GOVERNMENT IGNORES ADVICE AND INLAND REVENUE PROJECT GOES 517% OVER BUDGET
By Richard Harman (author)
An Inland Revenue project to change liable parent payments has gone off the rails with a massive budget blowout.
But this time Treasury saw it coming and tried to warn the Government about it.
However the Government ignored the advice.
Pressed by Labour’s Grant Robertson in Parliament this afternoon, Finance Minister Bill English brushed the whole debacle off by saying that he believed that children who were deserving the support of their separated parents could not wait around until the Inland Revenue Department’s system is all changed.
The project to change the way child support payments were calculated went over budget from $34 million to $210 million.
Treasury consistently opposed the project arguing that it did not deliver value for money and the huge amount of work required to re-programme the Inland Revenue’s antiquated FIRST computer system was taking resources away from the bigger project to introduce a new Inland Revenue computer system.
STARTED WITH BEST OF INTENTIONS
The proposal started with the best of intentions.
In July 2011 the Government decided to review the child support scheme because its primary assumption was that the paying parent was the sole income earner and that the receiving carer was the main care provider was no longer necessarily true.
“However, today when parents live apart, there is an increased emphasis on shared parental responsibility and both parents remaining actively involved in their children’s lives,” the 2011 review said.
“Work participation rates of both parents, particularly in part-time work, has also increased since the scheme was introduced, resulting in the principal carer of the children now being more likely to be in paid work or seeking paid work.”
There were other problems with accumulated debt which was estimated at $3 billion.
“The scheme is now, in many cases, out of date and out of line with social expectations
“This undermines some parents’ incentives to meet their child support obligations and therefore detrimental to the wellbeing of their children.”
So in August 2011 the Inland Revenue Department proposed that the formula for calculating the payments be changed and the change take place on April 1, 2013.
INLAND REVENUE KNEW ITS COMPUTER SYSTEM COULD NOT COPE
But at the same Inland Revenue knew that its FIRST computer system was decrepit and had a 40% chance of system failure.
Documents released under the Official Information Act in 2013 showed that half of INLAND REVENUE 's 1100 data entry staff were engaged full-time on correcting data entries in the system.
As a consequence n May 2013, then-Revenue Minister Peter Dunne, announced the Government's biggest ever overhaul of a Government IT system - a $1.5 billion upgrade of the department's "First mainframe" computer system.
Mr Dunne admitted the system was "fully stretched" and a 10-year project to upgrade the system was required.
One of the factors putting pressure on the first system was the need to reprogramme it for the proposed child support payment changes.
By August 2012, barely a year after the project began, Treasury was saying that the aim of the reform was to create a significantly better child support scheme but the evidence suggested the change would not achieve this.
“Aside from the departmental and revenue costs, the costs and benefits are largely unquantifiable,” it said.
The biggest problem was the FIRST computer.
Treasury questioned what the value of was in reprogramming this to accommodate the changes knowing that the replacement system would have to be programmed a short time later.
Treasury said that in transitioning to the changes, Inland Revenue would need a permanent increase in staff to manage the changes.
Instead it recommended that Inland Revenue go for a less complex set of changes which would not require changing the FIRST computer system.
GOVERNMENT IGNORES TREASURY ADVICE
But the Government decided to go ahead with the changes.
In fact things were already spiralling out of control at Inland Revenue.
In a paper to both Finance Minister, Bill English, and Revenue Minister, Peter Dunne later in August, Treasury quoted from an Inland Revenue briefing note paper which said Implementation of projects in FIRST of the size and complexity of the child support changes are likely to increase the risk of FIRST becoming unreliable.”
Treasury concluded that it was going to take 11,000 days of effort to make the systems changes into FIRST.
Again, Treasury argued that the changes should be delayed.
Again, the Government rejected their advice.
Things got worse.
The following month Inland Revenue asked the Government for an additional $35 million to complete the project which had originally been budgeted at $34million.
A 517% BUDGET BLOWOUT
Just over a year later, in November 2013 it was estimated the changes were going to cost $210 million, a 517% blowout on the original budget in just over two years.
Finally the Government began to act.
In June 2014 the project was called back and the dates were pushed out.
This substantially reduced costs but it was still over budget.
Now it was expected to cost $105.4 million and the first change went live on April 1, this year.
But there was to be a sting in the tail.
SYSTEM WORKS AT LAST BUT PARENTS NOT HAPPY
Many child support payers found their payments increased under the new system.
Some 33,000 liable parents went up under the new formula but a further 46,000 paid less and a further 58,000 were unaffected.
An Inland Revenue spokeswoman said 1,138 applications for reviews of the new payments were still waiting for decisions.
Grant Robertson was scornful of the way the Government had managed the whole project.
“Despite the cost blowouts National went over the heads of its key departments and pushed ahead with the project,” he said.
“Such wasteful spending is a disgrace at any time but it is much worse when National is unable to reach surplus and says there is little left in the kitty for child poverty.
“That the Government is happy to waste over $200 million on an IT system for child support rather than on child poverty says all you need to know about its priorities.”