Part 1: Introduction

Inland Revenue Department: Benefits management for the Business Transformation programme.

1.1
In this Part, we discuss:

1.2
The Inland Revenue Department (Inland Revenue) is responsible for collecting and managing tax. It is also responsible for supporting other important government services, such as Working for Families tax credits, child support, KiwiSaver, student loans, and paid parental leave.

1.3
Inland Revenue needs to have robust and up-to-date systems, processes, and tools to carry out its responsibilities effectively. In 2011, Inland Revenue began a significant Business Transformation programme (the programme), which is intended to modernise the revenue system.

1.4
Inland Revenue is implementing the programme in four overlapping “stages”, some of which have been completed:

  • Stage 1 – enable secure digital services;
  • Stage 2 – streamline tax;
  • Stage 3 – streamline social policy; and
  • Stage 4 – complete the future revenue system.

1.5
Stage 1 (enable secure digital services) went live in 2017. It introduced new online services for Goods and Services Tax (GST) and made it possible for new businesses to register for an Inland Revenue number online.2

1.6
Stage 2 was delivered in two major releases. These releases included major tax products such as income tax and the Working for Families tax credit. Release 2 was delivered in April 2018 and Release 3 in April 2019.

1.7
Stage 3 has been folded into the other stages and releases. Parts of it have been included in Releases 2, 3, and 4, and its final elements in Stage 4.

1.8
Release 4 was delivered in April 2020 and involved moving KiwiSaver and student loans into Inland Revenue’s new system.

1.9
Stage 4 is designed to wrap up the final elements of the programme. It includes moving child support and paid parental leave to the new system and decommissioning Inland Revenue’s old technology platform.

Why we did the audit

1.10
Between 1 July 2014 and 30 June 2019, the programme’s operating expenditure was $583.5 million and its capital expenditure was $278.4 million.3 Inland Revenue estimates that the total cost of the programme will be up to $1.7 billion4 and that it will be completed in the 2021/22 financial year. Inland Revenue reports that it is “tracking within budget and expects to complete transformation within the funding envelope approved by the government”.5

1.11
Because of the programme’s significant cost, the extent of changes involved, and its importance to New Zealanders, we decided to report on aspects of the programme during its implementation.

1.12
Our first report on the programme, published in 2015, described how it was governed.6 The programme had a comprehensive and clear governance structure, an established methodology, and an advanced approach to managing risks. Our report made several recommendations, including that Inland Revenue periodically review the programme’s governance to ensure that it remained fit for purpose.

1.13
Our second report, published in 2018, discussed whether the programme’s procurement was effective, was well managed, and complied with relevant government requirements.7 Inland Revenue centralised its procurement activity. It did this so that its procurement approach could focus on relationships and outcomes, which would support it getting value for money. We identified some minor improvements Inland Revenue could make to comply with the Government rules of sourcing8 and its own policies, and to improve aspects of record-keeping for contracts.

What we looked at

1.14
This is our third report on the programme. For this audit, we looked at whether Inland Revenue had a robust framework for managing, measuring, and reporting benefits from the programme.

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We looked at Inland Revenue’s benefits management because we wanted to provide assurance to Parliament and the public about the benefits that the programme has delivered so far. We also looked at how well placed Inland Revenue is to deliver the remaining benefits of the programme.

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We did this by assessing whether Inland Revenue’s framework for realising benefits is:

  • appropriate, reliable, and relevant; and
  • effective in assisting it to achieve the objectives of its investment.

1.17
We did not look at policy decisions about the programme or audit the programme’s costs as part of this review.

Benefits management in the public sector

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The Treasury defines benefits management as the practice of identifying, analysing, planning, realising, and reporting benefits.9

1.19
Active benefits management is seen as good practice in project and programme management. The Treasury’s guide Managing benefits from projects and programmes: Guide for practitioners notes that “[i]nternational studies have shown that organisations with high benefits management maturity have greater success with their projects and programmes.”10

1.20
Historically, in New Zealand and other jurisdictions, transformation programmes have a poor track record in demonstrating that “the benefits they were established to deliver have been realised”.11

1.21
The Treasury leads investment management in the public sector and has a lead role in benefits management. The Treasury’s guide on benefits management sets the expectations for benefits management and realisation for public organisations.

1.22
The Treasury’s guide provides important foundational information on good practice for benefits management. These principles include:12

  • Managing benefits is iterative by nature and not a fixed series of staged practices. Plans should be updated during the project or programme.
  • To be effective, benefits management should be integrated into strategic planning, project, programme, and portfolio approaches, performance management, and reporting systems.
  • Managing benefits continues after a project or programme has been completed. It requires a structure that is able to transition into business as usual.
  • To demonstrate value, benefits should be:
    • measurable: financial and non-financial;
    • meaningful: there is a direct relationship between achieving the measure and achieving the benefit;
    • attributable: it can be reasonably claimed that the benefit was achieved from the investment and not any other project or programme; and
    • aligned to strategic outcomes and targets.

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Inland Revenue told us that it based its benefits management on the Treasury’s guide.

How we carried out our audit

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To carry out our audit, we:

  • reviewed and analysed relevant documents from Inland Revenue;
  • interviewed Inland Revenue staff, including staff from the benefits team and senior leaders;
  • spoke to people from the Treasury’s Investment Management and Asset Performance team, and Vote Revenue managers and analysts; and
  • spoke to Gateway13 review team leaders and the Independent Quality Assurance team that Inland Revenue commissioned to review aspects of the programme.

2: Your Inland Revenue number keeps track of the tax you pay and helps ensure that you pay the right amount or get the right entitlements. It is unique to you. If you have a company, trust, partnership, or other type of business, you will need a different Inland Revenue number for each one.

3: Updated programme costs will be available in November 2020.

4: This is a 10-year estimate of cost (to 2023/24) that includes ongoing costs. The amount excludes inflation, depreciation, and capital charge.

5: Inland Revenue Department (2019), Programme business case addendum: Business Transformation programme – Implementing New Zealand’s future revenue system, Wellington, at page 15.

6: Office of the Auditor-General (2015), Inland Revenue Department: Governance of the Business Transformation programme, Wellington.

7: Office of the Auditor-General (2018), Inland Revenue Department: Procurement for the Business Transformation programme, Wellington.

8: The Government rules of sourcing set out good practice guidelines for government agencies to follow in the sourcing stages of the procurement process. The rules can be found at www.procurement.govt.nz.

9: The Treasury (2019), Managing benefits from projects and programmes: Guide for practitioners, Wellington, page 7.

10: The Treasury (2019), Managing benefits from projects and programmes: Guide for practitioners, Wellington, page 1.

11: The Treasury (2019), Managing benefits from projects and programmes: Guide for practitioners, Wellington, page 1.

12: The Treasury (2019),Managing benefits from projects and programmes: Guide for practitioners, Wellington, pages 7-8.

13: A Gateway review is an independent and confidential peer review process that assesses projects’ and programmes’ progress at important points and rates the likelihood that they will successfully deliver their outcomes.