Inspector-General of Taxation's Review into the Australian Taxation Office's Change Program

1

For the purpose of minimising risks arising in future large scale ICT [information and communications technology] projects, the Inspector‑General recommends that the Government consider requiring the ATO, and agencies with which it has ICT interfaces, to:

• employ best practice modularised design approaches, avoid single contractor over-reliance, avoid lengthy projects and consider the commercial realities of pricing and rewarding contractor performance;
• establish improved governance and scrutiny functions by ensuring:
  • the agency's peak decision-making body (appropriately augmented with skilled and experienced ICT and key business line personnel) is directly responsible for managing the oversight of the project;
  • an independent, authoritative and ICT-skilled government representative (from outside the contracting agency) be a mandatory addition to the augmented agency's peak decision-making body for the project's duration (including post implementation follow up where appropriate); and
  • the independent government representative report directly to Government and be required to furnish appropriate, periodic written progress reports that are publicly released at appropriate times; and,
• fully explore formal intra-Governmental protocols or standards to provide reliable system function testing, both internal to the agency and for system interfaces between relevant Government agencies, during any ICT upgrades or changes, including:
  • standards for system data form, structure and definitions;
  • specifying how intra-Government testing should be conducted and who is accountable for that testing and ensuring compliance with the standards; and,
  • requiring periodic review processes to ensure such protocols or standards conform to current best practice.

The Government will consider how the elements of this recommendation interact with its existing policies and standards before taking this recommendation further.

2

To ensure that the community is fully informed and is in a position to take appropriate action with respect to potential adverse effects of significant software releases or large ICT implementations (including TaxTime requirements), the Inspector-General recommends that the ATO, in future, communicate via the appropriate mediums and in real time:

• the risks, in specific, meaningful and transparent terms;
• the impact of the risks; and
• any changes to the identification or impact of those risks, (including additions, solutions or mitigation strategies).

ATO response: Agree

For major ICT deployments (such as TaxTime), the ATO will incorporate into our organisational project management methodology a requirement that specific consideration should be given to communicating:

• the risks, in specific, meaningful and transparent terms;
• the impact of the risks; and
• any changes to the identification or impact of those risks (including additions, solutions or mitigation strategies).

3

The Inspector-General recommends that the ATO design and implement improved ICT reporting of output performance and processing details, in consultation with external stakeholders, to ensure there is better transparency and understanding of the system's operation, for example, the type of returns that are not successfully processed as opposed to broad system aggregate statistics.

ATO response: Agree

The ATO will continue to publish regular "issues logs" on the Tax Professionals section of the ATO website to alert tax agents of any issues as they arise where the processing of returns may be delayed.

Further, the ATO will continue its consultation with tax agents and professional associations to assist them to better understand and utilise information on the Tax Agent Portal.

4

For the purpose of addressing tax practitioners' lack of awareness of the appropriate avenues for compensation claims, the ATO should ensure that it specifically notifies tax practitioners of the different avenues for compensation claims, including how to make claims for:

• payments made under the Scheme for Compensation for Detriment caused by Defective Administration;
• act of grace payments made under section 33 of the Financial Management and Accountability Act 1997;
• ex gratia payments; and
• any other relevant legislative or administrative compensation payments that may exist.

ATO response: Agree

The ATO website provides information on how taxpayers and tax agents can make a claim for compensation.  This includes information about when losses can be compensated, service standards and where further information can be obtained.

The ATO website also provides an application form which details what information is required to be submitted as part of a claim.  The ATO will highlight this information and the relevant application forms for tax agents in future communications.

5

For the purpose of minimising risks arising in future large, complex ICT projects, the Inspector-General recommends that the ATO consider for future projects, whether it should have guidelines in place early in the development of the project to assess and process claims for compensation by members of the community for substantial detrimental impacts imposed.

ATO response: Agree in part

For future large and complex ICT projects the ATO will consider whether additional guidelines are needed to assess and process possible compensation cases.

6

For the purpose of addressing tax practitioners' concerns with the basis for, and process to obtain, compensation, the IGT recommends that the ATO work with the tax practitioner community to robustly and openly reconsider its position on compensation claims under the CDDA scheme [Compensation for Detriment caused by Defective Administration scheme] and the process by which such claims should be made.

ATO response: Not agreed

The CDDA scheme does not operate on the basis which involves consultation about findings of defective administration.  The ATO considers each case on its merits.  As at 30 November 2010, the ATO has received 59 claims from taxpayers and 35 claims from tax agents for a total of 94 claims.  Each of these claims for compensation under the CDDA scheme are considered on their merits.  For an individual taxpayer, interest is paid with the delayed refund if a notice of assessment is issued more than 30 days after the income tax return is lodged.  The ATO will continue to consider current claims and any future claims received on their merits.

7

For the purpose of addressing ATO staff concerns in relation to the systems arising as a consequence of the Change Program, the ATO should conduct open and frank post-implementation consultation with its staff and:

• understand the causes for ATO staff concerns; and
• communicate the ATO's consideration of those concerns including what action, if any, the ATO intends to take in relation to each particular concern.

ATO response: Agree in part

The ATO undertook extensive consultation with our people during the various phases of the Change Program.  The engagement of our people to ATO values, objectives and priorities is very important to us and we will continue to consult with our people to understand and where possible, resolve any issues which may be a concern for them.

8

The Inspector-General recommends that:

• the ATO continue to consider CPT Global's [the ATO's post‑implementation reviewer of Release 3 of the Change Program] recommendations and publicly report on their progressive implementation; and
• in the event that the ATO does not implement any of CPT Global's recommendations, the ATO provide public reasons for not so doing.

ATO response: Agree

The ATO's Change Program Steering Committee agreed on 19 August 2010 to implement all of the recommendations made by CPT Global.  Work on all recommendations has commenced.  Some recommendations have already been implemented.  A report on progress will be provided on the ATO's website.

9

For the purpose of improving the transparency surrounding the assessment of the costs and benefits of the Change Program, the Inspector-General recommends that the ATO publish in full Aquitaine's [the ATO's independent assurer for the Change Program] final report on its review of the costs and benefits of the Change Program.

ATO response: Agree

The ATO will publish on the ATO website the final Aquitaine report on the Costs and Benefits of the Change Program.