With the public realm becoming increasingly corporate, it's open to risks familiar to its private counterparts. Kylie Hansen reports.
When it comes to the public sector, issues of corporate governance are even more complex than the private sector's relationship with shareholders. Public servants not only serve the greater public, they are also accountable to parliament and then there's the delicate matter of their relationships with ministers.
With the massive restructuring and corporatisation of the public sector, these issues have come to the fore. The media has been filled with stories about public/private partnerships and to whom, if anyone, they are accountable. The collapse of the NSW Grains Board in 2000 with accumulated loses of $152 million has put the issue of risk management in the public sector firmly in the spotlight. A recent NSW auditor-general's report found that 45 per cent of public trading enterprises did not have a risk management plan.
John Farrer, professor of law at Bond University and director of the Institute for Corporate Governance says that despite years of corporatisation of government at a federal and state level, we are yet to come to grips with how this new style of rule is to be held to account. He explains that when it comes to corporate governance in the public sector, there are two important areas which need focus risk management and enhancing stakeholder value.
While he says Australia compares reasonably well on a global scale, there are still problem areas. 'We talk about corporate governance and each state has legislation governing it, but the fact is that each state government still has its cronies and political patronage still operates at a level of appointment to these boards. And that affects the quality of government.'
While Farrer believes that the public sector does not suffer from the fallout of 'blanket self interest' like private industry does, 'you do get poor and careless management'.
'The question is whether there is a system that is adequate to rule it out. And when you go down the path of corporatisation, it makes it more remote from parliamentary accountability,' he says.
In a bid to find answers to some of these vague lines of responsibility, the New South Wales, and to some extent, the Queensland governments have undertaken studies into the issues of corporate governance. Now it is the Victorian parliament's turn.
The public accounts and estimates committee has embarked on a broad-ranging inquiry into issues of performance and accountability in the public sector.
'This has arisen because of significant changes to the public sector, particularly the increase in public/private partnerships,' says committee member, MP Judy Maddigan. 'We are looking at appropriate authority lines and whether the public service is providing best results. We will look at whether the community feels that with privatisation of public utilities, people still have the same access to information. Areas like electricity services raise a lot of questions,' Maddigan says.
In these days of stratified government, that review has a lot of areas to cover. As well as looking at government departments and agencies, it will address independent public sector agencies (like the Equal Opportunity Commission); entities with corporatised management (like Federation Square); state owned enterprises (like the Urban and Regional Land Corporation); statutory bodies (like TAFEs and the National Gallery); local government; industry advisory boards; community committees (like schools and safety boards), not for profit outfits and those with private sector partners like some prisons and hospitals.
The review will look at corporate governance issues such as whether each organisation has a clearly defined role and responsibilities, whether there are adequate measures in place to protect the public interest and one of the most vexing questions the level of openness and accountability. With its final report due to be handed down in November, it is a very timely review, says public policy specialist Dr Ken Coghill.
'There are valuable lessons from experience in Australia and internationally as to whether existing corporate governance arrangements in the Victorian public sector are appropriate in view of the significant reforms which have transformed it,' says Coghill, who is director of the public policy and management program at Monash University. 'This is particularly so in the use of alternative service delivery mechanisms,' he says.
Coghill says ministers and government must acknowledge that they will be held politically accountable for what happens, not only in their own departments but across the raft of quasi government bodies and not for profit organisations.
'Ministers must accept that they have complex interrelationships with both the private and not for profit sectors and with federal government powers. The community expects government to act to protect public interest over and above whatever immediate interests private business, not for profit organisations and indeed ministers themselves, must have,' he says.
One of the areas of corporate governance which Dr Coghill sees as a growing question is the issue of releasing or withholding information. 'There must be a presumption that any and all information is available. The only limitation must be where it is in the public interest to withhold information.'
Coghill says that a business or minister cannot be permitted to sit on information unless they can prove it is in the public interest to do so.
'A major issue is information collected by an organisation providing a service or supplying goods on behalf of the public. At its simplest, this information must be the property of government as a provision of the contractual relationship in each case.
'There should be an overriding statutory requirement that all information generated as a consequence of the provision of goods and services ... remains the property of the government and is publicly available.'
But is there an easy solution to these concerns? The Victorian president of CPA Australia, Professor Colin Clark, says it's difficult to generalise about corporate governance in the public service. 'That's because the public service ranges from central departments to agencies in the twilight zone,' he says. But, he says, a central concern has been the enormous change in the public service over the last decade and whether the fundamental aims of corporate governance have kept up.
'It is probably a risk with corporate governance practice to continue to be too heavily focused on compliance rather than performance,' says Clark, who is also the head of the public sector research unit at Victoria University. 'The shift in the public sector has been to adopt a focus on performance.'
