Sovereign Wealth Funds

While the Australian Government Future Fund has proven highly successful unfortunately the returns are swallowed by previous governments fiscally reckless decisions on treatment of Civil Servants perks and benefits of employment. However, the use of Sovereign Wealth funds has proven effective world wide in generating funds for Government services.

Manage Australia recommends the creation of the following funds to help cover Governments core service responsibility’s;

  • Welfare       – 2016/17 expenditure $158.61B*
  • Health         – 2016/17 expenditure $71.41B*
  • Education   – 2016/17 expenditure $33.67B*
  • Defence       – 2016/17 expenditure $27.16B*

Of course under the current trend of budgetary deficits ($16.6B in 2016/17), burgeoning debt, and debt repayments, this will be a very difficult target to achieve. Manage Australia accepts there will be non-core government service cuts required, as well as stringent budget control (see post here) to eliminate waste, and so called “middle class welfare” will need to be significantly scaled back.

The model for the funds will be the allocation of budget surpluses to funds listed in order. A Target of $20B surplus to be deposited in the funds, in order, per year up to:

  • Welfare       – $200B  ($20B  Years 1 to 10)
  • Health         – $100B  ($20B  Years 10 to 15)
  • Education   – $60B    ($20B  Years 15 to 18)
  • Defence       – $60B    ($20B  Years 18 to 21)

Interest from the funds will be distributed 50% to offset the budget and 50% to be reinvested into the fund.

To protect the funds from potential raiding from future governments we recommend a change to the constitution to protect the funds in perpetuity.

Manage Australia recognises this is a difficult policy to implement, with many self-interested bodies likely to object.  However, we believe the general public will recognise the long term benefits of such a policy, despite the potential short term discomfort.

*Source http://www.abc.net.au/news/2016-05-03/budget-2016-sliced-diced-interactive/7363834#spending/breakdown/2017/social-security-and-welfare

Zero Point Budgeting for Government

It is clear the current practice of budget formation and management within Government is both clumsy and uncontrolled in any realistic sense. Manage Australia recommends the use of Zero-based budgeting to regain control and management of the governments budget process.

Zero-based budgeting (ZBB) is a repeatable process that organisations use to rigorously review every dollar in the annual budget, manage financial performance on a monthly basis, and build a culture of cost management among all employees.

The ZBB process is based on developing deep visibility into cost drivers and using that visibility to set aggressive yet credible budget targets. The annual budgeting process does in fact start from zero and is very detailed, structured, and interactive in order to facilitate meaningful financial debate among managers and executives.

Throughout the year, multiple owners are tasked with managing performance and continuing the healthy debate on cost management. Through new system and process controls, and aligned incentive programs, all employees make cost management a part of their daily routine.

In order to achieve this 3 important cost elements need to be captured at a micro level

  1. Forecasts – How much do we anticipate the cost of the element will be on a monthly basis. This forms the basis for the budget bid. It will be revised on a monthly basis as Actuals are realised.
  2. Approved Budget – This is the considered amount of funding allotted to the cost element.
  3. Actuals – A tracking of funds on a monthly basis to inform managers of performance vs forecast.

Some may argue that is process exists within government organisations and departments now, this is half true. Two key elements are missing from the current practice:

  1. Granular low level monitoring – Government deals in aggregate costs and details pertaining to those costs are invisible, unmeasurable and therefore unmanageable.
  2. Yearly Ground Up budget formation – Government works on a “Last year + x%” method of estimating (forecasting) budget requirements, this method fails to review the relevance of cost elements in achieving the governments stated goals.

Manage Australia believes that these reforms would result in not only a much more effective and efficient benefits driven Government, but will remove redundant Government budget burdens resulting in less cost for government overhead for the Australian Tax Payer.

Problem Statement: Government is engaged in Social Engineering.

The recent social media activity of Yassmin Abdel-Magied highlights a problem with Government at all strata; individuals and groups are using taxpayers funding to promote personal views and advocate position of advocacy for groups and/or social movements.

Its is Manage Australia believes that this form of social engineering both is an inappropriate use of public money, and inappropriate support of one sector of society in any contest of ideas.

In order to end this practice Manage Australia suggests the following actions;

  • De-funding of all government initiatives, councils, grants and foundations dedicated to forming community perceptions or attitudes.
  • Remove any and all cultural practice, or funding for cultural practices, from regular government day to day activities.
  • Remove all funding for Social Opine or Social Commentary within publicly funded entities.

Further, significant reform of the ABC and SBS in terms of resizing and rationalisation of services provided would aid in the cessation of public funding being misdirected into matters of social engineering.

 

Problem Statement: Federal Government Travel

The Australian Public Service (APS) Travel costs totalled $427 million for 2016. While a significant amount, it should be noted that Corporate Commonwealth Entities (CCEs) are NOT required to use this system and their costs are not represented in the $427M amount.

Source: http://www.canberratimes.com.au/national/public-service/federal-public-service-travel-bill-nears-half-a-billion-dollars-in-2016-20170417-gvm06m.html

The Whole-of-Australian-Government Travel Services (https://www.finance.gov.au/procurement/travel-and-related-services) was established to provide governance and guidance in order to reduce the cost of government travel for the APS. Clearly this initiative has failed to curtail an increasing impost on the Australian taxpaying citizen.

Manage Australia’s proposed solution:

  • Centralisation of Departmental bureaucracy to Canberra.
    • The Senior Executive Services (SES) will be rationalised* and (re)located to departments buildings within Canberra.
    • Non customer facing (shop-front) bureaucracy will be rationalised* and (re)located to Canberra.
  • Air Travel less than 4 hours will be Economy class only. This extends to all levels of APS and SES.
  • Hire Car services will be for exceptional circumstances only and subject to a reimbursement scheme, otherwise ground transport services will be available via a simple Taxi voucher system as used by most of corporate and businesses in Australia.

The bureaucracy formed around Public servant travel has substantially grown, and failed to impact on the cost. The System requires simplification, rationalisation and the entitlements of the Australian Public Servants revised downwards.

* Manage Australia has a view that APS bureaucracy is oversized and outweighs the customer facing services of departments by too great a ratio. See posts tagged Rationalisation.

The Australian Federal Government has too many Agencies and Commissions

The Australian federal government currently has 192 separate entities – Agencies, Services, Tribunals, Corporations, et al. established to govern, administer, and rule over aspects of government delivery outside of Government itself. (click More below to see full list)

Manage Australia believes this is outsourcing of government duties in many cases, in other cases Agencies are redundant in the context of a more effective and efficient government that is focused on the delivery of core government function at the Federal government strata.

Continue reading “The Australian Federal Government has too many Agencies and Commissions”