Part 3: Progress in achieving the desired objectives

Setting up Central Agencies Shared Services.

3.1
When CASS was set up in March 2012, its objectives were:

  • minimising risk through increased resilience;
  • increasing efficiency and effectiveness of services; and
  • enabling closer working between the central agencies and showing leadership to the public sector.

3.2
In this Part, we discuss whether CASS:

Incomplete measures for monitoring and reporting on progress

Lesson 5
Define clear operational objectives (matched to the strategic objectives of the businesses being served), set measurable performance targets, and report accurately and promptly against those targets to monitor progress.

3.3
The central agencies have not yet adequately defined how they expect CASS to operate and deliver its services, and CASS does not yet have good performance indicators. Because of this and the lack of baseline information, CASS has not adequately monitored and reported on its progress so far.

3.4
CASS has reported progress against a limited set of service performance measures based on a Service Catalogue10 that it has prepared. At the time of our audit, the measures were incomplete – they were mostly for Finance and the IT service desk, with only a few for HR. The Treasury's Annual Report 2012/13 noted this limited set of performance measures and stated that CASS was making progress as expected.

3.5
The 2013 business plan for CASS acknowledged that its performance measurement processes were still being developed. CASS is carrying out some performance reporting improvements, such as monthly reports to the Partnership Board on progress against budget.

Improved service resilience but sustainability risks remain

3.6
Setting up CASS has significantly improved the capability and resilience of DPMC's corporate services, which was one of CASS's primary objectives. CASS and DPMC staff told us that some functions are now much improved, such as payroll, ICT helpdesk response, and ICT resilience. Better ICT capability is still needed to respond to urgent requests (for example, to enable DPMC support for Cabinet) and security requirements.

3.7
These improvements are in line with the June 2013 Performance Improvement Framework report by the SSC about DMPC.11 The report noted that CASS has a vital task to perform in supporting DPMC to prevent a failure of ICT infrastructure, which could lead to "undue risk" to the Government. DPMC did not have the budget to upgrade its ICT system, or to meet expansion requests for enhanced security. DPMC needed to gain broader staff capability within a small workforce, and to mitigate the risk of depending on one individual for specific responsibility or knowledge.

3.8
The lack of effective planning for the early phase of operations after March 2012 meant that permanent and temporary CASS staff worked many long hours to set up CASS core business. This adversely affected staff morale; we were told that CASS risks staff "burnout" and high turnover, and might find it difficult to attract suitable staff. CASS relied on temporary staff to supplement the 65 permanent, full-time equivalent staff, and to provide flexibility to cover peaks in activity.

3.9
At first, 13 temporary staff worked in CASS. At the time of our audit (two years on), there were 26 temporary staff, including staff brought in to cover the move from the Ministry of Civil Defence and Emergency Management into DPMC. In our view, a risk to the sustainability of CASS remains through having a high proportion of fixed-term staff. Although we heard that the work burden (and need for temporary staff) is reducing and staff turnover is at an acceptable level, future growth in operations could increase the workload again.

3.10
We note that CASS is now setting up a programme office to manage ongoing projects and to avoid the costs and continuity problems of recruiting fixed-term staff.

Not all functions performing effectively

Different functions are performing at different levels of effectiveness

3.11
In March 2013, CASS carried out maturity assessments on the effectiveness of each of the four functions that transferred (now in three teams, Finance, HR, and ICT). The assessments showed that they are performing at different levels of maturity, with all functions yet to achieve full effectiveness. The 2013 business plan set targets to improve the performance of all of its functions.

Finance is the most effective function

Lesson 6
Working to get processes and systems in line before establishment helps to speed up transition and ensure that services are delivered better.

3.12
Finance is the most effective of the transferred functions and has been the most successful in supporting the central agencies at both transactional and strategic levels. The finance team achieved a range of improvements as well as completing the change process effectively. The team then produced a strategic plan in August 2012 that clearly set out its purpose and intentions. The finance team has provided managers with effective financial reporting and with support and training for managing their budgets. Staff in the Treasury told us that the service had reduced while CASS built up its services, but the finance team has now enhanced the financial support provided to all three central agencies.

3.13
Putting a common financial system into effect early helped set up this function faster and ensure that it was operationally effective. Before CASS was set up, the three finance teams had been working towards a common system and process, getting financial management functions and systems into line, which greatly helped service delivery. Most of the permanent finance staff were already employed in the Treasury. This made the staffing transition easier and avoided the effects on productivity or loss of morale that were experienced by the other functions.

3.14
The CASS Finance Manager role currently incorporates the role of Chief Financial Officer for the three central agencies. This means that the CASS Finance Manager is responsible for:

  • providing strategic advice to the central agencies about financial services, as Chief Financial Officer; and
  • delivering those services, as CASS Finance Manager.

3.15
It will be important for the central agencies to keep this arrangement under review to ensure that there is appropriate separation between these responsibilities.

HR function is operating effectively in some areas but has been slowest to gain momentum

Lesson 7
For functions such as human resources, ensure that adequate attention is given to respecting and supporting the different cultures within the agencies and, where appropriate, bringing together those different cultures in a more standardised approach.

3.16
The HR function was adversely affected because the team did not start with a systematic, co-ordinated approach to the services it should provide. At first, HR did not have enough staff to support three different cultures with diverse processes and practices. This has resulted in inconsistent service delivery (as indicated in its maturity assessment). We heard from some service users (senior staff) that the HR team's service delivery reduced in terms of systems, management information,12 and capability. This reduced the effectiveness of aspects such as recruitment, organisational development, and staff learning and development.

3.17
Difficulties have arisen from:

  • having to do many transactional tasks in three different ways to suit each agency;
  • a lack of capability and flexibility to support high-demand or peak periods, such as recruitment campaigns;
  • not yet enough understanding of how to work effectively with the organisational cultures and practices of the central agencies; and
  • a lack of effective consultation and communication to work out how to support the central agencies' differing strategic objectives for organisational and staff development.

3.18
CASS is reviewing the HR model. The HR team is working on policies and processes that support the central agencies' strategic priorities, such as the Treasury's diversity policy, and learning and development opportunities that are tailored to the needs of the individual agencies. The team is also introducing a new electronic recruitment system for the three agencies. The HR team has made other improvements, such as dashboard reporting and providing employee information to service users, introducing a new payroll system, and greater transparency and consistency in remuneration processes. The HR team has improved in capability and the overall resilience is stronger than it was before CASS was set up.

3.19
In our view, HR would benefit from developing its capacity further to support the three different cultures and operating procedures of the central agencies. Where appropriate, it would also be helpful to work with the central agencies to standardise some process and procedures. This could lead to efficiency savings. The central agencies (through the Partnership Board) have agreed on some processes that can be aligned, such as remuneration and setting employment terms and conditions. In our view, the central agencies need to further consider whether other processes should be aligned.

ICT effectiveness was strained at first due to weak systems and is now improving

Lesson 8
Use appropriate industry or government standards to work out levels of capability in each function and to prepare processes for addressing agency needs. Develop an Information and Communications Technology strategy to ensure that the technology work programme is prioritised to meet strategic business needs.

3.20
Effective planning for ICT systems and processes and how they would work was lacking. This contributed to increased demand for ICT services and "help desk" requests in the months after CASS was set up. Soon after CASS was set up, it became clear that the central agencies had considerably underestimated the work needed to allow the central agencies to operate with common or compatible ICT systems and processes.

3.21
CASS commissioned a comprehensive analysis from Davanti Consulting (the Davanti review), produced in June 2012. The Davanti review showed that DPMC and SSC required greater investment and resources for ICT. The Davanti review identified the existing state of affairs in detail, linked functionality requirements to the business objectives, and included some "transformation mapping" (laying out the order and prioritisation of work to complete the transition).

3.22
Based on the Davanti review, CASS put in place the Central Agencies Development Programme (the Development Programme). This was a series of projects for improving ICT maturity to support each function within CASS and for achieving a unified and centralised ICT structure to serve and support the central agencies. After a lack of direction and planning early on, CASS and the Partnership Board revised the Development Programme to allow it to be completed.

3.23
Overall, CASS carried out the Development Programme effectively and to time. The "Final Closure" report of the Development Programme showed that many significant ICT and finance projects were completed, including several strategies for aspects of ICT, standard operating procedures, the Service Catalogue, and prioritisation frameworks for business transformation and consolidation. Reviews of the Development Programme indicated that CASS adhered to good practices in project management and that reporting was regular and sound.

3.24
CASS has now completed a draft overall strategy for ICT that aligns projects and activities with strategic objectives. The Development Programme is being completed, but it was unclear how the Development Programme projects matched CASS's strategic priorities. In some instances, the lack of an overall strategy until now has allowed less urgent projects to be prioritised over basic functional needs. Staff are capable and committed but have been stretched with these competing priorities. CASS has drawn from day-to-day staff resources to complete essential work on its ICT infrastructure and install necessary systems in DPMC.

3.25
In our view, CASS has not used the most effective framework for understanding the current state of ICT maturity of the central agencies. CASS has used the Information Technology Infrastructure Library, a sound framework for managing ICT service delivery, to deliver and improve its operational services. A more comprehensive framework – for example, the COBIT13 standard – would ensure a sound alignment of the ICT strategy with CASS's objectives and goals.

CASS not yet consistently providing services expected by users

3.26
Service users we talked to have experienced some improved services, such as progress with IT help desk, financial reporting, and supporting managers to better manage their budgets. However, many service users, including some at senior levels in the central agencies, expressed concern about whether CASS would improve enough to provide the support they required or expected.

3.27
The service users we talked to indicated that they expected CASS to make more progress towards delivering services effectively. The time and effort that CASS has put into building the basic systems and processes that support the central agencies has not always been visible to service users. Also, workload pressure has meant that CASS staff have not always been able to deliver the expected level of service, and users have become dissatisfied.

3.28
CASS staff are expected, as part of their job description, to build and maintain relationships with service users, to manage expectations and improve responsiveness to users' needs. However, the Partnership Board and CASS need to ensure that there is better communication to support improved service delivery and help to better manage the expectations of service users.

3.29
The results of a service user survey carried out in September 2013 indicate that service users do not fully understand what CASS does. CASS has set out in detail the services that it provides in its Service Catalogue and Service Level Agreement documents to make clear to service users what level of service to expect. However, service users have found the Service Catalogue difficult to use. Service users said that it was difficult to access the Service Catalogue or training in how to access services, and that CASS neither focused on customers nor communicated effectively.

3.30
In our view, CASS has responded too optimistically to feedback from service users. Feedback from the service user survey in 2013, and through SSC's Performance Improvement Framework reviews, pointed to some service delivery improvements, but also to the need for significant progress.

3.31
Contrary to CASS's assessment of risk, some service users told us that they were considering seeking independent solutions to their service needs, which may incur further costs to the central agencies. At the time of our audit, CASS had yet to work out how to improve its response to the survey. CASS needs to quickly plan and put into effect its response, and communicate this effectively to service users.

Limited information about cost savings

Lesson 9
Good information about costs is needed to provide a baseline to estimate savings accurately and set realistic future targets for further savings.

3.32
Efficiency is a secondary driver for CASS, because its small scale does not allow for significant economies of scale. However, in the current constrained fiscal environment, all government departments need to seek opportunities to make savings. CASS has considered where it can make efficiency savings, such as rationalising ICT upgrades when needed for the central agencies, and has also aimed to show operational savings.

3.33
After the establishment date, CASS revised the initial baseline information to gain better baselines for future comparisons. This has allowed CASS to estimate savings in costs and improvements in service efficiency. CASS estimates savings of $1.8 million since it was set up, but also acknowledges in the 2013 business plan that the estimates of pre-CASS running costs are approximate.

3.34
For example, CASS estimates that it has made savings from bringing different IT systems into one system. CASS also reported savings against the projected costs of the ICT Development Programme, achieved through skilful contracting and employing staff who were able to work in a number of roles.

3.35
After assessing the evidence, we were not able to confirm whether CASS's estimates of savings in its first year of operation are based on reasonable assumptions.

3.36
The 2013 business plan provides costs and projected costs for future years, based on CASS's first year of operation. CASS expects that in the next two years, as it settles in and gains more efficiency, its services will cost the central agencies less.

3.37
CASS kept savings targets at modest levels during its first two years of operation. This was because it had taken on board the lessons from overseas of not setting unreasonable expectations for savings and that relatively small-scale operations such as CASS would not achieve significant economies of scale.14 Investment is also required when setting up any new organisation, and investment costs normally limit any early savings that can be achieved. An example of this was extra resources to set up effective ICT systems in DPMC, which had a weak ICT system because of a previous lack of investment. Also, CASS has incurred extra staffing costs through using temporary contracts to cover vacant, unfilled positions or to provide extra capacity during the transition period.

3.38
To achieve cost efficiencies, it is important for CASS to set realistic targets. CASS will need to ensure that under-staffing is not being used to illustrate cost savings and does not undermine its resilience and sustainability.

Central agencies working together more closely but more to be done

3.39
A motivating factor behind the creation of CASS was to achieve closer working relationships between the central agencies, demonstrate leadership, and model a more integrated public sector.

3.40
There has been progress – some improvements now allow the central agencies to better co-ordinate their activities. Service users commented positively on shared access to the different email systems, a centralised finance function, and the self-service payroll facility.

3.41
However, as an example of leadership for the public sector, there remains some way to go for the central agencies to be seen as effectively working together. The central agencies outlined, in internal documents, the need to agree the level of standardisation of services. However, we did not see evidence of the central agencies building on this understanding to reach a shared view of the balance between standardisation and flexibility to accommodate their different cultures and approaches.

10: The Service Catalogue and its companion document, the Service Level Agreements, set out the range of services that CASS provides to the central agencies, and the level and timeliness of provision that service users can expect. The documents are available to service users on the agencies' intranets.

11: Available at the State Services Commission website, www.ssc.govt.nz.

12: We note that the 2013 business plan states that: "[CASS is working to implement] a Human Resources Information System (HRIS) to provide a single, reliable source of information for Managers, Staff, Finance, and HR … within a highly automated environment."

13: COBIT (originally, Control Objectives for Information and Related Technology) is a framework for developing, implementing, monitoring, and improving information technology governance and management practices. It incorporates many industry standards and resources, including Information Technology Infrastructure Library and related standards from the International Organization for Standardization. See www.isaca.org for more information.

14: New Zealand Treasury (2012) Administrative & Support Services Benchmarking Report for the Financial Year 2011/12, pages 4 and 5, available at www.treasury.govt.nz. The report notes that small agencies are not able to achieve economies of scale.

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