provided editorial comments and they have been incorporated as appropriate in the report.
40. The AFP's full response on the proposed report is reproduced below:
The AFP has welcomed the opportunity to contribute to the ANAO performance audit AFP Management of the Implementation of New Policy Initiatives, embraces the commentary provided within the report and agrees with the recommendations arising from the audit. The magnitude of growth for the AFP over the past decade is, as stated by the ANAO, unprecedented in the AFP's history and unusual in public administration. Whilst accepting the report it is important that the findings and content be balanced by facts such as the allocation to the AFP of over 140 NPIs since 2000-01, with associated funding approaching $6 billion.
This growth has resulted in considerable expansion of AFP operational activity domestically and internationally in support of broader government policy goals, including many at the forefront of the national security agenda. During this time of rapid growth, the AFP has continued to deliver against the AFP's Portfolio Budget Statement key performance indicators. The AFP, through enhancements to existing arrangements and the development of new frameworks, is actively progressing implementation of the four recommendations. The contents of the report provide the AFP with an excellent opportunity to further progress a range of strategies with a view to strengthening the AFP's approach to managing the implementation of NPIs and broader governance considerations.
The AFP notes that the ANAO found the AFP to be generally successful and advised that the AFP has in place substantial elements of effective governance and a coordinated framework of Committees. In the context of Recommendation 1, the AFP has commenced a body of work regarding the AFP's Committee framework, associated Terms of Reference and clearly defined executive authority. In the report, the ANAO indicates that the AFP has implemented a structured policy development process and brings together policy development and implementation considerations at an early stage. Recommendation 2 identifies that strengthening existing practice will be progressed through a greater focus on addressing AFP business needs, including the identification of implementation risks and mitigation strategies.
Since commencement of the audit fieldwork the AFP has actively progressed the implementation of a range of strategies through the establishment of a Portfolio Management Office (PMO). The PMO will develop and maintain appropriate business support structures and governance for AFP change initiatives including projects, programs and NPIs, ensuring delivery against Recommendations 2, 3 and 4. The AFP is fully committed to the effective implementation of the PMO to enhance the development and delivery of change strategies and initiatives.
The findings and recommendations in the report have informed the AFP's corporate investment in and management of its entire business change portfolio.
 In this publication, the term New Policy Initiative (or NPI) reflects AFP usage and describes a Government initiative with funding and operational impact, announced either in or between Federal Budgets. NPIs announced between budgets may also be reported in Mid-Year Economic and Fiscal Outlook, or in agency Additional or Supplementary Additional Estimates Statements.
 Reported expenditure in 1998–99 was $274.8 million, or $384.2 million in 2009–10 prices.
 Appendix 1 of the report lists 143 NPIs that were reported in Government budget papers between 2000–01 and 2009–10 (inclusive). The estimate of funding is based on the reported funding for each NPI (except where budget papers note that provision for the measure had already been included in the forward estimates, in which case a value for the measure has been estimated) and is identified in Appendix 1. The basis of the calculation of the estimate for each NPI is specified in Appendix 1.
 In 2005–06, for example, funding for NPIs was 73.6 per cent of total funding.
 Allen Consulting Group, New Realities: National Policing in the 21st Century (Federal Audit of Police Capabilities), 30 June 2009, also known as the Beale Review.
 Minister Wong's speech Better Government, delivered to the Commonwealth Authorities & Companies Discussion Forum, 8 December 2010 available from <http://www.financeminister.gov.au/speeches/2010/sp_101211.html> [accessed 13 December 2010].
 The AFP has since advised that a report against all NPIs was provided to the December 2010 meeting of the Strategic Leaders Group (SLG) and that future reporting to the SLG will be on a six-monthly basis.