Auditor-General's overview

In March 2012, the Department of the Prime Minister and Cabinet, the State Services Commission, and the Treasury (the central agencies) launched a shared services organisation – Central Agencies Shared Services (CASS). CASS provides human resources, financial, information management, and information technology support to the central agencies.

Using one shared services organisation to support a number of others is not a new concept. It has been tried in many countries, with varying success in achieving effective and efficient delivery of services. Within our public sector, this approach is not common. In setting up CASS, the central agencies wanted (together with other objectives) to show leadership and have CASS as a potential model for the public sector.

I wanted to know whether CASS was set up well, how effectively and efficiently CASS is performing, and whether it is proving to be a good model for others to follow. I particularly wanted to see whether the approach to setting up CASS provides lessons for other public entities.

CASS has commissioned several reviews evaluating aspects of its progress. For example, EY (Ernst & Young) carried out a review of CASS after one year of operation, which CASS delivered to the Treasury in July 2013.

My staff used EY's findings as a starting point for a performance audit. This report of our performance audit is the first review to be made public.

It is not yet clear whether CASS provides a useful model for the public sector to follow. Many lessons have been learned from setting up and operating CASS. Although some improvements have been made along the way, more are still needed.

The central agencies did not follow best practice in setting up CASS. CASS was set up by the intended date, but important and fundamental aspects of the change were not done well.

For example, the central agencies did not plan effectively for setting CASS up. They did not determine early on how CASS would operate and how it would support the central agencies' strategic objectives – the "big picture" of CASS. This "big picture" was not clear, and the move to one support agency was not well planned.

There were also weaknesses in governance and management as CASS was set up. Overall, consultation was poor and fewer experienced staff transferred than anticipated, resulting in a loss of skills and knowledge of how DPMC and SSC worked. There was not enough focus on building a culture for CASS. The transfer of functions to CASS resulted in some avoidable initial operational difficulties.

Most significantly, the central agencies did not effectively collect baseline data to inform change management plans and allow the performance of CASS to be measured. The time and resources needed to bring systems together and to get CASS up and running smoothly were underestimated.

CASS staff should be commended for putting in extra time and effort to get services functioning effectively. However, work pressures on CASS staff have been severe in the first 18 months, with staff working long hours for many months. Morale has been low and CASS has needed more temporary staff than predicted. As an operating model, this cannot be sustained. Although we heard that the work burden is lessening, a significant risk to the sustainability of CASS remains.

Setting up CASS has benefited service users in the Department of the Prime Minister and Cabinet, who have experienced some important improvements in services. Some improvements have allowed the central agencies to better work together. However, CASS functions are performing at different levels of effectiveness. The finance function is performing most effectively. The human resources function has been the most difficult to establish and slow to improve its effectiveness. The effectiveness of information technology was strained at first by having to address problems more serious than anticipated in the Department of the Prime Minister and Cabinet, but is now improving.

CASS is not yet consistently providing services at the level expected by service users. Some service users told us that they might look elsewhere for the services they need. This could incur further costs to the central agencies. Further work is needed to improve the effectiveness of services and strike a balance between standardisation of services and flexibility that appropriately accommodates the differences between the central agencies.

CASS has estimated some savings since it was set up and forecasts further cost reductions. However, the baseline information collected before CASS was set up was not robust. Despite some effort to gain good information after CASS was set up, the baseline information used for comparisons includes some estimates, and I cannot confirm whether the estimates are based on reasonable assumptions. It is important for CASS to set realistic targets that do not undermine its resilience and sustainability.

The central agencies are committed to improving CASS and have now formed a short- and long-term view of CASS's role and strategic priorities. CASS and the central agencies recognise the importance of making improvements to ensure a smooth running operation before considering expansion. The recommendations I have made should help.

My report also includes a list of important points for other entities that are considering a shared services arrangement. These points are drawn from the lessons learned in setting up CASS and from good practice in other organisations and jurisdictions.

I thank the staff of CASS and the central agencies for their time and assistance during our audit.

Lyn Provost
Controller and Auditor-General

18 June 2014