2.3 Corporate services

The Commission also examined spending on corporate services by agencies within the Australian Public Service (APS) as part of the survey of government agencies operating under the Public Service Act 1999. Agencies provided information on departmental expenditure, including the estimated proportion spent on corporate functions. Details are included at Attachment 2.2.

Chart 2.5 shows the proportion of departmental expenses spent by agencies on corporate functions, ranging from below 10 per cent to around 40 per cent. On average, agencies spend around 21 per cent of their running costs on these functions.

Chart 2.5: Corporate expenses as a proportion of departmental expenses

This diagram shows the percentage of corporate spending per full-time equivalent employee for each of the agencies surveyed by the National Commission of Audit.

Source: National Commission of Audit Survey, 2014.

The Commission collected information on eight corporate functions: human resources; finance; legal; communications; general management; compliance; procurement; and information and communication technology (ICT).

Chart 2.6 shows the average distribution of corporate spending by agencies that responded to the Commission’s survey. The chart shows that the largest proportions are spent on ICT, general administration, human resources and financial management.

Chart 2.6: The average proportion of each agency’s departmental expenses spent on corporate functions

Chart 2.6 shows the average distribution of corporate spending by agencies that responded to the Commission's survey. The chart shows that the largest proportions are spent on ICT, general administration, human resources and financial management.

Source: National Commission of Audit survey, 2014.

A number of submissions to the Commission identified corporate services as an area for efficiency gains.

Real efficiencies could be gained across corporate services through the adoption of whole-of-government approaches to the provision of ICT, reducing policy compliance costs, provision of e-learning packages and greater standardisation of business processes.

Department of Education, 2013.

In order to make comparisons across agencies, corporate spending per full‑time equivalent (FTE) staff member was examined.

For each corporate function, spending per employee varies significantly across agencies. For example, the top quartile of spending per FTE on finance functions is more than double that of the bottom quartile.

The size of an organisation does not seem to have a strong bearing on overall corporate spending per person. However, there are scale effects for some specific functions. As shown in Charts 2.7 and 2.8, finance and procurement costs per employee tend to be higher in smaller agencies and lower in larger agencies.

Chart 2.7 Finance spending per FTE by organisation size

Chart 2.7 shows that finance spending per employee tend to be higher in smaller agencies and lower in larger agencies.

Source: National Commission of Audit Survey, 2014

Chart 2.8 Procurement spending per FTE by organisation size

Chart 2.8 shows that procurement spending per employee tend to be higher in smaller agencies and lower in larger agencies.

Source: National Commission of Audit Survey, 2014

In addition to comparing across agencies, the survey data on corporate spending was compared to a peer group sample of 79 organisations from public administration, services, finance, real estate and insurance industries drawn from The Boston Consulting Group’s Excellence in Support Functions (ESF) benchmarking database.

The Commission notes that caution must be taken when comparing corporate services expenditure between public and private organisations. However, given both public and private sectors undertake a range of similar transactional administrative tasks, such a comparison can inform public sector considerations.

Spending per staff member was used as a common comparator and data was collected from APS agencies in categories that align to those used by The Boston Consulting Group when analysing corporate services data in private sector organisations.

The distribution of spending on corporate functions by APS agencies compared to the benchmark agencies is shown in Chart 2.9.

The benchmarking exercise indicates that in some areas such as finance and legal services, public sector agencies tend to spend less per person than similar private sector organisations. Conversely, APS agencies tend to spend significantly more per person than the private sector on human resources and communications functions.

Chart 2.9: Distribution of corporate spending per staff member by agencies

This diagram shows the distribution of spending per staff member on different corporate functions.

Source: National Commission of Audit Survey, 2014.

Human resources stands out as an area where the surveyed APS agencies seem to spend significantly more per staff member than the benchmark agencies. As shown in Chart 2.10, median spending on human resources across the surveyed agencies was $4,670 per person compared with $2,160 in similar private sector organisations.

Chart 2.10: Human resources spending per FTE in surveyed agencies

Chart shows median spending on human resources across the surveyed agencies was $4,670 per person compared with $2,160 in similar private sector organisations.

Source: National Commission of Audit survey, 2013.

Shared services

The Commission examined a number of corporate services initiatives both internationally and at state level, where differing levels of success had been reported.

The IBM submission to the Commission referred to a number of shared services initiatives in the United States and the United Kingdom that suggested between 20 and 30 per cent savings are achievable by moving to a shared services platform.

At a local level, and as reported in the Commission’s Phase One Report, the Australian Capital Territory Government has a shared services arrangement for a range of corporate services for all agencies. This process has been seen as successful, with support and leadership from the top, a change leader and a high level of commitment with clear boundaries.

Data collected from agencies indicates that around a third of public service agencies with over 20 staff already have some form of shared services in place, although on average this represents only around 9 per cent of their corporate services. Most agencies surveyed also outsource a small proportion of their corporate services (on average around 12 per cent).

The Department of Education and the Department of Employment have advised the Commission of a new corporate services partnership arrangement in 2013 with the proposed establishment of a Shared Services Centre. This partnership builds on the previous shared services model provided to a number of government agencies by the former Department of Education, Employment and Workplace Relations for IT and corporate enabling services.

References

Australian Government 2010, Ahead of the Game: Blueprint for the Reform of Australian Government Administration, Department of the Prime Minister and Cabinet, Canberra.

Australian Government 2013, Shared Services, Australian Public Service Commission, APS Human Capital Matters, Issue 6, Canberra.

Australian Institute of Management 2012, Shared Services In The Public Sector, White Paper, Sydney.

Australian Public Service Commission 2013a, APS At A Glance, viewed online February 2014, <http://www.apsc.gov.au/about-the-apsc/parliamentary/aps-statistical-bulletin/2012-13/main-features#s1>.

Australian Public Service Commission 2013b, State of the Service Report 2012-13, Canberra.

Bandiera, O, Prat, A, Sadun, R and Wulf, J 2014, Span of Control and Span of Attention, Working Paper, Harvard Business School, Massachusetts.

Buchanan, I, Chang, J, Couto, V, Neilson, G, Pigorini, P, Saddi, J, Schädler, J, Tan, E, and Uchida, A 2003, Management Spans and Layers: Streamlining the Out-Of-Shape Organisation, Booze Allen Hamilton, Chicago.

Deloitte 2010, In The Hot Seat, Reducing Costs In Public-Sector Organisations In An Age Of Austerity, research paper, Deloitte LPP, London.

Department of Education 2013, Department of Education Submission to the National Commission of Audit, Canberra.

New South Wales (NSW) Government 2013, Public Sector Reform: Reforming the Public Sector to Deliver Improved Services to the NSW Government, NSW Public Service Commission, Sydney.

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Verspaandonk, R, Holland I, and Horne, N 2010, Chronology Of Changes in the Australian Public Service 1975 – 2010, Parliamentary Library, Parliament of Australia, Canberra.

Yost, E 2013, What Kinds of Factors Should Determine How Many Direct Reports A Manager Supervises? HR Magazine, July 2013.