CPDS Home Contact Professionalism: Chronological Summary

22 December 1999

To Mr Len Scanlan,
Auditor General

Thank you for the documents enclosed with your letter of 20/12/99 [a response to a previous letter] in relation to the role of the Auditor General as a statutory officer responsible to Parliament.

I have perused your Annual Report and the Results of Audits Performed with interest, and I appreciate the successes they reflect in coping with a complex and changing situation.

However I still have grave concerns. Collective efforts on behalf of Parliament by your office, by other statutory officers and by government are not proving sufficient. The 'rubber is not hitting the road', either in terms of effective administration (1) or (for example) in terms of overcoming Queensland's poor positioning for future economic requirements (2).

I submit that our political process proved unable to cope with changing economic (and other) requirements, and has unwittingly damaged the institutional effectiveness of government by politicising (ie amateur-ising) the Public Service. At times this is revealed as public scandals (3), but often it results in long-term failure of initiatives which are short-term political 'successes' (4)

It has been vital to 'blow the whistle' on under-performance resulting from a lack of balanced, high-level knowledge and experience. However when things started to go seriously wrong, and existing public servants (such as myself) tried to carry out their traditional Westminster role as a source of independent advice, the political system simply 'shot the messengers' (5).

My letter of 21/11/99 enclosed a letter to the Chairman of the CJC about several important consequences of politicisation / amateur-isation which were indirectly in the CJC's ambit.

However my perusal of your reports suggests that serious consequences are more likely to impact directly on the Auditor General. For example:

The above issues are elaborated in Attachment A. I submit that they need attention (6).

[Signed John Craig]

Attachment A: Issues of Concern which overlap QAO's Area of Responsibility

Competitive Position of GOCs: QAO's reports identified eliminating GOCs' competitive advantages and disadvantages as a current / emerging issue (eg via Competitive Neutrality Fees). Unfortunately all analyses to date have been 'politically correct', and have dangerously ignored the impact of politics on the ability of corporatised and commercialised public entities to avoid financial large losses in the face of competition (7). This issue requires re-evaluation.

Damage to Pubic Assets by Public Service Politicisation. Requirements for accrual accounting were introduced (as I understand it) to allow a meaningful balance sheet of public assets to be developed - and to aid in managing those assets. However as noted in my letter to MLAs dated 28/5/99 (8), the building of a balance sheet of tangible assets says little about a government's performance without also considering intangible public assets (9). And as politicisation erodes such intangible public assets, politicisation must be a matter of direct concern to anyone seeking to understand how public assets are really being managed.

The effectiveness of professions as a social institution is somewhat threatened by politicisation (at least in government) (10). And as politicisation of senior appointments currently has bipartisan political support, and as our political system is not well equipped to perceive what damage is being done, a considered analysis by a truly professional body may be the only way prevent further deterioration. I note that audit standards which the QAO's uses are based on the work of professional accounting bodies.

Risks can not be properly managed due to a growing gap in the public sector between 'appearances' and 'reality'. Everyone pretends to do the 'right (trendy) thing' (eg to have a 'Client Service Charter') but the results often lacks real substance - because it is usually the politically acceptable (rather than the objectively realistic) version of the 'right thing' which is endorsed (11). This phenomenon is, I suspect, the result of the ascendancy of politics (which is only concerned with appearances) and the erosion of Public Service professionalism (which had traditionally provided government with a counter-balance in terms of objective reality) (12). This gap could prove costly in terms of ineffective risk management (13).

There are systemic defects in the Managing for Outcomes approach which has been adopted to integrate strategic planning and output budgeting. That system is built on dubious assumptions (14) eg: that government 'outputs' (rather than creating the framework for economic and social transactions) are the most important government contribution to community welfare (15); that outputs can be adequately defined and measured (16); and that formal strategic planning can effectively define outputs. Thus outcomes are often intrinsically biased against the public interest. Can audits be meaningful in such a framework?

Agencies' Abilities to Achieve Future Results: The QAO's audit mandate is oriented only to public financial accounts. While this is very important, there is apparently a corporate shift towards non-financial performance indicators (eg relationship with clients, and learning / innovation capability) - because financial indicators merely show the past performance of organizations, and do not reveal their capabilities to achieve future results (17). Furthermore short term financial gains can conflict with long term requirements, while a 'balanced scorecard' allows operational management consistent with overall strategy. This shift (and its motivation and significance) could be highlighted to Parliament, and lead to a new factor being legislatively required in performance management system audits. Current pressure (18) on the QAO to test the accuracy of 'non-financial output performance data' (which data are also about past achievements) seems to have little relationship with what may be needed.


1. The Re-emergence of a shambles in Queensland's Public Service was indicated by anecdotes quoted in letters to MLAs dated 28/5/99 and 23/7/99 which were enclosed with my letter of 3 August 1999. Those anecdotes were volunteered by responsible observers without leading questions.

2. A lack of real progress: our poor economic positioning includes: our past economic specialisation; a lack of institutions able to be effective in developing stronger economic capabilities; and a lack of relevant knowledge and research capability associated with our small-business, branch-office foreign-investor-reliant economy. The latter is a severe limitation as knowledge is now replacing capital as the critical factor in competitive advantage and productivity. Queensland has long given economic priority to securing capital investment - without complementary efforts to acquire the knowledge assets now usually required for investment to be highly productive. For example, investment has been cultivated in (often) low productivity sectors such as tourism, resource extraction and basic mineral processing. Queensland has thus under-performed economically (despite its fast overall growth due to increases in labour and capital inputs). Per capita income has continually declined, relative to leading international trends. The quality of jobs has often been poor. Over the past decade, the rural, coastal and metropolitan margins and many individuals have suffered high under-employment (or unemployment), due to an inability to cope with fundamentally changed requirements. In turn this has led to social stresses and political instability. And the problem does NOT seem to be being solved. For example a summary is enclosed of Comments on Innovation: Queensland's Future (which was a recent draft plan by the Department of State Development). The draft plan suggested an ambitious goal of making Queensland a world leader in innovation. This was consistent with the Smart State theme of the 1999-2000 State budget, and seems to be part of a whole-of-government program orchestrated by the Department of the Premier and Cabinet to 'reposition' Queensland globally in the knowledge economy. The goal of a stronger innovation capability is desirable, and overdue. As innovation is the main way to create economic value from knowledge, a good commercial innovation capability in regional communities would reduce many current social symptoms. But, despite the draft plan's intentions, much of the innovation infrastructure it suggests can (at best) provide costly 'toys' for Ministers to play with, rather than being commercially relevant - for reasons outlined in enclosed summary comments. There are also risks that a politically based push to 're-position' Queensland could unwittingly de-skill our innovation capabilities, as political efforts to 're-engineer' the Public Service (theoretically to make it business-like) did to the Service's professional skills in the early 1990s. A full version of enclosed comments can be provided if of interest.

3. Public Evidence: The issuance of an Interactive Casino licence MAY have been a visible consequence of defective Public Service action - as hypothesised in my letters of 3/8/99 and 3/10/99.

4. Hidden Under-performance: The main risk with initiatives such as that to build an innovation capability (see Note 2) is not that they will result in visible fiascos (like the APEC Technomart, which was a part of that program) but that they achieve their short term political goal of convincing community leaders that enough is being done about innovation - while producing practical results which are not commercially effective.

5. Westminster tradition: One observer apparently described my situation as a test case for this (apparently now defunct) tradition (see McDermott P `Tenure of Senior Queensland Public Servants', Australian Journal of Public Administration, March 1993).

6. Reporting? QAO's analysis of risk management (Corporate Governance: Beyond Compliance, Report No 7 of 1999-2000) suggests a way to bring such matters to Parliament's attention.

7. The Competitive Disadvantage of GOCs: Several persons (eg in the electricity industry, in industry research) have highlighted to me how political expectations have obliged government businesses to serve clients who do not offer best prospects for financial returns. This should, in principle, be compensated by Community Service Obligation payments - but in practice it is (usually) not. Corporatised and commercialised government entities are now in a position equivalent to that of nationalised industries (ie are subject to both political influences and competition). Such entities tend worldwide to produce major financial losses for governments because of (a) conflicts between (often informal) political demands and the focus on market demand which is required for commercial success (b) the effect of politics on management skills and orientation. The reality of actual trading losses beginning to emerge in the electricity industry (the tip of an iceberg?) can also be noted.

8. Enclosed with my letter of 3 August 1999

9. Producing only a balance sheet of tangible assets may be futile because (a) the intangible assets of a major organization (which reflect the staff knowledge and skills and organisational arrangements which allow them to work together) are often much more valuable than the tangible assets which accrual accounting can assess and (b) politicisation of the Public Service can potentially erode the value of (intangible) public assets more than any potential gains through superior management of tangible assets.

10. Professionalism can usefully be defined as a combination of high level theoretical knowledge with practical experience of what should happen when that theory is applied. Our political process has been moving away from professionalism as a basis for Public Service (a fashion which has had bi-partisan support because the consequences and alternatives were not properly evaluated). The political system has then proven singularly unable to accurately identify persons who do combine high level knowledge with practical experience (ie are true professionals). And as politically selected senior staff then lead, train and appoint all others, the net effect is of a massive loss of real professional competence in the public sector. Despite this our political system has also been singularly unable to tell what harm it is doing. The idea of 'information asymmetries' (which the Institution of Engineers recently used to good effect in the submission about Queensland's Professional Engineers Act) provides an explanation of why politicisation of senior Public Service positions is so disastrous. It is equivalent to the client deciding who should be a qualified professional. Unless something is done by professional organisations to restore professionalism (ie to re-emphasise a proper balance of real knowledge and experience) as the basis for senior Public Service then the context within which a large fraction of younger professionals work is NOT going to be hospitable to their professional development.

11. Appearance and reality - an example: Such a gap MAY have contributed to the clearly poor decisions associated with the granting of an Internet Casino license which was referred to in my letter of 2/8/99 and 3/10/99.

12. A Loss of objectivity: This phenomenon is arguably closely related to concerns expressed by Alan Bloom in his influential work The Closing of the American Mind (1987). He argued that the quality of universities was deteriorating because the reference point for truth had shifted from empirical reality onto human culture (ie what people wanted to be true) - a shift which he argued eroded the possibility of further learning. [This shift is probably the result of post-modern / post-positivist philosophies which argue that knowledge is merely a social construct. This view clearly applies in SOME situations, but many appear to have erroneously assumed it applies to ALL knowledge]. In some respects Bloom's work seems to have been a complaint about political correctness (ie the view that whatever an interest group wants can become 'true', if anyone who says that it isn't 'true' is suppressed by political action), but in other ways it was a comment about a fundamental reduction in Western societies' faith in the traditional empirical foundations of their science and technology.

13. Appearances and reality - another example: QAO's Report No 7 for 1999-2000 dealt with risk management. In risk management a key issue is presumably whether agencies understand their strategic environment. The pretence is that they do. The reality is that they are not organised to do so (a conclusion expressed in early 1998 by an interdepartmental committee in Initiating the Preparing for the Future Project (summary enclosed) - a report which was lost in the change of government). In a letter in September 1999, the Premier's Chief of Staff, Mr Rob Whiddon, indicated that the strategic capability of the Public Service was of key importance to the present government. But this can only be a polite fiction, because a politicised Public Service can never have the depth of knowledge and experience required to give realism to such aspirations (see enclosed copies of letters to Mr Whiddon of 24th and 25th September). However, unless they do get it right, risks will not (in fact) really be managed - and losses WILL be sustained.

14. Managing for Outcomes: Only Part of the Answer: The summary of a paper which outlines concerns about unrealistic assumptions underlying the Managing for Outcomes approach is enclosed. A complete version can be provided if of interest.

15. Emphasis on government outputs can be dysfunctional: as outlined in Note 9 on a letter to Professor Robert Mulgan which concerned Public Service politicisation (enclosed with my letter of 3/10/99). Arguably our systemic fixation on government outputs (eg public sector 'assistance' to individual firms) was a major factor in Queensland's failure over the past decade to develop a productive modern economy (as such 'assistance' is the opposite of developing the ability of business and the community to provide such support - which would be the hallmark of a developed economy).

16. Difficulties in realistically defining outputs were highlighted by Robinson M., 'Contract Budgeting', QUT School of Economics and Finance.

17. The Value to Queensland of Non-Financial Performance Indicators - a 1997 paper is enclosed which outlines this matter, and why accountability in terms of the use of financial assets is no longer sufficient to ensure the effective management of organisations.

18. Pressure to evaluate non-financial output performance data is coming through the Managing for Outcomes Policy Guidelines according to your 1999-2000 report.