Societal well-being includes material well-being arising from the ready availability of services and goods, as well as items such as education and training, health, and environment, and are usually highly desired by the citizens of a country (OECD 2009). Improving society’s well-being is the fundamental responsibility of governments (Asher 2011), achieved by strong and sustainable economic growth through the effective and efficient administration of government finances and a better governed public sector (Barrett 2002; Wanna 2012). Improved governance of the public sector ensures its management is answerable to its citizens (Public Bodies Review Committee 2006), who, based on the greater flow of information, are demanding what has been equated with private sector management standards of transparency and accountability (Bertucci 2006b; Hoque 2008).

The Role of Private Sector Governance in the Australian Public Sector

In Australia the move to introduce New Public Management [NPM] techniques focused on private sector practices began in the seventies, but gained momentum with a number of reports released during the nineties (Hoque 2008). Private sector practices introduced included performance measurement, accrual accounting and budgeting, and a change to outcomes and outputs reporting, with the aim to improve the efficiency and effectiveness of the public sector, making the public sector both more accountable and transparent (Mackay 2011; Martinsen & Jørgensen 2010). But there is some question over the effectiveness of the new practices, with some commentators stating there is still work to be done (McPhee 2011), others questioning the validity of the new methods for the public sector (Davis 2010), whilst a number of writers suggest that the techniques fail to adequately take account of the needs and demands of the public sector (Wettenhall 2005). This essay explores these issues within the federal context beginning with a brief historical overview of the NPM practices in the Australian Public Service (APS), continuing with an exploration of the governance of the public sector, with a particular focus on accountability and transparency, and concludes by suggesting that it may be necessary to review the new public management practices and suggests further research may be needed.

The APS has more than 80 agencies, including Departments, Executive Agencies and Statutory Agencies (Australian Public Service Commission [APSC] 2011). Prior to 1988 APS agencies used a cash-based accounting and reporting system (Davis 2010). Tight budgets and a global call for state services to do more with less money (Bertucci 2006a), forced the government of the day to change how the APS managed itself, requiring it to be leaner, more efficient, and more effective in how it served the public (Davis 2010; Mackay 2011). Initial changes included the introduction of a program management and budgeting framework, including performance management, program evaluation, and medium-term expenditure reporting (Mackay 2011).

A change in government in 1996, in the wake of a recession, saw a new rhetoric emerge, strongly focused on private sector ideology for the APS, a belief that private sector management practices would improve the delivery of services and lead to greater efficiency and effectiveness of the public sector (Davis 2010; Mackay 2011). At the centre of the NPM was accrual accounting (Davis 2010), already under discussion as an option, which was formally adopted with the first federal accrual budget in 1999-2000. The language around the adoption of the accrual accounting was focused on the devolution of management decisions, and better performance management (Davis 2010). In line with accrual accounting an outcomes and outputs reporting framework was introduced, with a heavy emphasis on performance management systems (Hoque 2008), on the basis that this would improve governance of government agencies, leading to greater accountability and transparency (Bertók, Caddy & Ruffner 2001).

Public sector governance is a complex concept (Demirag 2004) with a broad definition that encompasses management (Barrett 2002), the practices, policies and procedures of an agency (APSC 2007), and its governing structure (Howard & Seth-Purdie 2005), and is concerned with decision-making, accountability and those who control the top of the agency (Armstrong, Jia & Totikidis 2005). Although governance in the public sector is not new, existing under a legal framework derived from legislature[1] (Barrett 2002), a new model for public sector governance was developed by the Australian National Audit Office [ANAO] (2003), though it was a model that was not intended to be prescriptive. The model closely mirrors governance practices in the private sector (Armstrong, Jia & Totikidis 2005), and emphasises learning from the experiences of and developments within the private sector (Uhrig 2003). Practices include increasing accountability and transparency, devolving responsibility for decision-making, a stronger focus on ethical behaviour, outcomes and output reporting, and importing parallel financial practices, such as accrual accounting, from the private sector (ANOA 2003).

Accountability and transparency are two basic elements common in the literature in the discussion of governance (ACAG 2005). Accountability refers to the “imperative to make public officials answerable for their behaviour and responsive to the entity from which they derive their authority” (para 2.3). The introduction of private sector governance reforms as discussed above is predicated on the assumption that this will improve accountability (Demirag 2004; Martinsen & Jørgensen 2010). Certainly accountability is not limited to the private sector and has a firm place in the public sector; however, it can be argued that the contexts and demands are different in the two domains (Barrett 2003).  Public sector actors have traditionally been accountable in a hierarchical relationship through the bureaucracy, relying on the checks and balances of public sector rules and regulations (Erkkilä 2007). Furthermore, there are many kinds of accountability in the public sector, including legislative, political, financial and managerial (‘The buck stops where?: Accountability in the public sector’  2012). The introduction of NPM arrangements adds a layer of complexity that challenges these traditional relationships and understandings (Wettenhall 2005).

The challenge for those working in the public sector is to understand how these forms of accountability relate, and to whom they personally are accountable, which may refer both to their line manager, but also to be accountable for the performance of their duties, meeting performance targets, and for the expenditure of public resources (Department of Administrative Reforms & Public Grievances 2011). Moreover, there is a further question of how to balance these accountabilities in a way that allows for a flexibility in decision-making that is part of the devolution of managerial control (Barrett 2003), particular where the relationships between agencies develop, as in the delivery of a whole-of-government program (Lacey et al. 2012). Inter-linkages between agencies, departments and external providers make developing accountability performance measures for a single agency or department increasingly complex (Lacey et al. 2012).  However, these issues can be addressed by focusing on developing strong organisational structures that puts the development of staff at the centre, builds strong inter-agency relationships, and includes increasing transparency in the publication of all documents, including those related to resources and tenders (Lawson 2008).

Transparency is the other key element in the development of governance structures and reform (ACAG 2005) and has been described as the “essence of accountability” (Bowrey 2007, p. 43). Transparency refers to access by the public to all information in a timely manner, to the “decisions and performance of governmental institutions” (Department of Administrative Reforms & Public Grievances 2011, p. 6). The emphasis here is on both reporting and the performance measures that are reported. Hoque (2008) found a clear link between agencies’ reporting measures, the outcomes/output framework, and its reporting practices, with the emphasis on flexibility of delivery, rather than compliance and control as was traditionally in place. His analysis of the published reports of four government departments showed that measures of performance that were market driven were “given precedence in performance measures and reporting, and greater competition is championed as the path to a more efficient and effective public sector” (p. 489). Public sector reporting of performance is usually through annual reports, Portfolio Budget Statements, appropriations Bills before parliament (Lawson 2008), but may also include public websites (Public Bodies Review Committee 2006).

However, the sheer quantity of information that has been made available on many Agency and Department websites highlights one of the main issues with public reporting, information can be hidden behind volume, which generates opaqueness and complexity (Greiling & Spraul 2010). Heald (2012) described a number of barriers to transparency of information supplied in the public domain, besides obfuscation through information overload, which included making the information so technical that it required specialist knowledge to comprehend it. This is certainly true for much of the financial reporting available in Government Agency and Department annual reports. Heald made the point that whilst financial reports for the private sector were aimed at clearly defined recipients, budget papers in the public sector required a range of reporting, including financial, performance outcomes, and policy objectives, written for a broader audience. This is a problem echoed by Lawson (2008) who found that the volume of information, lack of clear and consistent information, a failure to link information between various styles of reports required by Parliament, as well as changes made in line with new reporting frameworks, made it difficult for Oversight Committee members to assess them effectively (see also Mackay 2011). And yet this is essential if the public service is to be accountable, as Lawson states, “the accountability and transparency of the Australian government ultimately rests with the interest, vigilance and knowledge of the Senators and Members of Parliament” (p. 920).

In 2009 a new government replaced the existing framework with a new Outcomes and Programs Reporting Framework (Mackay 2011). The intention of the new framework is to make the existing outcomes more specific and tangible. However, this is assuming that the failure of the previous reporting frameworks was an inability to properly develop outcomes. What it fails to recognise is that there was a failure of implementation of the previous framework (Mackay 2011). The lack of prescription by ANAO meant there was a large variation in the quality of governance practices implemented, in a sector where compliance and control was the traditional approach (Hoque 2008; Subramaniam et al. 2011). Secondly, it needs to be recognised that it may just be impossible to capture the essence of all of what a government does within a single outcome (McPhee 2011). Moreover, studies showed that there continued to be a heavy focus on inputs and processes rather than outcomes and outputs, an apparent disconnect between the framework and budget systems, as well as a lack of consistency in performance measures over time (Lacey et al. 2012; Mackay 2011). Lacey et al (2012) found that on average half the performance measures reported on in annual reports appeared only once, whilst most performance measures would appear in no more than about two annual reports, as agencies respond to the changing demands of the public, new governments and changing global contexts.

Performance measurement, accountability, transparency and governance, these aspects of the NPM paradigm have proved to have greater levels of complexity and be more challenging than may initially have been supposed (APSC 2007; Heald 2012; Lacey et al. 2012; McPhee 2011). There are ‘wicked problems’ that do not fit neatly into pre-determined outcomes and outputs (APSC 2007; Lacey et al. 2012). Wicked problems are those requiring more than one agency to deal with them, multi-faceted issues that do not fit into neat department and silo agency structures encouraged by the NPM approaches (Ryan & Walsh 2004), especially when agencies have different interpretations of what those management approaches look like. The growing trend for government services to be delivered by multiple agencies leads to inevitable tensions (Lacey et al. 2012; Ryan & Walsh 2004). The APSC (2007) conducted and published a review of the implementation of governance practices in a number of agencies, aimed at providing governance guidance to the public sector. The implementation of new governance structures and practices as detailed in the document were intended as case studies for other APS departments, to demonstrate how inter-agency governance issues could be addressed (APSC 2007).  A strong emphasis in the report is that there is no single approach that works in all situations, and similar to the private sector guidelines provided by the ASX (2007), it is only when governance becomes part of the culture of the organisation that it will work to make a difference for the organisation (APSC 2007).

There are significant differences between the public and private sectors, even though on the surface there appear many common characteristics (Armstrong, Jia & Totikidis 2005). The difficulties experienced with the implementation of NPM highlights that the public sector is not there yet (Mackay 2011). Problems with implementation may well demonstrate that the work was done too quickly, or not enough thought was given to how the two sectors share common and yet have different problems (Davis 2010). Difficulties highlighted with performance management, reporting, accountability, transparency and other governance structures give lie to the idea that what works for the private sector will automatically work in the public sector,  demonstrating a lack of understanding of the complexities that abound (APSC 2007; Mackay 2011; Ryan & Walsh 2004). Yet, governments have an imperative to make the public sector more accountable, more transparent if they wish to address the issues facing our society (ACAG 2005). Effective governance practices will make the public sector more accountable to the people (Barrett 2003), and whilst this essay has highlighted some of the issues, it is not an argument that governance models should be abandoned, rather that more work should be done on making them work (APSC 2007; Hupe & Edwards 2012).


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[1] These include: the Financial Management and Accountability (FMA) Act 1997; the Commonwealth Authorities and Companies (CAC) Act 1997; and the Public Service Act 1999


© 2012 Karin Oerlemans