Richard Curran: Department of Finance needs a culture shock
THE Department of Finance has been heavily criticised for its failings in the creation of the economic, banking and property crisis.
A draft version of a new Public Accounts Committee (PAC) report heavily criticises the department for a raft of issues, including a lack of qualified staff, creating an environment where people didn't challenge one another and a failure to judge systemic risk. It also raises the question of whether the department is fit for purpose.
Just a couple of years ago the Wright report looked into the very same issues. It got full access to internal email and correspondence. The department declined to provide the same information to the PAC for fear of prejudicing the pending banking inquiry. This sounds like a lame excuse. It is hard to see how it would have prejudiced anything.
The Wright report listed a raft of deep and fundamental flaws in the organisation and running of the Department. It even suggested that the management of the public service should be moved to a different department. It also found that it lacked key skills, was more numbers-driven than strategic, didn't engage enough with the broader community and "often operates in silos".
It said the department did provide warnings about the direction of the public spending and construction during the boom but wasn't forceful enough in voicing them.
The Wright report ended up being the wrong report. It didn't look at the culture of the department or why it failed to provide an analysis of the risks of a change in economic fortunes. It said the department didn't have enough economists, but failed to say how many were actually working as economists; and left the impression that not much economic analysis went on other than around the Budget.
Wright spotted much of what is in the PAC report but reached very tame conclusions.
Undoubtedly, the department failed to safeguard the public interest during the boom in these key areas. It didn't even listen to the very few of its staff who voiced concerns about the madness of the boom. But has it improved?
It has hired in some new expertise, including at the very top with the appointment of John Moran, a former banker
and non-career civil servant. It has beefed up its economic and banking divisions with more staff. Its latest organisation chart is dated May 2013. It shows an allocation of 17 staff in the economic division, including an economic strategist and an economic forecaster. But it had two unfilled vacancies in risk analysis and economic analysis.
Three big financial services divisions have a total of 76 people, including some outsiders, that "man mark" each of the banks, assess financial sector risk, manage State holdings in the banks etc.
The fiscal policy division has 39 staff and HR looks to have been beefed up to 17 staff.
Incredibly one of the biggest sections is the Corporate Office. It has 72 people – almost as many as the entire banking and financial services section. These guys look after things like, FOIs, corporate communications, press office, accommodation and printing, minister's office and change management, as well as two civilian drivers.
The culture of the department may be changing, but who knows for sure. Not providing material to the PAC that it gave to the Wright report suggests it hasn't changed enough.