Part 1: Introduction
1.1
In this Part, we discuss:
- why we carried out our audit;
- why Central Agencies Shared Services (CASS) was set up;
- how CASS has been set up;
- how CASS is funded; and
- how we carried out our audit.
Why we carried out our audit
1.2
The Government's Better Public Services programme has, as a priority, achieving a more effective and efficient public service.1 Functions such as human resources (HR) and finance underpin the effective and efficient delivery of public services. Agencies are exploring how these functions are best organised and delivered. One approach is for one agency to carry out such functions for several other agencies. This is commonly referred to as a shared services arrangement.
1.3
CASS was set up in March 2012 to merge corporate functions from the Treasury, the Department of the Prime Minister and Cabinet (DPMC), and the State Services Commission (SSC).2 These agencies are known as the central agencies because they share a State sector-wide perspective. Along with the General Chief Information Officer and other functional leaders3 in government, they also refer to themselves as "the Corporate Centre". This "Corporate Centre" positioning – working together to lead, co-ordinate systems, and support the public sector – was part of the expectation that CASS would be a model for others to follow.
1.4
The CASS "decision document" (December 2011) described CASS as a way for the central agencies to lead the public sector by example. The senior leaders of the central agencies also saw CASS as a way to show leadership to the rest of the public sector on sharing service delivery.
1.5
Because this approach was relatively new in our public sector, we wanted to assess how well CASS was operating and whether the central agencies had successfully managed the changes needed to set up CASS. To achieve good outcomes, it is important to effectively manage any change process. We wanted to find out whether, in setting up CASS, the central agencies had shown leadership and provided a model for the rest of the public sector to follow when setting up a shared service. Importantly, this was one of the main objectives for setting up CASS when it was approved by the Government.
1.6
The four functions that were transferred to CASS were:
- information technology and information management, referred to collectively in this report as information and communications technology (ICT);4
- people management (human resources, or HR); and
- financial management (finance).
1.7
CASS had been operating for about 18 months at the time of our audit fieldwork. This was enough time to assess whether the central agencies had shown leadership in how CASS was set up, and to assess CASS's progress towards delivering the intended outcomes. We also wanted to draw out any early lessons for the public sector.
1.8
At the time of our audit, CASS was in its "transition" phase of standardising and developing operational processes and systems. We assessed whether CASS was delivering services at the level we would have expected after 18 months of operation.
Why Central Agencies Shared Services was set up
1.9
The central agencies had been talking for some years about restructuring support services in the Treasury and setting up a shared service. In a paper to Cabinet in July 2007, the Treasury concluded that sharing services would provide limited cost savings but might provide other benefits. In 2008, the central agencies commissioned EY to consider options for improving the central agencies' co-ordination.5
1.10
In May 2011, the chief executives of the central agencies decided to set up a shared services arrangement. The merging of corporate services was intended to:
- increase overall effectiveness, efficiency, and consistency of corporate services;
- address "urgent" capability and resilience6 problems in DPMC;
- act as the basis for closer working between the central agencies; and
- show leadership to the public sector.
1.11
The chief executives agreed to situate CASS as a business unit within the Treasury, which had office facilities available and would supply most of the staff for the new organisation. This required relocation and bringing together different systems and organisational cultures. Although cost savings were not highlighted as an objective in the CASS vision statement, the chief executives expected that savings and efficiencies would be gained through streamlining services and economies of scale.
1.12
CASS describes the merger, in its 2013 business plan, as being in three phases:
- Establishment – from the decision to proceed with CASS ("initiation") to the establishment (or "go live") date, 7 March 2012;
- Transition – from the establishment date to the end of 2013; and
- Transformation – from the end of the transition phase to the point when CASS is fully operational. (This phase might continue beyond the first four years because CASS expects to continue to enhance and improve its operation).
1.13
Figure 1 outlines the timeline for CASS from initiation to full operation.
Figure 1
Time line for managing the change to a shared services arrangement
| Phase | Date | Milestones |
| Initiation | August 2010 | Appointment of the Integrated Corporate Services (ICS) Steering Group |
| May 2011 | Paper advising Cabinet of proposal to set up a shared service | |
| July 2011 | Decision to merge | |
| Establishment: design of CASS, planning and change management process, and relocation of staff to the Treasury. | July 2011 | Appointment of the CASS Change Management project manager, the "Establishment Director" |
| December 2011 | Appointment of a new Establishment Director on departure of the original Establishment Director | |
| Staff reconfirmation process | ||
| Shift to the Treasury's premises | ||
| 7 March 2012 | Establishment ("go live") | |
| 12 March 2012 | Set up of CASS Partnership Board | |
| Transition: "bedding in", standardising and building common processes and systems, and finalising service-level agreements. | July 2012 | Approval of the Central Agencies Development Programme |
| July 2013 | Review of lessons from CASS – One year on (EY review) | |
| September 2013 | Completion of the Central Agencies Development Programme | |
| 19 December 2013 | Revision of Partnership Board Charter | |
| Transformation: further development and full standardisation of processes and systems, and long-term strategic planning for CASS. | 2016/17 | Expected that CASS will be fully operational by this time, but will continue to improve and enhance its operation. |
How Central Agencies Shared Services has been set up
1.14
CASS is a business unit of the Treasury and its staff are employees of the Treasury.7 In June 2014, CASS had 65 full-time equivalent staff and 26 fixed-term staff (some of whom have been contracted to cover the move from the Ministry of Civil Defence and Emergency Management into DPMC). CASS is a relatively small shared service operation compared to overseas shared service organisations. CASS provides services to about 700 staff in the central agencies.
1.15
CASS is headed by a Director who has decision-making responsibility for CASS's day-to-day operation. The Director of CASS reports to the Partnership Board (the governance body for CASS), and to the leadership teams of the central agencies.
1.16
The Partnership Board has responsibilities for strategic decision-making and prioritisation for CASS, delegated by the chief executives. Senior managers from the central agencies sit on the Partnership Board as representatives of their agencies and as advocates for CASS in their agencies. The Deputy Secretary (Strategy, Change, and Performance) from the Treasury chairs the Partnership Board.
How Central Agencies Shared Services is funded
1.17
The central agencies contributed to setting up CASS on a proportional basis. Figure 2 shows that the establishment costs, as estimated in the business case for CASS in December 2011, totalled $6.27 million.
Figure 2
Establishment costs of Central Agencies Shared Services, by funding agency
| The Treasury $m |
SSC $m |
DPMC $m |
Total $m |
|
| Operating expenditure | 2.26 | 0.85 | 0.53 | 3.64 |
| Capital expenditure | 1.64 | 0.61 | 0.38 | 2.63 |
| Total capital and operating expenditure | 3.90 | 1.46 | 0.91 | 6.27 |
Note: Figures have been rounded.
1.18
According to information provided by the Treasury, CASS establishment costs are estimated at about $3.2 million, about $3.07 million less than estimated in the 2011 business case.8 These figures include redundancy, implementation, and transition and capital expenditure costs, but do not include subsequent enhancements and replacements.
1.19
The central agencies fund CASS's operations from their budgets proportionally, working out the amounts every year based on how services are used. Figure 3 shows the funding allocation set for 2012/13 in the 2013 business plan.
Figure 3
Funding allocation set for Central Agencies Shared Services, for 2012/13
| The Treasury | SSC | DPMC | Total |
| 56.8% | 24.5% | 18.7% | 100% |
| $8.14 million | $3.52 million | $2.69 million | $14.35 million |
Note: Figures have been rounded.
How we carried out our audit
1.20
We interviewed and held focus group meetings with a range of CASS staff and staff in each of the central agencies to gather their experience of CASS's establishment and service delivery. We reviewed a wide range of documents, including internal and external review reports and policy documents of the central agencies. We drew on our own in-house ICT expertise and from overseas sources about shared services to help inform our expectations and assess CASS against them.
1.21
In March 2013, the Treasury commissioned EY to evaluate how CASS had been set up (the EY review). In July 2013, EY provided its report, Review of lessons from CASS – One year on, to the Treasury. SSC's Performance Improvement Framework reviews of the central agencies also comment on the performance of CASS. Our performance audit built on the findings of the EY review and also considered findings from SSC's reviews and other internal reviews. This report about our audit is the first review of CASS to be published.
1: The Better Public Services programme encourages agencies to change, develop new business models, work more closely with others, and use new technologies to meet challenges. See the State Services Commission website at www.ssc.govt.nz.
2: Memorandum of Understanding relating to CASS between the Department of the Prime Minister and Cabinet, the State Services Commission, and the Treasury, page 1.
3: See www.ssc.govt.nz/bps-functional-leadership-papers-released.
4: The New Zealand Government ICT Strategy and Action Plan states that: "ICT spans Information Management, Technology Infrastructure, and technology-enabled business processes and services."
5: EY is a global professional services firm based in London. EY may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. See the EY website, www.ey.com.
6: By "resilience", we refer to an organisation's ability to support its core business and delivery of services effectively now and in the future.
7: In this report, we use "CASS" to refer to the business unit and its staff and operations.
8: See the Treasury's Annual Report 2011/12, available at www.treasury.govt.nz. Additions for 2011/12 include $1.25 million transferred from SSC and DPMC with the set-up of CASS.