Part 4: Effectiveness of the governance arrangements

4.1
In this Part, we look at how effective the programme's governance is in line with what we expect of good governance.

4.2
Inland Revenue's governance has provided clear direction to the programme and effectively advanced the programme in that direction.

4.3
Progress has included successfully completing the programme's concept and feasibility phases, successfully completing the mobilisation phase and the pre-design workstream, and starting the design workstream. One of Inland Revenue's main achievements in the pre-design workstream was to appoint an external provider as the design partner for the high-level design work in Stage 1.

4.4
The governance of the programme has largely met our expectations. We found that:

• decisions about governance were clear and recorded;
• the programme has advanced to the design workstream and has developed a Target Operating Model;
• external assurance reviews of the programme have been mostly positive and lessons have been learned from other major projects and programmes; and
• a memorandum of understanding and an assurance plan have been agreed with the Corporate Centre.

4.5
We identified some aspects of governing the programme that Inland Revenue needs to consider. We describe these at the end of this Part.

4.6
We also comment on the challenges of working out whether investment in programme governance and assurance has been value for money.

Making decisions and providing direction with good information

4.7
Effective governance of the programme has resulted in clear decisions and direction. We found appropriate debate within governance groups to support the decisions and direction.

4.8
We also found that governance groups recorded and communicated decisions and the actions required to give effect to those decisions well. Responsibility for actions and the progress made were recorded clearly.

4.9
One challenge the programme faces is getting timely necessary approvals from the governance groups. The decision-making pathway to get approval from governance groups (how a decision can be made) and the sequencing of meetings of governance groups (when a decision can be made) are both important. Another consideration is the number of decisions the governance groups have to make.

4.10
We observed some practical approaches in the form of a few work-arounds⁸ of defined governance processes to get timely decisions. Examples include a decision after a meeting to approve deliverables, and approving terms of reference by email. In our view, deciding to take a practical approach was appropriate. Work-arounds appear to be uncommon. The programme has a process for out-of-cycle approvals.

Working to achieve desired outcomes

4.11
We found that the way the governance groups work helps to achieve the programme's objectives. We found:

• many examples of learning from other organisations and projects (such as from Novopay⁹);
• that managers were held accountable when a project was over budget or not delivered on time;
• problems being referred to more senior staff when necessary; and
• action being taken in response to delayed reporting.

4.12
The main governance decisions made in the programme have allowed the programme to progress to the design workstream and to develop the Target Operating Model. This model translates the strategic intent (defined by vision, objectives, and design principles) of the transformation into operational capabilities required in the future. These operational capabilities are grouped into several layers that collectively cover stakeholders, channels, services, organisation, policy, people, processes, platforms, and technology.

Co-ordinating projects

4.13
Inland Revenue recognises the need to co-ordinate decisions throughout the programme and business. Identifying an organisation-wide release model has been proposed as a way to achieve better co-ordination.

4.14
Projects in the programme are co-ordinated well. The Portfolio Governance Authority plays an important role in this. The programme's governance groups communicate with each other and share decisions and information well. BOFs are important in integrating the programme and business and are responsible for:

• representing a wide range of business roles, acting as advocates for Inland Revenue's culture, and being the main communication channel within Inland Revenue;
• working closely with programme managers to ensure that changes to the programme (such as to process, organisation, and technology) are accepted;
• ensuring that future business process design is in line with the Benefits Management Framework, as defined in the programme business case and the detailed business cases submitted to the Treasury and Cabinet; and
• reviewing all main deliverables within their responsibility and ensuring that all business process content is appropriate and relevant to deliver the Target Operating Model and IR for the Future¹⁰.

4.15
Additional BOFs (such as the Enterprise Support Services BOF and the Information Systems BOF) have been added to the governance structure over time.

Managing external relationships effectively

4.16
The Corporate Centre has an assurance role in major government projects and programmes, including information and communications technology (ICT) projects. The programme, although not an ICT project as such, must follow the Corporate Centre's assurance processes. Inland Revenue has followed those processes, including the Treasury's Better Business Case and Gateway Review processes, and the Office of the Government Chief Information Officer's ICT assurance planning.

4.17
Inland Revenue has signed a Memorandum of Understanding with the Corporate Centre and agreed an assurance plan for the programme. These took time to work through and agree, with Inland Revenue scrutinising the value being added to the programme.

4.18
Inland Revenue has also involved the Corporate Centre in planning the terms of reference for independent quality assurance reviews of the programme.

4.19
As well as the Corporate Centre, Inland Revenue has regular meetings with other government organisations that have major projects or programmes in train. These include the Accident Compensation Corporation and the Ministry of Social Development.

4.20
To get other stakeholders input into its work, including the programme, Inland Revenue works with three advisory groups (the Commissioner's Transformation Reference Group, the Tax Simplification Panel, and Information and Communications Technology Reference Group). Inland Revenue has discussed the possibility of having a bigger customer input in governance decisions.

Responding to external reviews and recommendations

4.21
The Programme Charter recognises the need for internal, external, and central agency assurance. Inland Revenue has sought reviews of and acted on a range of assurance aspects over the life of the programme (see Figure 5).

Figure 5
Assurance reviews of the Business Transformation programme

4.22
The findings of these reviews have generally been positive. Inland Revenue has tracked responses to these assurance reviews well and made improvements to the programme. The programme's governors review responses to the assurance reviews.

4.23
Inland Revenue has addressed programme governance matters raised in a 2011 Performance Improvement Framework review.

Value for money

4.24
About $83 million has been spent on the programme as at the end of November 2014. This includes spending on governance and assurance of the programme.

4.25
It is difficult to work out whether the expenditure on governance of the programme and assurance is value for money because of:

• the unique nature of the programme;
• the programme needing to use specialist resources available only from a competitive international market; and
• investment in governance and assurance being like an insurance policy, with the value of that policy being tested only when something goes wrong.

4.26
It is too early to work out whether the investment has been value for money, because the programme has yet to deliver the benefits outlined in the business case. We note that other reviews consider that the work done to date has provided good foundations for the programme.

4.27
We sought external advice on benchmarks for assurance reviews and administrative costs for supporting governance for a programme such as this. We were told that, on average, 1%-5% of the total cost for large programmes is spent on assurance reviews and 5%-15% is spent on programme management and governance. Those benchmark percentages, however, should be considered as indicative only, given that they do not specifically relate to transformation of tax systems.

4.28
To date, Inland Revenue's spending on assurance reviews and administrative costs for supporting governance have been relatively low compared with these indicative benchmarks. Whether the cost of the assurance reviews and governance is appropriate and value for money depends on how successfully the programme achieves its desired outcomes.

4.29
In our view, Inland Revenue needs to be confident that the money being spent on the governance arrangements and assurance work for the programme to provide value for money. We will scrutinise this value-for-money aspect as the programme develops.

Matters to watch

Work-arounds

4.30
The programme has used some work-arounds to ensure that decisions are timely. Some work-arounds, (as discussed in paragraph 4.10) are inevitable, because of the complexity of the governance arrangements, and a practical approach will be required from time to time. However, care needs to be taken to ensure that work-arounds are not used so much that they risk the integrity of the governance arrangements and approved decision-making processes.

Assurance processes

4.31
The Senior Responsible Officer and Programme Director – not the governance groups – approve management responses to independent quality assurance reviews. In our view, there would be more independence if governance groups, rather than those individuals, approved the responses.

4.32
Gateway Review is part of the Corporate Centre's assurance process. Gateway Review findings have limited circulation and are mainly meant as advice for the programme's Senior Responsible Officer. We support Inland Revenue sharing those results as widely as possible among senior governors within the bounds of the process agreed to with the Treasury. In our view, the wider the circulation of this information among the programme's governors, the more assurance value the information could add to the programme.

Recommendation to manage important risks

4.33
We have noted some of the aspects of paragraphs 4.30-4.32 in our recommendation about important risks that Inland Revenue needs to manage over the life of the programme.

8: A work-around is a method, sometimes used temporarily, for achieving a task or goal instead of the usual or planned method.

9: For more information about Novopay, see the report of the Ministerial inquiry into the Novopay Project available from the SSC website.

10: IR for the future is Inland Revenue's guiding strategy. It describes Inland Revenue's purpose, vision for the future, organisational values, improvements coming for customers, and main challenges. See Inland Revenue's website, www.ird.govt.nz.

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