ATO called out for not tracking costs in digital transformation program

A probe into the Reinventing the ATO Program by the Australian National Audit Office (ANAO) has found the Australian Taxation Office (ATO) did not effectively track the costs and savings involved with the agency-wide transformation.

The Reinventing the ATO Program was expected to better position the ATO to be more contemporary, innovate with technology, and meet taxpayer expectations.

The program was initiated partly in response to the Australian Public Service Commission's capability review in 2013, which outlined the challenge for the ATO to transform its existing processes, systems, culture, and workforce to be more "agile, responsive, efficient, and effective".

According to Commissioner of Taxation Chris Jordan, the transformation project -- which officially kicked off in 2015 -- is focused on changing the way the ATO communicates, which includes initiatives such as improving its website; writing better targeted, plain English letters; and using new channels like the small business newsroom.

"We want to offer streamlined, contemporary and tailored services, and we want to work with you in a constructive and respectful way," Jordan says in an explanatory video. "Reinventing the ATO is not a short-term program, it's not a fad. It's about embedding deep and long-lasting change in the ATO."

The program applies to all aspects of the ATO's operations, including infrastructure, tools, services, and capability, and has been broken up into six segments: Digital infrastructure and services, smarter data, working with partners, tailored engagement and support, workforce capability and culture, and governance and measuring success. The six "strategic programs" oversee 100 projects.

According to ANAO, all 100 projects are required to apply the ATO's corporate project management framework, which it explained was revised in July 2016 to provide a greater focus on the value proposition of projects, including costs and savings.

However, in Costs and Benefits of the Reinventing the ATO Program, ANAO said the ATO is not managing the entire process using a formal program management methodology.

In its report, ANAO found that while the ATO has "sound" systems and guidance for estimating and monitoring the costs, savings, and benefits associated with its transformation projects, the effectiveness of the processes involved has been compromised by low levels of conformance.

Without widespread adherence to these processes, 62 of the 100 projects had applied the ATO costing tool, of which 34 had costs assured by ATO Finance, the ANAO reported.

"As a result, the costs, savings and benefits from these projects cannot be calculated," ANAO said. "The ATO needs to ensure greater conformance to processes for estimating and monitoring project costs, savings, and benefits, to provide transparency about the net benefits of programs and support decisions about the commencement, continuation, resourcing, and direction of projects."

However, ANAO said the ATO recently introduced internal financial benefits reporting that provides a framework for measuring and monitoring savings from Reinventing the ATO projects going forward.

"Nonetheless, a lack of completeness in monitoring and reporting on the achievement of Reinventing the ATO projects, and the program more broadly, has limited transparency about the scale and nature of benefits achieved," ANAO continued.

Additionally, only 56 of the 100 projects outlined expected benefits in project pre-approval documentation, including non-financial benefits and productivity improvements.

Only eight projects included actual costs in status reports and 13 projects included actual costs in closure reports.

As for the 67 projects where data was available, ANAO said costs were estimated at AU$300 million from 2013-14 to 2018-19. The ATO said monetary savings recognised as a result of the transformation are expected to be AU$419.5 million to AU$598.9 million in the first five years, and a recurring annual saving of AU$57.4 to AU$81.6 million thereafter.

The ATO has experienced a tumultuous year where IT infrastructure is concerned, having suffered a handful of outages over the past 11 months, from "one-of-a-kind" SAN outages to mainframe reboots.

The department has responded with promises of "smooth operating" IT, as well as the assurance of a more "connected and bulletproof" system than ever before.

"We've processed returns faster than ever before, refunds faster than ever before, more refunds and more returns than ever before, complaints are down 30 percent compared to last year -- every single indicator you look at has blown previous years out of the water," ATO CDO John Dardo told a House of Representatives Standing Committee on Tax and Revenue last month.

"People don't realise there's very few places in the IT world that have to deliver at the scale and the speed that we do for tax time. You're talking new code, new IT systems, new products for regulatory or legislative change, releases of new product for the agent community -- all that was done and on top of that, we blew away every stat."

According to Dardo, the ATO's biggest investment in the IT space is its standard business reporting capability, which sees the taxation office moving from the "old world digital" that comprises mainly portals into the "new world digital", which is essentially machines talking to machines.

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