Since 1999 the Government has actively pursued a policy of relocating agencies, or parts of them, to regional NSW.

The audit assessed whether there was good quality information and analysis available to support the selection of agencies and their new locations and whether outcomes have met expectations. We reviewed processes co-ordinated by the Government Asset Management Committee (GAMC) and four relocations. Two of the relocations, the WorkCover Authority to Gosford and the Department of Local Government (DLG) to Nowra, were announced in early 1999. The other two relocations we reviewed, Mineral Resources to Maitland and the State Debt Recovery Office (SDRO) to Lithgow, were announced in late 2001.

Opinion

On balance, we believe that the decisions by the Government to relocate the four agencies were not adequately supported by advice from GAMC.

On the positive side, we found that decisions to relocate the agencies were arrived at quickly by the Government, that GAMC began developing appropriate processes to support government decisions and that the relocations were operational within three years from announcement.

Significant weaknesses in our view were:

·         the decisions to relocate the agencies were made either without advice or with only limited advice from GAMC

·         GAMC’s processes did not provide timely and thorough advice when required.

GAMC’s advice to the Government on WorkCover and SDRO provided only limited options and analysis. The decisions to relocate DLG and Mineral Resources were made by the Government with no advice or business cases provided by GAMC.

The absence of business cases with clear objectives also means that no evaluations have been undertaken of outcomes against relocation objectives.

Auditors-General in various jurisdictions have highlighted the need for governments to be circumspect when making decisions affecting marginal electorates. Three of the four relocations that we examined were to marginal electorates. Without transparent processes in such situations, history has shown that governments may be exposed to criticism.

If the Government and GAMC are to achieve more accountable decisions they must support:

·         processes providing more thorough analysis of options and timely advice

·         compliance with established and relevant guidelines, and

·         evaluation and reporting of results.

Summary of recommendations

We recommend that GAMC:

·         document its processes for implementing government accommodation reform policies and strategies (page 19)

·         produce business cases for all important office accommodation reform recommendations (page 19)

·         evaluate significant accommodation reform initiatives, such as relocations, against objectives and targets (page 23)

·         report annually on performance of government accommodation reforms (page 23)

·         conduct a review assessing the need for any further relocations to regions and identifying more pressing regional priorities (page 20).

Key findings

Chapter 1 – Developing the policy and its means of implementation

The Government began a policy in 1997 of improving economic growth in regional areas by relocating jobs. To implement the policy, the Government Office Accommodation Reform Program was established in late 1998.

GAMC’s role includes testing the viability of agencies to relocate to regional NSW and advising the Government on agencies that could be relocated.

Chapter 2 – Selecting the agencies and the new

GAMC did develop a process to test the suitability of agencies for relocation to regions by assessing agency leases and the nature of their business. However this did not result in timely recommendations to government.

regional

locations

GAMC did not support its advice to government with well-developed business cases assessing the viability of relocating the agency and possible new locations. When studies were undertaken, they did not comply with business case principles.

GAMC’s provision of advice to government in two of the four cases is clear recognition of its role to provide advice to government on relocations.

Without robust assessment and justification it is not possible to conclude that the most appropriate relocations were approved and that public funds were applied in the best possible way.

Chapter 3 – Have the relocations been evaluated?

Without business cases setting out performance expectations, such as targets for ongoing economic impacts, it was impossible to undertake evaluations. Therefore, Parliament and the public are unaware of whether or not the relocations were successful.

Co-ordinated response from Premier’s Department

I refer to the letter of 16 November 2005 from the Assistant Auditor-General Performance Audit concerning the Performance Audit on Agency Relocations to Regional NSW.

The Premier’s Department has coordinated this response on behalf of WorkCover, Department of Local Government, Department of Primary Industries (former Department of Mineral Resources), State Debt Recovery Office and the Government Asset Management Committee which I am the Chair.

The basis upon which this Audit was established was flawed from the outset as it involved the review of policy decisions taken by the Government of the day.  It is clear that the intent of these policy decisions by Government was to stimulate local communities by enriching economic growth through much needed employment, infrastructure and improved access to services by the community.

The inference that the decisions taken have not demonstrated whether the relocations were successful or that public funds were applied in the best possible way is not justified given the significant indicators provided below.

Construction (Employment and Economic Impact)

The relocation of the four agencies to regional areas resulted in significant job creation and local industry development opportunities during construction of the premises. Construction of office buildings results in substantial direct employment on-site, as well as indirect jobs in the building component supply industry.  Direct and indirect jobs created during the construction of premises include:

Mineral Resources – Maitland:  150 direct jobs; 200 indirect jobs

State Debt Recovery Office – Lithgow:  48 direct jobs; 60 indirect jobs

Local Government – Nowra: 65 direct jobs; 85 indirect jobs

WorkCover – Gosford: 322 direct jobs; 420 indirect jobs.

Total construction expenditure across the four agencies has been estimated at approximately $70 million - $30 million in Gosford, $22 million in Maitland, $11 million in Lithgow and $7 million in Nowra.

In the case of the WorkCover relocation to Gosford, 78% of trade/tender packages were let to local contractors, 75% of sub-contractors were employed from within the region, and 100% of supplies were obtained from local businesses.

Post Occupancy – (Employment, Economic Impact and lessons learned)

Relocation has been a successful strategy in increasing public sector employment in rural and regional areas to stimulate economic activity. As noted in the report, over 1500 positions have been relocated since January 2000, bringing over $50 million annually in salaries alone into their communities. Of these positions, 872 are located in the four agencies specifically reviewed by the audit.

Approximately 75% of positions in those four agencies have been filled through local recruitment, improving employment outcomes for their respective areas. Relocation of the remaining staff from Sydney has contributed to local population growth.

Apart from the contribution of staff salaries to the respective local economies, all relocated agencies purchase locally, within government procurement guidelines. Local purchasing includes printing, cleaning, catering, security and newsagency services. WorkCover, for example, also has motor vehicle maintenance undertaken by Central Coast firms.

The overall economic impact on regions over and above the staff employed can be very significant. It has been estimated that, for the 200 positions relocated to Maitland with the now Division of Mineral Resources, Department of Primary Industries, there is an annual economic impact of approximately $15 million, including supporting a further 130 jobs in the local community.

Evaluation of other elements of the relocations also allowed the identification of best practice and its application to succeeding relocations. For example, the post relocation report prepared by WorkCover was an important guide for the relocation of the now Division of Mineral Resources, Department of Primary Industries. WorkCover staff also provided direct advice to other relocating agencies.

Earlier agency relocations include the former Superannuation Administration Corporation to Wollongong, the NSW Police Firearms Registry Branch to Murwillumbah, the Registry of Cooperatives to Bathurst and, of course, previous governments undertook significant relocations such as the Department of Agriculture to Orange and the Central Mapping Authority to Bathurst.

There are no further significant relocations currently under consideration. However, should this situation change, GAMC will consider the recommendations of the audit in relation to any decision making processes.

In conclusion, I reiterate my position that I consider the basis of this audit flawed. It is a matter of government policy where agencies are located. Both sides of politics in this State have made decisions to relocate agencies to regional and rural NSW, predicated on a clear policy of encouraging employment opportunities and economic activity outside Sydney

(signed)

C Gellatly

Director-General

Dated: 8 December 2005