Machinery of government (MoG) changes occur when the Government decides to change the way responsibilities are allocated and structured across departments and other public service agencies. Examples of MoG changes include abolishing or creating a public service agency, merging or absorbing agencies or parts of agencies, and moving functions and resources, including people, between agencies.

On paper, MoG changes are easy – they do not require legislation, and they can be initiated at any time simply through an Administrative Arrangements Order (AAO) made by the Governor on the advice of the Premier. AAOs can be (and often are) drafted, made, published and commenced very quickly, and they are not ‘disallowable instruments’ – meaning that unlike regulations and other subordinate legislation, the Houses of Parliament are not given the opportunity to veto them.

In practice, however, implementation of MoG changes can be complex, and the changes can have considerable short and long-term implications on the ground.

In this edition of In Focus, we highlight aspects of MoG changes that relate to agencies’ administrative conduct, with a particular focus on maladministration risks agencies should watch out for. These include:

• The importance of good change management with appropriate planning and governance
• The potential for administrative confusion and errors following a MoG change
• Managing conflicts of interest at a personal and organisational level
• Risk to the ‘control environment’ during MoG change
• Records management, including the transfer of records between agencies and the disposal of records
• Dealing with requests made under the Government Information (Public Access) Act 2009
• Ensuring complaint-handling pathways are clear, available and accessible
• Complying with the requirements of the public interest disclosures scheme
• Agency distraction and disruption, and the potential impacts of MoG changes on service and program delivery.

We do not comment on the political or policy merits of MoG changes, in any specific case or in general. Nor do we seek to assess whether and when the costs of MoG changes might outweigh the benefits.

The importance of good change management

On paper, and as a matter of law, MoG changes occur in an instant. In reality, the situation is usually much more complex, and the complete on-the-ground implementation of a MoG change will often take a considerable period of time to work through.

The importance of sound change management processes, with proper planning and governance, cannot be overstated. What is appropriate in this regard may differ with the scale and complexity of the change. More complex MoG changes, and those that impact a large portion of the sector, will typically require the establishment of a steering committee that likely includes the secretaries of the affected agencies. These large-scale changes may also require the involvement of representatives from central agencies. Small-scale or less complex MoG changes that impact only particular parts of one or two smaller agencies are generally led by an agreed lead agency, perhaps at deputy secretary level.

In any case, steering committees established to guide MoG changes should include representatives from all agencies impacted – to manage the transition of staff, resources, and responsibilities with the least disruption to business as usual.

The Cabinet Office has helpfully published the Machinery of Government Changes Guide (MoG Changes Guide), which steps agencies through MoG planning, implementation and post-implementation processes. At over 60 pages, the MoG Changes Guide is very detailed, and it is a critical tool for agencies to work through when they are undergoing a MoG change.¹

The potential for administrative confusion and errors following a MoG change

In the transition period that follows a MoG change, when the legal position has changed but the reality on the ground is taking time to catch up, agencies and officials need to be especially mindful of the potential for significant confusion (both internally and externally) which could lead to administrative and legal errors.

A particular risk arises because AAOs change the way certain references are ‘construed’ (ie read) in other legislation, regulations and other statutory instruments, as well as any ‘other instrument’, contracts and agreements.² The references that can be changed are those that mention ministers, public sector agencies, or public sector roles.

The changes in references are typically made on a ‘global’ basis – that is, the change is made to all instruments that may contain such a reference, without needing to identify each particular instrument or reference. Especially if these references are not quickly up-dated to reflect the changes made by the AAO, this has the potential to lead to some confusion and uncertainty, which can increase the risk of public sector maladministration:

1. There will be a divergence between what legislation and other instruments say, and what they mean

Documents whose meanings are changed by an AAO continue to exist in their original terms. This means that legislation, policies, delegations, contracts and a whole slew of other documents may no longer mean what they say. That includes Acts of Parliament and subordinate legislation, which will still appear on the legislation website in their original form.

At the time of being ‘mogged’, those agencies and affected staff who administer legislation, contracts and other instruments with changed references, will need to work through the AAOs to ascertain precisely how they have been changed.

Going forward, and for the world at large, however, there is no mechanism by which anyone reading that legislation would know that it has been affected by an AAO, or in what way, without manually searching the AAOs (which are published separately on the website). Working through past reference changes can be a challenging process, particularly given that:

• Whether or not a reference is changed will depend on whether it already existed at the time the AAO was made.
• Multiple reference changes may be layered by a chain of MoG changes over many years.
• Understanding a change of reference will often require a detailed understanding of the substantive MoG change itself. For example, an AAO will commonly provide that a reference to a department is to be read as one thing ‘if used in relation to’ some generally-described matters (such as ‘the transferred part’ of an agency),³ and is to be read as something else if used in relation to other matters.⁴

Unless and until legislation and other instruments are amended to align with the post-MoG legal reality, there will be risk of confusion and uncertainty – and therefore potentially error – in applying those documents.

If, for example, an agency’s delegation instrument provides that some public servant has power to make a certain decision, but in fact an AAO has been made that means it is no longer that public servant but some other public servant who now has this function, any decision by the first public servant to exercise that function will be unauthorised and unlawful. This is so even if the first public servant is acting under an honest mistake. As well as constituting a form of maladministration,⁵ there may be other legal consequences, including for third parties affected by the decision, if it is found to have been legally invalid.

Given these risks, in our view, agencies should seek to review and update all instruments that have been ‘amended’ by AAOs as soon as possible. That includes legislation and regulations, as well as agencies’ policies, delegations, ministerial directions and so on. In the case of legislation, the Parliament’s statute law revision program (which provides for a miscellaneous amendments bill to be passed by Parliament each sitting period) provides a straightforward vehicle for this to be done.

Given the risks of unauthorised decisions and actions, it is particularly critical that agencies review and reissue decision-making delegations and authorisations expeditiously.⁶

In the meantime, agencies and public officials need to be alive to the possibility that, when they see a reference to a minister, agency or public official in an Act or other document, it may mean something other than what it says.

2. There may be ‘clunky’ reference changes that could create unintended consequences in practice

A related issue is that, because reference changes are made on a global basis, they can sometimes operate in ways that lead to perverse or otherwise unintended outcomes. There are any number of possible examples:

• A change could result in a person being required to consult or obtain their own approval for a decision (ie where an Act says that Secretary X must consult with Secretary Y before making a decision, but an AAO is made providing that Secretary Y is to be read as Secretary X).
• A change could result in a change to the composition of a board or committee that is perverse or impractical (for example, if the effect is to reduce the number of board members, but the quorum for board meetings is unchanged).

For this reason, the MoG Changes Guide emphasises the important role of agency legal teams in identifying legislation or parts of legislation that may be affected by an AAO, and providing advice on any necessary review or amendments that should be made to legislation or governance documents.

3. There may be a failure to appreciate the limits on what an AAO has done (and what else needs to be done as a consequence of the MoG change)

Although AAOs are extremely powerful, there are limits to what they can do. Public officials need to be mindful about what AAOs cannot do, and the fact that additional steps may be required to give effect to consequential changes beyond those contained in the AAO order. For example:

• AAOs do not change reference constructions in every document – only in statutory and other ‘instruments’, contracts and agreements. If there are references in other agency documents that need to be updated, then that needs to be done manually.
• AAOs cannot change references that refer to ministers or public officials by name (and not merely by their office). For example, each state-owned corporation will have two named shareholding ministers. If a MoG change affects a shareholding minister, there may need to be a process to remove a shareholding minister and appoint a new shareholding minister, and this cannot be assumed to have been effected by a general ministerial reference change in an AAO.
• AAOs only operate in respect of changes to the ‘public service’. Other changes associated with a MoG (such as changes to the governance of a statutory body) would need to be implemented in the usual way and may, for example, require legislative amendment.⁷

Conflicts of interest

Avoiding conflicts of interest is imperative in the public sector – and where this is not possible, they must be disclosed and managed.

MoG changes can result in new conflicts of interest arising. They can also impact the way existing conflicts were being controlled. When implementing MoG changes, agencies should implement strategies to identify any new or updated conflicts, and review controls of existing conflicts.

Integrity agencies repeatedly make findings relating to failures to declare and appropriately manage conflicts. Such failures can undermine confidence and trust in the public sector.

As an example, an employee of one government agency may not have a conflict in that role, or they may have a conflict that is being appropriately managed. If that employee were to move to a new agency, or if their agency became part of some larger agency, those staff movements, changed reporting lines or new functional responsibilities may require declarations and management of new or updated conflicts of interest.

Agencies should be monitoring any known conflicts of interest during the planning and post-implementation stages of a MoG change – this includes reminding staff of the need to identify and declare any new conflicts, and otherwise ensuring that staff abide by relevant provisions of the Code of Ethics and Conduct for NSW Government Sector Employees⁸ and any supplementary agency-specific codes.

MoG changes can also bring about ‘conflicts’ in a broader sense. In its 2021 report ‘Machinery of government changes’, the Audit Office of NSW considered how the former Department of Planning, Industry and Environment had managed MoG changes. It noted ‘…there were risks associated with placing functions and agencies that represent potentially competing policy interests within the same 'cluster', such as environment protection and industry.’

The Audit Office also observed that there was an absence of any ‘evidence of plans to manage these issues… as a part of the machinery of government change process’.⁹ This highlights that, even if the decision to make a MoG change is outside of the control of the affected agencies, the execution of the change and the management of its impacts are the agencies’ responsibility.

Risk to the control environment

The disruption caused by MoG changes can create greater potential for wrongdoing, including corrupt conduct. The NSW Independent Commission Against Corruption (ICAC) has highlighted this issue, reporting a potential relationship between corrupt conduct and organisational change. Large-scale change in particular can impact the control environment (that is, the internal controls agencies have in place to minimise risk) and ‘create a climate of discontent, confusion and uncertainty in which corruption can flourish.’¹⁰

Recent ICAC investigation reports also note organisational change as a factor that may have contributed to corrupt conduct. For example, a 2021 investigation found that serious corrupt conduct had occurred in relation to the sourcing of software systems for the Western Sydney Institute of TAFE. In that matter, the corrupt conduct occurred in a context of broad organisational reform. MoG changes had moved the agency from one portfolio to another, which created uncertainty and confusion about which policies or procedures were applicable.¹¹

Restructures often focus agencies’ attention on considerations like efficiency and cost. While it is important to ensure that change occurs as swiftly as possible in order to avoid unnecessary impact on staff morale and service delivery, the environment of rapid change can increase agencies’ exposure to the risk of corruption in matters like staff appointments and procurement.

MoG changes can also impact on other areas of corruption prevention. For example, changes could result in a failure to backfill a vacant role that is responsible for certain corruption controls. Staff movements linked to MoG changes – including allocating staff to new positions, taking staff offline or allocating people to responsibilities that are beyond their capacity – can also cause issues around reporting lines (which may become less clear), decision-making delegation and inadequate supervision. All of these factors can make corruption prevention more difficult. MoG changes can also cause delays to planned integrity initiatives including training, audits, and risk assessments, which may be deferred or placed on hold while the agency is busy with change activities.¹²

The merging of agencies may necessitate a consolidation of systems and processes, and in some cases, this may not happen – at least initially. Disconnected systems could then make it easier for a person to find opportunities for wrongdoing. As an example, it could be more difficult to detect fraudulent transactions if a master vendor file, supplier due diligence, purchase orders, credit card processing and goods receipting are all managed in different systems.

Records management

As stated in the MoG Changes Guide: ‘Deciding what happens to agency information, records, data, and records management systems is a key component of due diligence.’¹³

It is imperative that agencies meet the requirements of the State Records Act 1998. This includes creating, keeping and maintaining records, and the continued right to access those records, including under the Government Information (Public Access) Act 2009 (GIPA Act).

In a June 2023 report, the Queensland Audit Office urged agencies to focus on records management when undertaking MoG changes. The report noted that in one case, an agency identified more than 87,000 records that were not correctly transferred or disposed of following MoG changes, increasing the risk of sensitive information being lost.¹⁴

Some risks and challenges associated with the transfer of records between agencies include:

• differing and incompatible systems impacting the ability to access records
• delay transferring records with changes to agency functions
• failure to maintain proper record labelling and record management controls relating to privacy, security or confidentiality
• lost or missing records
• failure to properly dispose of records and/or decommission systems.