Response to the Australian National Audit Office performance audit of the Green Loans Program

The Department welcomes the ANAO audit report as a useful contribution to understanding the issues that confronted the design and delivery of the Green Loans Program.

The Department considers that the report’s findings are generally consistent with the findings of other recent independent reviews of the Green Loans Program. These reviews (the reports of which were released on 8 July 2010) include:

  • the Independent Inquiry into the Green Loans Program ‐ Review of procurement processes and contractual arrangements by Ms Patricia Faulkner AO
  • the Internal Audit Review of the Procurement Practices in the Green Loans Program produced by Protiviti
  • the Review of the Green Loans Program produced by Resolution Consulting Services.

Since the Program became the responsibility of the new Department of Climate Change and Energy Efficiency on 8 March 2010, the Department has been working continuously to address the suite of legacy issues associated with the Program, including those identified in the extensive set of reviews which the Program has undergone.

Since 8 March 2010, significant improvements in the delivery of the Green Loans Program have been made, including:

  • improved processing of assessor invoices with payments actioned under standard timeframes (30 business days from receipt of a correctly rendered invoice) since May 2010
  • resolution of almost 20 000 enquiries and complaints since February 2010
  • new delivery mechanisms in place for dispatch of assessment reports with delivery within 10 days of receipt by the Department
  • significantly reduced average wait times (under two minutes) for both assessment bookings and enquiries since March 2010
  • delivery of Green Rewards to eligible householders
  • improved handling of complaints, including improved processes for formal audit and investigation of the behaviour, performance and business practices of home sustainability assessors and assessor organisations by an independent auditor
  • improved web‐based reporting of changes to the Program, including weekly updates on payment processing times for invoices submitted by assessors
  • establishment of a dedicated Association of Building Sustainability Assessors (ABSA) client relationship manager to provide a consistent point of communication and contact between the department and ABSA, ensuring that there is greater transparency of information and rapid resolution of any issues that arise.

There remain, however, a number of legacy issues that the department is working actively to address.

Governance, Risk Management and Procurement

Since the Machinery of Government changes in March 2010, the Department has focused on developing a framework that highlights the need for, and supports the establishment of, solid governance arrangements throughout the agency.

The governance framework includes the updated risk management framework for the agency; reinforces the accountability of officers both at the SES and APS levels for effective oversight of program implementation; and highlights the Secretary’s expectation that program and project boards will be utilised to bring together collective expertise and broader perspectives to an issue, project or program delivery and to help Senior Executives manage risks and exercise strong managerial control over program implementation.

The Department has also developed a new governance and program support structure to assist with program design, implementation and monitoring.

Risk management plans, risk mitigation and compliance strategies that are consistent with agreed departmental frameworks are already in place or are being developed for all programs administered by the Department. Independent quality assurance of risk management plans is also being undertaken.

To address the findings in relation to non‐compliance with procurement practices, the department is developing centralised processes to support procurement and contract management, including:

  • establishment of a contract register to capture known contracts and procurement plans
  • improved documentation of new procurements and contract variations
  • delivery of procurement and contract management training to staff across the organisation. To date, 200 staff have completed the two hour training course. This training is mandatory for all staff in the Green Loans and Green Start Programs.

Management and monitoring of program implementation

The Department has strengthened the skills of program managers through an increased investment in human resource support, workforce planning and ensuring that the appropriate people and resources are dedicated to tasks when required.

In addition, the Department has focused on ensuring there is regular oversight of program performance and issues, including through the use of weekly reports that track a range of indicators of activity and performance in relation to the Program. Among other things, these reports track the number of calls received and answered, the number of assessments booked, the number of completed assessments, the number of assessment reports sent to householders; outstanding inquiries; invoices received and processed and the number of Green Rewards claims received and paid.

Since taking responsibility for the Program, the department has placed a priority on providing high quality, clear and timely of briefings and reports to the Minister. Since early 2010, comprehensive briefs have been provided to the Minister outlining progress against key deliverables and highlighting any emerging issues which needed to be addressed. Within the Department, a priority has also been placed on ensuring clear communications exist between the Green Loans Program area and the key areas of the Department that provide specialist advice and support.

Data integrity and lCT support

In order to address the Program’s IT legacy issues, the Green Loans Program area, in conjunction with the Department’s specialist information technology area has been actively pursuing improvements to the IT systems that support the delivery of the remaining aspects of the Program. Some of these improvements are already evident, such as improved timeliness for the distribution of assessment reports to households.

More generally, the Department:

  • has invested in significant improvements to its business systems, including ICT platforms and support, financial management systems and human resource management systems
  • is developing a Client Service Charter
  • has implemented formal complaints handling arrangements.

Despite these improvements, a number of legacy issues associated with Green Loans Program data integrity have emerged over time. The Department is establishing a specialist team to manage a project that will improve the integrity of program data and confidence in the quality and accuracy of the data. This work will enhance the effectiveness of the Green Loans independent compliance and audit program and the efficiency of program delivery (such as through automated checking of assessor invoices).

In relation to the Program’s assessment tool, the design of this tool drew on and modified the underlying algorithms utilised by the Victorian Environment Protection Authority for their Australian Greenhouse Calculator, to produce an assessment tool that met the requirements of the Commonwealth’s Program. The Australian Greenhouse Calculator is a well established and widely accepted tool used in the home sustainability industry for a similar purpose to that of the Green Loans assessment tool. As such, the reliability of the assessment tool at the outset of the Green Loans Program was considered to be sound.

The Department acknowledges the ANAO’s comment that refinements have been made to the assessment tool over time to improve the quality of household assessment reports but does not agree that it has been necessary (or useful) to re‐issue assessment reports subsequent to these improvements. The refinements that have occurred to the tool subsequent to the launch of the Program have been part of a normal business improvement process that would be expected under any IT project, and do not represent a fundamental change to the way the tool operates or generates recommendations. The tool has been fit for purpose since the outset of the Program and has generated reports that provide useful advice to households on improvements they could take to improve their energy and water efficiency. Subsequent refinements to the tool have improved its ease of use for assessors but have not diminished the value of reports generated prior to the improvements being made.

Program compliance

A review of contracts under the Green Loans Program is underway. This review will identify and resolve any issues with existing contracts to allow their finalisation. This review is being lead by an independent, external procurement and contract specialist with support from both the team responsible for administering the Program and the Department’s specialist procurement and contracting area.

The Department is also conducting an independent audit of the program. Where discrepancies are identified by the independent Program auditor, the Department has a range of compliance actions available which it can pursue. These range from directing assessors to rectifying erroneous reports or re‐doing an assessment, to recovery of costs and the suspension or termination of contracts.

Stakeholder engagement

While throughout the Program efforts have been made to keep stakeholders informed of program activities and changes, the department acknowledges that some relationships have been challenging, and has sought to make improvements to stakeholder communication to address this. These improvements include:

  • providing an expert departmental team to support complaints escalation received from the dedicated program enquiries hotline and other channels
  • continued and enhanced communication with assessors via the assessor eNewsletter
  • providing, on the Green Loans website, weekly updates for assessors on invoice processing times
  • regular meetings with ABSA and the appointment of a senior client relationship manager to facilitate improved communication and rapid resolution of issues as they arise.

The future

The Department has drawn on the range of lessons from the development, design and implementation of the Green Loans Program to deliver a more robust Program in Green Start. On 8 July 2010, the Government announced that the Green Loans Program would be phased out, transitioning to a new Green Start Program.

Through every aspect of the design and delivery of any future programs administered by the Department (including the proposed Green Start Program), the Department will be paying close attention to the key themes identified by the ANAO and other reviewers of the Green Loans Program.

As a result of the experience with the Green Loans Program, the Department will ensure that in the design phase of new programs, a number of improvements to program arrangements are considered including:

  • exploring options for delivery of the program in a way that will both:
  • improve value for money, transparency, ability to target to priority areas and accountability for delivery of outcomes
  • manage demand‐driven components to safeguard against budget blowouts and provide certainty of income and timing of payments for successful recipients (such as through use of a grants model)
  • appointment of a probity advisor to provide advice on any funding assessment process; to assist with addressing any specific probity issues that arise during the process of assessing applications for funding; and to maintain independent oversight of the overall assessment process
  • seeking independent legal review of all documents that support delivery of the program including program guidelines and funding agreements
  • seeking assurance from an independent adviser that the design of the program and its associated governance arrangements are consistent with both the current policy framework for the administration of Commonwealth programs and the recommendations of the independent reports.

Conclusion

The various reviews of the Green Loans program, including the findings contained in the ANAO audit highlight a series of lessons that need to be absorbed by all program delivery agencies. For example:

  • there are inherent challenges in delivering programs of this nature, including the enormous difficulties predicting demand ‐ particularly when demand is effectively driven by contracted service providers and when the product offered is essentially free
  • there are inherent real and perceived risks where the Government enters into arrangements with external parties to deliver program outcomes
  • critical decisions need to be made in program design about how much to deliver services in‐house and how much to outsource
  • the heightened risk of tight delivery and implementation timeframes
  • the importance of engaging actively with stakeholders to achieve program outcomes, particularly for programs where the service is provided by contractors on behalf of the Government, directly to the community
  • clear and up‐front communication of program risks is important as is a clearly identified process for rapid escalation of issues as they arise
  • the degree of innovation in a program at its conception and in the design of the delivery model need to ensure that prior experience and, as far as possible, existing processes are employed to reduce risks around program delivery
  • while robust leadership and governance is required when delivering any program, this is particularly critical when attempting new or innovative modes of program delivery and where contracted service providers are reliant on effective delivery of the program.