State Trustees Mismanagement of represented persons - auditor general report
This audit assessed whether State Trustees is effectively managing the financial and legal interests of represented persons. It examined the extent to which State Trustees is meeting its legislative and administrative responsibilities, the systems and processes that enable State Trustees to measure quality, timeliness and cost effectiveness, and the adequacy of State Trustees' communication and accountability processes to represented persons. The audit found that State Trustees is not able to clearly demonstrate that it is fulfilling its obligations to represented persons. State Trustees’ direct engagement with represented persons is not sufficient for it to be assured that their needs and wishes are properly understood.
State Trustees Limited: Management of represented persons
(Long report follows this summary).
Tabled: 8 FEBRUARY 2012
Represented persons are those deemed incapable of managing their own affairs due to disability, mental illness, injury or other incapacitating circumstances. They are considered to be among the most vulnerable members of the community. Under the Guardianship and Administration Act 1986 (the Act) represented persons are appointed administrators who must manage their legal and financial affairs while acting in their best interest. State Trustees Limited is the administrator for over 10 000 represented persons in Victoria.
This audit assessed whether State Trustees is managing the financial and legal affairs of represented persons in their best interests.
The audit found that State Trustees is not able to clearly demonstrate that it is fulfilling its obligations to represented persons. Its focus is on measuring its commercial success and it relies predominantly on compliance with its service contract with the state as a proxy for compliance with the Act. However, this does not demonstrate the quality or effectiveness of the management of represented persons' affairs and it does not have the robust governance, monitoring and reporting mechanisms needed to do so. There is also inadequate quality assurance and review of the services provided to represented persons.
State Trustees’ direct engagement with represented persons is not sufficient for it to be assured that their needs and wishes are properly understood. In addition, poor information management and high case manager turnover means that decisions about their affairs are not always based on complete or accurate information.
Victoria's Auditor-General, Des Pearson, this morning tabled the following report in the Victorian Parliament:
State Trustees Limited: Management of represented persons
Ordered to be printed
VICTORIAN GOVERNMENT PRINTER February 2012
PP No 102, Session 2010–12
President
Legislative Council
Parliament House
Melbourne
Speaker
Legislative Assembly
Parliament House
Melbourne
Dear Presiding Officers
Under the provisions of section 16AB of the Audit Act 1994, I transmit my report on the audit State Trustees Limited: Management of represented persons.
Yours faithfully
D D R PEARSON
Auditor-General
8 February 2012
Audit summary
Background
Among the most vulnerable members of
the community, represented persons are those deemed incapable of managing their
own affairs due to disability, mental illness, injury or other incapacitating
circumstances. State Trustees Limited is the administrator for over 10 000
represented persons in Victoria. As administrator, State Trustees is obliged
under the Guardianship and Administration Act 1986 (the Act) to manage
the financial and legal affairs of represented persons while acting in their
best interests.
Victoria's ageing population is a key
challenge and priority for the community. By 2050 the estimated proportion of
the population aged 65 and above will be 23 per cent compared with 14 per cent
now, thus significantly raising the number of elderly people needing trustee
services. Continued growth is also expected in the demand for community
services with increasingly diverse and complex client needs. This will directly
impact on the demand for administration services by represented persons.
This audit assessed whether State
Trustees is managing the financial and legal affairs of represented persons in
their best interests.
Conclusions
State Trustees' focus is on measuring
its success in terms of its commercial strength. It gives less consideration to
whether it is meeting its obligations under the Act.
State Trustees' governance and control frameworks
align with better practice but flawed implementation, ineffective oversight,
and a failure to regularly and systematically test how effective controls are
in practice, limit the assurance it can provide to its board of governance
about organisational compliance and performance.
State Trustees has not appropriately
defined the services required to meet the Act's obligations, and its
performance management framework does not have the robust monitoring, measuring
and reporting mechanisms needed to track if it is effectively doing so.
Inadequate information management systems, combined
with high case manager turnover, means that decisions about represented
persons' affairs are not always based on complete or accurate information.
State Trustees' direct engagement with represented persons is also not
sufficient for it to be assured that their needs and wishes are properly
understood. There is also inadequate quality assurance and review of the
services provided to represented persons.
State Trustees relies predominantly
on compliance with the Community Services Agreement (CSA) with the Minister for
Community Services, as a proxy for compliance with the Act. But the agreement
is primarily concerned with service delivery, not service quality. As a result,
adherence to the CSA does not demonstrate either the quality or effectiveness
of the management of represented persons' legal and financial affairs.
Accordingly State Trustees is not able to
clearly demonstrate that it is fulfilling its obligations to represented
persons. Nevertheless, its new Business Process Management program, designed to
identify weaknesses in current business processes and practices, should lead to
a direct improvement in the quality of services delivered to represented
persons.
Findings
Governance framework
Compliance management
State Trustees' does not monitor its compliance with the
Act which sets out its key service obligations to represented persons.
Instead it relies on its procedures as its key operational
control in meeting service obligations. However, State Trustees has a
well-documented history of many of its procedures being out-dated, unused,
inadequate or non-existent.
Performance management
Only one of State Trustees' 21 corporate objectives relates
to the quality of services provided to represented persons. Of the 58 corporate
performance indicators, three are linked to that objective. However, no
corporate performance reports include these indicators.
Risk management
The 2004 risk management framework aligns with better
practice principles. However, it has not been fully implemented, or assessed
for effectiveness in managing risks relating to the estate administration of
represented persons.
Financial and investment management
To date State Trustees has undertaken only limited
performance benchmarking, particularly against other public trustees. It has
also recently changed its approach to the investment of client funds, which it
has yet to fully evaluate.
When evaluating the investment model, State Trustees needs
to consider how it meets its obligations under the Act to operate in the best
interests of represented persons.
Managing the affairs of represented persons
Staff skills and capacity
Faced with ongoing issues of high case manager turnover,
unsustainable case loads and the demand for specialised staff, State Trustees
introduced the 'manageable caseload' project to improve competencies and
caseload balances.
The project improved in-house case manager workloads and
competencies, and its success led to an extensive in-house staff competency
program. However, high turnover continues and there is doubt about State
Trustees' ability to sustain the program in light of the increasing service
demand and complexity of client needs.
Information management and IT strategy
Reviews over the past five years have identified poor
information governance, the absence of a policy and framework for managing
information assets, and a general inability to meet government requirements for
managing records.
As it relies heavily on the information in its client
information management system to make decisions on behalf of represented
persons, its poor information management practices place the quality of those
decisions and its services at risk.
The inconsistent quality of client records has the
potential to compromise financial and legal decision-making, and backlogs in
preparing financial or investment plans can adversely impact investment
returns.
State Trustees is implementing an Electronic Document and
Records Management System.
Client engagement
State Trustees staff need to form and maintain good
relationships with clients, which is best done through regular personal
contact. However, after the mandatory visit within the first 65 days of appointment,
staff visit only 5 per cent of ongoing clients each year. Poor record keeping
of communication with clients means State Trustees cannot demonstrate it is
effectively engaging with its clients.
State Trustees has a stakeholder engagement strategy for
its commercial and community stakeholders and actively engages the community on
issues relevant to represented persons. However, the strategy does not
explicitly include clients and no client engagement strategy exists.
Client feedback
State Trustees' one corporate service delivery objective
for represented persons is to improve the results of the annual client
satisfaction survey, the Client Value Index. This survey is a valid measure of
client and carer perception of service delivery quality, but it is State
Trustees only measure of this. Internal analysis of service quality against
defined quality targets does not occur. In isolation, the survey cannot be used
to demonstrate whether State Trustees is acting in the best interests of each
represented person.
The Client Concerns Panel is effectively handling the small
proportion of serious and complex complaints. State Trustees needs to improve
its handling of the other types of complaints it receives. It does not
consistently use its client information system to manage complaints, preferring
to record them manually in a spreadsheet-based register and/or in hard copy
files. Internal reviews have identified inconsistent quality of complaint
information.
State Trustees does not adequately analyse complaints data
to discern trends, identify issues or target staff training, and does not seek
feedback on complaints processes or resolution. An internal audit in 2009
recommended it implement both these improvements.
Recommendations
That State Trustees:
-
explicitly include its community services obligations to
represented persons in its Memorandum of Association so they are incorporated
into corporate objectives and governance frameworks - fully and properly implement its governance frameworks
-
include all legislative and contractual obligations in its
compliance framework and use the framework to monitor compliance against
these obligations -
evaluate the impact of its new investment strategy on
represented persons -
implement an information governance framework which is
aligned to the principles of good records management -
review and implement
strategies to improve consultant turnover rates, client communications,
record keeping, client feedback and all quality assurance processes.
Submissions and comments received
In addition to
progressive engagement during the course of the audit, in accordance with
section 16(3) of the Audit Act 1994 a copy of this report was provided
to State Trustees Limited with a request for submissions or comments.
Agency views have been considered in reaching our
audit conclusions and are represented to the extent relevant and warranted in
preparing this report. Their full section 16(3) submissions and comments
however, are included in Appendix A.
1. Background
1.1 Represented persons
Many Victorians are unable to manage
their own financial and legal affairs due to disability, mental illness, injury
or other circumstances. They are among society’s most vulnerable citizens.
Under the Guardianship and Administration Act 1986
(the Act), the Victorian Civil and Administrative Tribunal (VCAT) may order the
financial and legal affairs of these ‘represented persons’ to be managed on
their behalf by an administrator.
Under the Act, an administrator:
-
is responsible for the general care and
management of the represented person’s estate -
takes possession and care of, recovers,
collects, preserves and administers the property and estate of the represented
person, and generally manages their affairs -
exercises all rights which the represented
person might exercise if that person had legal capacity.
Section 49 of the Act requires an administrator to act in the
best interests of a represented person. This includes:
- encouraging and
assisting the represented person to become capable ofadministering their estate -
consulting with them and taking their wishes
into account as far as possible.
VCAT
determines an appropriate administrator for each represented person. Where
feasible and appropriate this is often a family member; in other circumstances
it may appoint a trustee. In many cases, this is State Trustees. Overall, State Trustees
acts as administrator for around 50 per cent of represented persons in
Victoria.
1.2 State Trustees Limited
The Public Trust Office of Victoria was established in
1939, to protect the interests of Victorians, particularly those with
disabilities. It became administratively independent from government in 1987,
when it became the State Trust Corporation of Victoria.
In 1994, The State Trust Corporation of
Victoria became a company (State Trustees Limited). This was part of the
government’s objective to make state-owned businesses more efficient by
exposing them to competition from the private sector. The business activities
of State Trustees expanded to include providing financial and related services
to a wider market.
However, a substantial
part of State Trustees’ core business is administration of represented persons’
financial affairs and estates. In 2010–11, State Trustees acted as
administrator for over 10 000 represented persons. Its total client base was
over 18 000.
At 30 June 2010,
represented persons’ funds represented 53 per cent of the $796 million
total funds invested and managed by State Trustees.
1.2.1 Community Services Agreement
State Trustees, like any
trustee acting as an administrator for represented persons, may charge for the
services provided.
In recognition that some
represented persons may lack the resources to obtain services, the State
Trustees (State Owned Company) Act 1994 makes the Minister for
Community Services responsible for ensuring that members of the public who do
not have the resources to manage and administer estates and property can
receive such services.
The minister may enter into
an agreement with a trustee company, person or body to provide these services.
For represented persons who are unable to pay for these services the agreement
provides for some or all of the costs to be met. A Community Services Agreement
(CSA) has been in place with State Trustees since 1994 and is renegotiated
every five years.
The CSA is not limited to
represented persons administration, but also includes community service
obligations in relation to other trustee services, deceased estate
administration, and attorneyships. However, services to represented persons
make up the large majority of services provided under the CSA.
The CSA requires State
Trustees to achieve specific minimum service or performance standards, to
report to the Department of Human Services (DHS) on the cost of services, to
maintain appropriate and relevant records for DHS, and to effectively manage
services for clients referred by VCAT.
DHS reimburses State
Trustees for the net costs of the services provided. State Trustees charges
those who can pay. Of the 10 000 represented persons for whom State Trustees
acts as administrator, around 8 500 are covered by the CSA.
In 2009–10, all
services provided to represented persons contributed $26.4 million (45 per
cent) towards State Trustees’ total revenue. Payments made under the CSA were
around $16 million.
The CSA obligations are separate and
additional to the obligation to act in the best interests of each represented
person, which is established in the Act and applies to all represented persons.
The CSA obligations do not displace this duty, and are not intended to
necessarily reflect what might be satisfactory performance in relation to
the Act.
1.2.2 Governance and business structure
State Trustees’ sole shareholder is the state of Victoria. Under the State
Trustees (State Owned Company) Act 1994, State Trustees reports through its
board of directors to the Treasurer.
Various committees oversee the organisation
and advise the board of directors on corporate risks. Figure
1A shows State Trustees’ corporate and business structure.
Figure 1A
State Trustees corporate and business structure
![Figure 1A shows State Trustees’ corporate and business structure.](state-trustees-assets/figure1a.png)
Source: Victorian Auditor-General’s Office.
The board delegates operations and
administration to the managing director who is supported by a corporate
leadership team and senior management group.
In total, State Trustees has seven
divisions, 26 business units and over 550 staff.
The Personal Financial Solutions
division is primarily responsible for the day-to-day administration of
represented persons’ estates.
1.3 Conduct of the audit
1.3.1 Audit objective and scope
The audit
objective was to assess whether State Trustees is effectively managing the
financial and legal interests of represented persons by assessing the:
-
extent to which State Trustees is meeting its
legislative and administrative responsibilities for represented persons -
performance measurement, monitoring and
reporting framework, systems and processes that enable State Trustees to
measure the quality, timeliness and cost effectiveness of services provided to
represented persons -
adequacy of State Trustees' communication and
accountability processes to represented persons.
1.3.2 Method and cost
The audit was conducted in accordance
with the Australian Auditing and Assurance Standards.
The cost of the audit was $560 000.
1.3.3 Structure of the report
The report is structured as follows:
-
Part 2 examines the adequacy of State Trustees’
governance structures and internal control frameworks to manage its legislative
responsibilities. -
Part 3 examines whether State Trustees has
sufficient resources and adequate practices in place to act in the best
interests of represented persons.
2. Governance and control
At a glance
Background
State Trustees should be able to demonstrate that it
acts in the best interests of represented persons through effective corporate
governance frameworks that apply robust performance, risk, compliance and
financial controls to oversee and meet legislative, contractual, strategic
and operational goals.
Conclusion
State Trustees cannot assure itself that it acts in
the best interests of represented persons. Although its control frameworks
generally align with better practice, shortcomings in oversight and
implementation give only limited assurance that they are working as intended.
Findings
State Trustees does not monitor or measure its
compliance with the Guardianship and Administration Act 1986. It has
an underdeveloped performance management system. While it has a generally
sound risk management framework, it has not been fully implemented, and
outstanding concerns remain in relation to the assessment and detection of
fraud.
State Trustees has performed limited benchmarking of financial performance, but
plans to enhance this over the next 18 months.
Recommendations
That State Trustees:
-
explicitly include its community services obligations
to represented persons in its Memorandum of Association so they are
incorporated into corporate objectives and governance frameworks -
fully and properly implement its governance
frameworks -
include all legislative and contractual
obligations in its compliance framework and use the framework to monitor
compliance against these obligations -
evaluate the impact of its new investment
strategy on represented persons.
2.1 Introduction
State Trustees should be
able to demonstrate it acts in the best interests of represented persons by
using appropriate governance and internal control
frameworks that focus on the best interests of represented persons, and then
subjecting these to regular testing and reporting.
2.2 Conclusion
Despite numerous internal and external reviews over
the past decade that identified shortcomings, State Trustees is not able to
demonstrate that it has adequate systems in place that ensure the best
interests of each represented person are being met. This is because it:
- does not measure or monitor its compliance with the Guardianship and Administration Act 1986 (the Act)
- has an unbalanced performance management system
- has not fully implemented its risk management framework
- has undertaken limited benchmarking of the performance of clients’ investments.
2.3 State Trustees’ governance and controls
In May 2000 the Auditor-General tabled a performance
audit titled Represented Persons: Under State Trustees’ administration.
Since then State Trustees has been externally reviewed
several times. The reviews covered:
- complaints management
-
the Community Services Agreement (CSA) and
compliance with stipulated requirements, alternative funding models, best or
most appropriate business and operating models, and costing and pricing
methodology - stakeholder management
- key performance indicators (KPIs).
The reviews’ findings
indicated that State Trustees had improved its operations in general but
further work in these areas was still required.
Further, State Trustees’
Memorandum of Association focuses on its commercial imperative rather than its
duties as administrator for represented persons. While State Trustees’
predecessor body had specific legislative objectives to provide administration
services in accordance with the principles of the Act, State Trustees’ Memorandum
of Association sets out its principal objective as to perform its functions for
the public benefit by operating its business efficiently, consistent with
prudent commercial practice, and maximising its contribution to the economy and
wellbeing of the state.
Consequently over the past
15 years its corporate focus has been on its commercial imperatives rather than
its duties as administrator for represented persons.
Read together
with the Personal Financial Solutions (PFS)
Operational Plan
(2010–11), services provided to represented persons operate on a
commercial footing. State Trustees has recognised the need to adjust its
focus and to increase the emphasis at corporate level on meeting its community
service obligations. It has commenced discussions with the Department of
Treasury and Finance to reflect this in its Memorandum of Association.
2.3.1 Compliance management
State Trustees does not monitor compliance with the
Act, instead using its internal procedures as a key operational control to meet
its obligations to represented persons.
The compliance management framework is generally
aligned with best practice. A compliance committee is responsible for
managing compliance and each division is responsible for implementing the
framework. However, the committee does not monitor or report on compliance with
the Act; rather, it monitors and reports on compliance with the CSA.
In 2008, State Trustees’ internal auditors reviewed
the compliance policy and framework, noting there was no regular compliance
monitoring at corporate and divisional levels. It did not assess whether the
divisions were implementing the framework effectively.
Administrative practices for represented persons are
described in over 100 policies, procedures, templates and tools. There are gaps in relevant policies and procedures, with some that are
inadequate, incorrect, out-dated or not followed.
2.3.2 Performance management
State Trustees is neither monitoring,
measuring nor reporting on the effectiveness and quality of its performance in
administering estates for represented persons.
Corporate performance management
framework
State Trustees’ corporate performance management
framework has 58 KPIs in the five key result areas of:
- growth
- client and community engagement
- financial sustainability
- people
- service excellence.
Although the areas of growth, financial sustainability
and people potentially affect State Trustees’ capacity and capability to
deliver effective estate administration services, the associated KPIs do not
measure the quality of these services.
KPIs for client and community engagement measure
promotion of client interests to commercial and community stakeholders. They do
not measure how well they are engaging with their clients.
Only three of the 58 KPIs measure service quality,
namely:
-
development and implementation of a framework of
client service standards, performance targets and monitoring and reporting
processes by 30 June 2011 -
the standardisation of client communications by
30 June 2013 - 95 per cent usage of the standardised communications.
State Trustees has yet to introduce the client
service framework scheduled for 30 June 2011. It has therefore not
yet effectively defined:
-
the specific services represented persons
require and how best to deliver them -
performance indicators to demonstrate the
quality of those services -
ways to monitor, measure and report on the
achievement of the performance indicators.
Performance monitoring and
reporting
The PFS division, responsible for administering
represented persons’ estates, provides monthly performance reports to senior
management covering divisional revenue and costs. It also includes information
on such things as the number of new and deceased clients, its ‘market share’ of
represented persons, and its commission from the sale of client properties.
Reporting on service quality is restricted to performance against the CSA. The
Department of Human Services accepts that reporting against the CSA does not
address the effectiveness or quality of services for represented persons.
Monthly performance reporting from the PFS division’s
business unit managers to the PFS General Manager is via two key reports. The
first contains data on the number of activities completed and outstanding, and
the second contains commentary on those activities. These reports are not
supported by qualitative data or analysis of whether State Trustees is meeting
its obligations under the Act.
Client services framework
State Trustees does not have defined standards for all of
the services it needs to provide to meet its obligations for the administration
of represented persons’ estates. Because of this it also does not have
performance targets and monitoring programs to measure and report on whether
these obligations have been met. State Trustees’ relies on compliance with the
CSA as a proxy for assessing whether it has met its obligations under the Act.
State Trustees has recently commenced a Business Process
Management (BPM) program to strengthen business processes and improve its
efficiency and effectiveness. The March 2011 BPM report recommended a focus on
client needs and the use of risk management, compliance management and the
development of business rules to ‘ensure our client needs are met’.
2.3.3 Risk management
Administration in the best interests of represented
persons requires effective identification, assessment and management of risks.
State Trustees’ risk management framework aligns with
better practice principles but has not been fully implemented in the divisions.
In addition, numerous internal and external review recommendations and two
recent serious fraud incidents have pointed to the need for more rigorous risk
management.
The risk management framework gives overall responsibility
to a Risk Committee of Management (RCoM) and requires divisional managers to
confirm every six months that ‘all risks have been adequately identified,
reported and reviewed with all actions being performed in an appropriate time
frame’.
The framework’s effectiveness has not been assessed
since it was set up in 2004 although State Trustees says that an internal
analysis done in 2010 suggests it is effective. However, there is no
documentation of this review to demonstrate that this analysis assured the
framework’s effectiveness.
Personal Financial Solutions
division
In September 2009, following an internal review of
risks in the PFS division, RCoM advised State Trustees’ board that all 12 of
the most serious risks related to represented person estate administration in
the division were not properly mitigated.
Shortly afterwards, RCoM decided not to conduct a
further review of these divisional risks until after State Trustees had aligned
its risk management framework to the new best practice standard. The alignment
was completed in August 2011.
Other than for recruitment and competency development
activities, State Trustees’ risk management records show no evidence that these
risks or their related controls have been monitored or reported on between the
2009 review and the 2011 realignment.
A 2011 internal audit of the PFS new client team found
deficiencies in the monitoring of improvement initiatives, the use of
procedures designed to improve the quality of client information, record
keeping of quality review activities and the team’s policies and procedures.
Managing fraud risk
The State Trustees’ fraud prevention and detection
framework is based on a model that aligns with better practice. However, two
recent serious frauds, while not directly related to represented persons,
highlight the need to properly implement the framework. The most serious of the
two frauds was identified fortuitously, not as a result of an effective
detection system. State Trustees’ fraud risk controls have repeatedly been
found to be weak in detecting and preventing fraud.
From 2001 to 2008 internal audit reported fraud
control weaknesses across the divisions. Although State Trustees advised they
had been remedied, similar reports have continued, including in the
Auditor-General’s annual financial audits of State Trustees from 2006 to 2010.
The most recent fraud risk assessment was performed in
2007. However, the assessment report noted that because State Trustees does not
use defined benchmarks to validate risks or controls, the assessment was not an
accurate measure of its risk profile.
As a result, State Trustees cannot demonstrate it has
adequately managed fraud risk.
Figure 2A
Fraud incidents
State Trustees’ fraud register shows 11 frauds and
thefts from 2007 to 2011, most of which were petty with no material loss to
the organisation. However, while frequency of detected incidents is low, two
were serious.
One was in the corporate
operations division where an employee forged the manager’s signature on
expense claims. The other was in the deceased estate administration division
where it went undetected for six years until 2010, and required significant
procedural change.
Three internal fraud investigations were carried out over
2010–11 as a result of the discovery of the fraud in the deceased
estate administration division. These found:
-
fraud control weaknesses and recommended strengthening and
adding controls -
fraud control was under-resourced, poorly managed and
inadequately reviewed -
State Trustees had poorly implemented or was not applying the
improved or additional controls recommended in the first review.
Two external reviews in the same period:
-
recommended a continuous fraud review program that included
testing fraud controls and fraud awareness training -
found that changes in processes and controls recommended in the
first internal review had not been implemented or were not being followed.
State Trustees is currently
reviewing its fraud prevention and detection framework and although its audit
committee initially rejected recommendations for enhanced fraud management,
it is now considering the use of fraud detection software.
Source: Victorian Auditor-General’s Office.
2.3.4 Financial and investment management
A core element of State Trustees’ business
is managing the assets of represented persons and in particular, their
financial assets.
Consultants manage represented persons’
day-to-day financial affairs using a budget based on their individual
circumstances. They are required to review the budgets annually and/or if a client’s
financial circumstances change.
In the second half of 2010 State Trustees
discovered that 10 per cent of represented persons financial and/or investment
plans had not been updated as required. It has consistently worked to clear the
backlog and currently there are only a few outstanding.
Investment management
State Trustees’ current investment strategy
is relatively new and it will be some years before its performance can be fully
evaluated.
The investment
of represented persons’ financial assets varies depending on whether the value
is:
- less than $30 000
- between $30 000 and $75 000
- more than $75 000.
For clients with less than $30 000, State
Trustees prepares a standard financial plan and places the funds in one of its
two cash common funds (CCF) which provide a monthly income. For client funds up
to $75 000, they also prepare a standard financial plan and place the first $30
000 in a CCF, investing the balance in other funds. Clients with more than $75
000 get a tailored investment plan.
As of June 2011 around 65 per cent of
represented persons have their funds solely invested in the CCFs. This makes
the performance of CCF funds crucial to the majority of represented persons.
State Trustees’ CCFs, when compared to similar funds of other public trustees
such as New South Wales, provide a smaller return. This is because the New
South Wales public trustee charges around half that of State Trustees for CCF
management. State Trustees’ other funds, for represented person with greater
than $30 000 outperform their New South Wales counterparts, with the exception
of the Australian equities/shares fund.
State Trustees also operates five
investment funds known as ‘inveST funds’.
Figure 2B shows total funds under
management at 30 June 2010. Of the $796 million in total funds invested by
State Trustees, $420 million, or 53 per cent, are financial assets of
represented persons. Almost $192 million, or 46 per cent, of their funds are
invested in CCFs.
Figure 2B
State Trustees – funds under management as at 30 June 2010
Investment fund |
Represented person funds |
Total funds |
Ownership of funds by represented persons |
---|---|---|---|
Cash common fund 1 |
87.2 |
87.2 |
100 |
Cash common fund 2 |
105.5 |
390.9 |
27 |
inveST Australian Equity Fund |
38.1 |
54.4 |
70 |
inveST Balanced Fund |
22.6 |
30.5 |
74 |
inveST Diversified Income Fund |
131.9 |
183.1 |
72 |
inveST International Equity Fund |
20.8 |
28.9 |
72 |
inveST Property Fund |
13.9 |
21.1 |
66 |
Total |
420.0 |
796.1 |
53 |
Source: State Trustees Limited.
Until 2009 State Trustees used ‘passive
investment’ where investment activities try to mirror those of different
investment markets such as stock and property markets.
In 2009 it began ‘active multi-manager
investment’ that selects specific investments based on the expected return and
associated risk level rather than following market trends. While the
requirement for closer attention to individual investments costs the client
more, State Trustees expects them to make higher long-term returns.
Investment strategies are long term in
nature and require a reasonable amount of time before their results can be
evaluated. As such, the overall impact of State Trustees’ new investment
strategy cannot be effectively evaluated for some years.
As represented persons have limited choice
about how their funds are invested, State Trustees needs to be sure that its
decision to change to the more expensive ‘active multi-manager’ style of
investment was a prudent one that is in the best interests of these clients.
Financial benchmarking
Meaningful benchmarking can identify
underperformance and trigger improvement. State Trustees has done limited
benchmarking against other public trustees and expects to do more in the next
18 months.
State Trustees has internally benchmarked all
its investment fund performances against a commercial peer group and some of
its funds against other public trustees. It has advised that the limited
performance benchmarking against other public trustees has been due to a lack
of public information and comparability.
The Trustee Corporations Association of
Australia represents public trustees and most of the private trustees in
Australia. State Trustees contributes to the association’s annual statistics,
with the data used to monitor growth rates across the industry.
State Trustees takes part in benchmarking studies
including human resource performance and investment management services. In
September 2010, it set up an investment group with other Australian public
trustees to standardise investment so benchmarking could occur in the next 18
months.
Recommendations
-
That State Trustees explicitly include its community services obligations to represented persons in its Memorandum of Association so they are incorporated into corporate objectives and governance frameworks.
- That State Trustees fully and properly implement its governance frameworks.
- That State Trustees include
all legislative and contractual obligations in its compliance framework and use
the framework to monitor compliance against these obligations. - That State Trustees evaluate
the impact of its new investment strategy on represented persons.
3. Meeting the needs of represented persons
At a glance
Background
State Trustees is required to act in the best
interests of represented persons. Represented persons have diverse, changing,
and often complex needs. Decisions on their behalf must be made with full
information, be transparent, and be subject to effective quality assurance.
Conclusion
State Trustees cannot assure itself that it acts in
the best interests of each represented person. More attention is needed to
improve record keeping systems, to increase client engagement, and to invest
in more sophisticated quality assurance systems.
Findings
In the area responsible for looking
after the interests of represented persons, State Trustees has a high rate of
staff turnover and generally poor management of client information. Together,
these mean that decisions about represented persons
are not supported by complete and accurate information,
or necessarily reflect the wishes or needs of represented persons.
These concerns are reinforced by
limited direct engagement with represented persons, underdeveloped feedback
and complaints systems, and an overall lack of quality assurance.
Recommendations
That State Trustees:
- implement an information governance framework which is aligned to the principles of good records management
- review and implement strategies to improve consultant turnover rates, client communications, record keeping, client feedback and all quality assurance processes.
3.1 Introduction
State Trustees should be able to demonstrate it acts in the
best interests of represented persons through attention to staff skills and
capabilities, decision-making supported by accurate and complete information,
effective engagement with clients, and robust quality assurance mechanisms. As
a public body, State Trustees must not only act in the best interests of
represented persons, but must be able to demonstrate that it does.
3.2 Conclusion
State Trustees cannot
demonstrate it is meeting its legislative and administrative obligations to
represented persons. High case manager turnover, poor information management,
inconsistent engagement with clients and a lack of quality assurance mean that
State Trustees cannot demonstrate it is making decisions about represented
persons in their best interests.
The outcomes for represented
persons rest with the skills and dedication of their assigned consultants.
State Trustees has taken steps to improve the competency of staff, but the
interests of represented persons remain at risk due to inadequate information
management combined with high staff turnover.
Inadequacies in its client complaints management, and
an inability to assure the accuracy and currency of the client information that
informs its legal, financial, investment and service delivery decision-making,
raises concerns about whether these decisions are meeting client needs.
3.3 The interests of represented persons
Under the Guardianship and Administration Act 1986 (the Act), State Trustees must act in the best interests of each
represented person.
State Trustees should be
able to demonstrate this by putting in place
appropriate internal control frameworks that focus on the best interests of
represented persons, and subjecting these to regular quality assurance and
testing.
To be consistent with the Act,
these frameworks should include:
- encouraging and
assisting the represented person to become capable ofadministering the estate - consulting with them and taking their wishes into account as far as possible.
Critical steps in ensuring that
State Trustees acts in the best interests of represented persons include:
- adequate training of staff
- access to complete and accurate information when making decisions
- transparent documentation of decisions and reasons
- sufficient and effective engagement with represented persons
- quality assurance.
3.3.1 Staff skills and capacity
Administering the estates of represented persons can
be complex, intensive and specialised. The requirements of the Act demand a
large, well trained, competent and stable workforce that can establish and
maintain personal relationships with up to 10 000 represented person
clients.
At the time of the audit there were about
140 Personal Financial Solutions (PFS) staff managing the estates of over 10
000 represented persons. About 88 of those staff are caseload managers,
referred to as consultants, who can be responsible for up to 400 clients
at any one time.
State Trustees has been actively developing its
workforce capability with an in-house staff competency program.
Staff competency
State Trustees recognised that heavy workloads, the
need for unique skill sets that can only be developed in-house and consistently
high staff turnover, raised the risks of poor quality service and of
overlooking critical client information.
In 2006, it began a Manageable Caseload Project (MCP)
to improve staff competency and the caseload balance of consultants in the PFS
division. All newly recruited PFS staff now receive six to seven weeks in-house
training and competency assessments. Mandatory ongoing training is also
provided to all consultants according to their duties.
Anecdotal evidence suggests that the MCP improved
service quality, competencies, workload balance and staff morale. State
Trustees has since adopted the principles of the MCP for the whole
organisation.
3.3.2 Information management
Making decisions in the best interests of represented
persons requires accurate and relevant information to be available. This not
only promotes better decision-making, but enables quality assurance, reduces
the risks associated with staff turnover, and assists in meeting accountability
obligations.
State Trustees staff base estate management
decisions primarily on the information in client records, kept in State
Trustees’ Asset and Information Management System, depending on it to be
timely, relevant and complete.
Reviews over the past five years have consistently
identified poor governance and management of information.
Three information management reviews between 2008
and 2010 found weaknesses:
- a 2008 Auditor-General’s report on #10;Management in the Victorian Public Sector" href="http://www.audit.vic.gov.au/reports__publications/reports_by_year/2008/20080312_records.aspx">Records
Management in the Victorian Public Sector found it did not meet the
requirements of sound records management
-
a 2008 internal review on the Security of
Information Assets found no organisational information management and security
policy, framework or supporting standards and an over-reliance on information
technology (IT) for information security -
a 2010 internal corporate risk review on data
integrity found the absence of a policy and framework for data integrity
contributed to poor data management practices across the business.
Developed in 2007, State Trustees’ IT strategy aimed to,
among other things, understand the key issues for the next five years and
develop a strategic plan.
The strategy identified that while existing business
systems lacked the capacity to meet business needs, some system performance
issues had more to do with poor information management than poor information
technology.
State Trustees
recognised that over the following decade technology initiatives costing $10.1
million needed to be budgeted for.
When consultants refreshed the IT strategy
in 2009 they noted that, except for some activities that related to client
relationship management, only one of the five initiatives had been carried out.
They also noted that staff
were entering unreliable and incomplete client information into State Trustees’
primary client information management system. The review recommended this be
resolved and that State Trustees introduce
a client information governance framework. To date, neither has occurred.
State Trustees
recognises that it needs to improve its information management and began work
to implement an Electronic Document and Records Management System in early
2011.
State Trustees has asserted that qualitative
information about services to represented persons is often captured at a client
or file level, and not expressly summarised in high?level reports.
However, information in client files has often been
found to be incomplete or inaccurate, and State Trustees still considers
records management and data integrity risk controls within the PFS division to
be deficient.
The lack of complete and accurate information on
client files prevents the demonstration of effective engagement with clients.
Most information on client files comes from telephone
conversations with clients and contact with carers, support workers and others.
The quality of the information in communications records is inconsistent. Some
are comprehensive while others are so minimal even the topic is unclear, and
understanding the matter recorded would require personal knowledge of the
client.
Staff turnover
Staff play an important part in effective
information management. High staff turnover puts quality decision-making at
risk where knowledge about individual clients and reasons for past decisions
rests with the assigned consultants.
State Trustees is aware of the effect of
high staff turnover and delays in replacing staff due to the extensive training
required and has taken steps to improve retention rates.
From 2007–08 to 2009–10 there has been a
steady fall in overall staff turnover with turnover in the PFS division in
particular falling from 26.5 to 18.4 per cent overall. However,
retention rates for PFS consultants have not improved between 2006 and 2011.
Almost half of State Trustees’ consultants have been in the role for less than
two years, with almost one quarter for 12 months or less.
Transparency
From a sample of client files, this
audit found that client files had minimal documentation of needs assessments to
inform budget decisions, both at the initial stage and ongoing. The majority of
records reviewed contained little evidence of assessment of the client’s
physical needs and financial circumstances, or detail about their wishes
regarding their assets.
The majority of communication records
did not include sufficient detail to adequately understand the matter discussed
in the record. In most cases, staff rely on their personal knowledge of, and
experience with, the client to ‘interpret’ the information in a communication
record.
Other files indicated that actions
had been taken, for example in complaints files, but contained no information
on follow-up or the outcome of the action.
For two clients, the consultant was
unable to locate the records required for review by the audit.
3.3.3 Engagement with represented persons
As it makes decisions daily on behalf of
society’s most vulnerable individuals, State Trustees must have a relationship
with each client to understand their circumstances, what they want, what their
current needs are and how they would like to live their lives.
State Trustees has a stakeholder engagement strategy
that includes promoting client interests to commercial and community
stakeholders. However, the strategy does not extend to client engagement and
communication. State Trustees has advised that it will review its stakeholder
engagement strategy in 2012–13.
The Community Services Agreement (CSA)
requires State Trustees to visit represented persons within 65 days of being
appointed by the Victorian Civil and Administrative Tribunal to assess their
personal and financial circumstances. However, it is not required to
visit them again.
The CSA does require some type of contact
with each represented person or their carer at least once a year to determine
whether their needs or circumstances have changed. This also enables State
Trustees to adjust their client records accordingly.
Regardless of the CSA obligations, State
Trustees has a responsibility under the Act to consult with represented persons
to ensure it is acting in their best interests.
State Trustees has substantial
point-of-service contact with represented persons. Throughout the year, its
call centre receives almost 300 000 phone calls from clients and carers, and it
provides front counter services, such as cash collections, to around
13 000 clients.
However, quality client engagement directly
between represented persons and their consultants is infrequent. After the
initial visit, only around 5 to 8 per cent of clients are visited each year.
A review of client files found one client
who had never received a visit from a State Trustees consultant.
Staff are expected to notify clients,
carers or family in writing when there is a change in the assigned consultant.
This has not occurred in many cases. One case file showed that the client had
been assigned 15 different consultants over the past five years, but few
letters had been sent to advise the client of these changes.
State Trustees has no client engagement
strategy. State Trustees’ Service Excellence Plan noted a lack of consistency
in the way it engaged with clients.
3.3.4 Quality measurement and assurance
State Trustees performs limited quality
assurance of the services it provides to represented persons.
State Trustees asserts that qualitative information
about services to represented persons is often captured at a client level.
State Trustees relies on team leaders to observe consultants, review files, and
discuss decisions. This is not documented, and State Trustees has no system to
check if this occurs.
The PFS quality review team is responsible for
reviewing each represented person’s file at least once every two years. However
the review focuses on the accuracy of client file data at the time of the
review rather than the quality of ongoing estate administration. Reviewers do
not assess the quality of decisions when doing the review, making it an
inadequate way to monitor whether the best interests of represented persons are
being met.
State Trustees’ two methods of ascertaining
represented persons’ satisfaction with its services are through a client
satisfaction survey, which is not validated against internal performance
benchmarks, and a complaints process that lacks quality assurance.
Client satisfaction survey
The Client Value Index (CVI) is State
Trustees’ only corporate measure of service quality, with improving CVI results
its only service quality objective.
The CVI is an annual measure of client
satisfaction with services. The CVI also meets the CSA obligation to
independently survey represented persons. In 2010 the CVI results for
represented persons showed 82 per cent satisfaction compared to
78 per cent in 2009, passing the target of 80 per cent. However, the
measure was reported at 75 per cent in 2011.
Quantitative data from the CVI survey is
analysed and used to recommend improvements. However, there is no documentary
evidence that State Trustees monitors and reports on their implementation or
effectiveness. State Trustees plans to analyse and develop initiatives from the
qualitative data for the first time in 2011 to contribute to improvements.
While a valid method to monitor client
satisfaction at an aggregate level, the CVI is not supported by internal
analysis of service quality against defined quality targets. In isolation the
survey is not sufficient to demonstrate that the best interests of each
represented person are being met.
Complaints management
State Trustees’ complaints management
framework consists of a complaints handling and dispute resolution policy and
operational procedures, and is generally aligned to better practice.
However, its use demonstrates inconsistent
quality of complaints record keeping, insufficient analysis and no systems for
complainant feedback.
Although the client concerns panel is
effectively handling the small proportion of serious and complex complaints,
State Trustees needs to improve its handling of the other types of complaints
it receives.
A 2009 review recommending implementation
of complaints handling functionality in the client information management
system was rejected on the basis that it would not result in sufficient
improvements on the existing spreadsheet-based complaints register and hard
copy files that were being used for complaints handling. However, staff use the
complaints system inconsistently, with some recording complaints on the
register but not on the client’s electronic file and others recording
complaints on this file but not on the register.
Complaints data reporting to State
Trustees’ board has not been sufficiently analysed to identify and address
performance issues and opportunities for continuous improvement, despite a 2009
internal audit recommending this.
The same internal audit recommended seeking feedback
on satisfaction with the complaints process, but this is still not occurring.
During this
audit, State Trustees advised it has begun to improve its complaints management
with:
-
a review of complaints governance and reporting, including better
data analysis -
a review of its client concerns panel charter with a view to
giving it greater powers to direct action and mandate systemic changes in
complaints processing -
the development and implementation of complaints management
functionality in its client information management system.
However, it has not advised how it intends to collect
feedback from complainants about their satisfaction with complaints handling
and resolution.
Recommendations
-
That
State Trustees implement an information governance framework which is aligned
to the principles of good records management. -
That
State Trustees review and implement strategies to improve consultant turnover
rates, client communications, record keeping, client feedback and all quality
assurance processes.
Appendix A. Audit Act 1994 section 16—submissions and comments
Introduction
In accordance with section 16(3) of the Audit Act 1994 a copy of this report was provided to State Trustees Limited with a request for submissions or comments.
The submission and comments provided are not subject to audit nor the evidentiary standards required to reach an audit conclusion. Responsibility for the accuracy, fairness and balance of those comments rests solely with the agency head.
![RESPONSE provided by the Managing Director, State Trustees Limited](state-trustees-assets/response1.png)
![RESPONSE provided by the Managing Director, State Trustees Limited – continued](state-trustees-assets/response2.png)
![RESPONSE provided by the Managing Director, State Trustees Limited – continued](state-trustees-assets/response3.png)
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