Government claims that $300 million in savings can be achieved by a ‘Tetris-type’ plan to pack public servants into unused office space don’t hold water, an audit has found.
The methodology used to calculate savings on a million-dollar project steered by the Department of Finance, dubbed Operation Tetris, was “not sufficiently robust and transparent,” Auditor-General Mr Grant Hehir has found.
The million-dollar plan involved accommodating public servants in the ACT and other major capital cities in already leased but partly vacant spaces rather than signing new leases.
The audit, released last week, found holes in the savings methodology used by the Finance Department to justify what Finance Minister Mathias Cormann referred to as a $300 million save over 10 years – including a blow-out in rental estimates and lease terms.
The equation used to support the government’s touted save also failed to consider fit-out and relocation costs, according to the audit office. Other assumptions in finance’s savings methodology “did not consistently hold,” the audit said.
It found while the project did ultimately reduce surplus office space and result in savings, the actual net value of the savings was unclear.
“It is evident that efficiencies and savings have been realised from this work, but Finance’s approach to estimating and tracking savings was not robust,” Mr Hehir found.
Holes in $300m calculation
Every element of the Department’s methodology used to calculate the cited savings had holes, the audit found.
“Analysis of the five sub-leasing agreements revealed that the assumptions in Finance’s savings methodology did not consistently hold,” the audit reads.
The three elements of the department’s savings methodology – the cited rent cost per square metre, the 10-year average lease term and the quoted area filled – were all inaccurate.
“Finance’s responses raised further questions about the basis of the methodology, and whether the approach taken was soundly based and consistently applied,” the audit said.
In costing the plan the government set the average rent per square metres at $460. However, the auditor said “no evidence” of this was provided and analysis of sub-lease agreements found that in four of the five cases examined rent was “materially less”.
The presumed lease term used to calculate the savings was also based on a 10-year-term, despite two leases having a seven and five year term.
There were also discrepancies in Finance’s summary tracking sheet of the net lettable area and what was listed in the sub-leasing agreements.
Unverified data, poor accountability
Despite flagging the need for verification of the actual savings in Finance’s initial advice to the Minister in April 2015, no such analysis was undertaken, the audit revealed.
“No such analysis was undertaken, or advice provided to the Minister on the actual outcome of Operation Tetris compared to the estimated savings, which were then publicly announced.”
The Department also claimed that savings figures for public sector office moves in Adelaide, totalling $2.1 million, were based on ‘actual avoided rent’ when in fact they were not – and were based on the $460 per square metre figure.
“Important aspects of the methodology were not clearly documented, and the approach followed did not include all relevant costs (including fit-out and relocation costs). Moves were tracked but the estimates were not verified or adjusted to reflect actual outcomes.”
The audit called upon the Department to ensure its ongoing program of work to deliver savings on Commonwealth leases is “supported by a robust and transparent savings methodology” and to improve its framework for assessing and reporting on the program.
In a response to the audit, Secretary of the Department of Finance, Rosemary Huxtable said that Finance agrees with the recommendations of the report and that these findings are “informing work underway to refine and improve robust methodologies,” she said.
“In particular, the Report’s findings will support continuous improvement under the Commonwealth property Management Framework, including through the effective use of data and reporting, to achieve ongoing value for money outcomes.”
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