The Australian National Audit Office (ANAO) has urged public sector agencies to be more rigorous in their monitoring and performance measurement efforts for outsourced service delivery.

Reflecting on a range of recent audit reports examining service delivery in an outsourced environment, the ANAO says a number have highlighted failings in the area.

Monitoring and performance measurement is central to tracking progress towards meeting the government's priorities, ANAO says.

"In particular, it is important to monitor a service provider's performance over time and the contribution to broader agency objectives and government outcomes," the latest edition of the ANAO's monthly newsletter, AUDITFocus, says.

ANAO notes Australian governments at both the commonwealth and state levels have been focusing on achieving a better performing public sector and building a more responsive public service that can deliver less costly and higher quality services to Australians.

But it urges agencies to ensure published performance information providing a top level strategic overview of an agency's performance for external accountability needs is backed by more detailed internal management information on the performance of outsourced services. Such internal measures are essential to allow agencies to diagnose trends against targets or activity levels and identify areas for improvement.

"Performance information about outsourced service delivery is most effective where it links the contribution of the outsourced service to the outputs and outcomes of the agency. The reporting in an entity's Annual Report of performance trends against easy to understand and clearly defined indicators can help Parliament and the public assess how well public money is being spent and what is being achieved," it says.

A number of recent audit reports have been critical of agency monitoring and performance measurement efforts. For example a recent report on Administration of the Community Aged Care Packages Program found the Department of Health and Ageing's (DoHA's) effectiveness in monitoring the performance of the program had failed to keep pace with the program's rising importance in terms of claims on Australian government funding and the weight it is now carrying in service provision for ageing Australians.

"While the Australian government, with DoHA advice, is participating in intergovernmental efforts to review and reform community care and has introduced a major review of its own community aged care programs, DoHA has not given priority to the introduction of effective and comprehensive information and reporting systems to ensure that the objects of the legislation are being met by the operation of the program," the report says.

"This has meant that, while issues of duplication, overlap, and lack of coordination with other community care services are being addressed, some key questions about program outcomes and the results of activities of service providers are difficult for DoHA to answer at present."

Another report into the administration of the Department of Employment and Workplace Relations' (DEWR's) Job Seeker Account found while the department's overall approach to its administration was sound, it needed to do a better job of identifying risks; place greater reliance on existing controls around the processes and procedures undertaken by Job Network Members that take effect prior to reimbursement of JSKA claims; and implement and report on DEWR's evaluation strategy.

"The greater use of outsourced services brings with it new challenges, including the required commercial, negotiating and project management skills to ensure:

• the achievement of government outcomes and improved performance

• a balancing of the benefits afforded by commercialization with the need to retain appropriate internal experience and supervisory skills, and

• conformance with legal and procedural requirements (including, where appropriate, security obligations)," ANAO says.