The role of the Government chief information officer will be expanded in an effort to prevent future privacy breaches and stop failed Information and Communications Technology projects being rolled out.
Government Chief Information Officer (GCIO) will now be equally responsible for the roll out and sign off of Government Information and Communications Technology (ICT) projects, like school payroll system Novopay, which has resulted in staff being underpaid, overpaid or not paid at all.
Mr MacDonald will now work directly with ministers to provide better oversight on privacy and security issues.
Prime Minister John Key said if ICT projects failed in the same way Novopay had, the buck would largely stop with the GCIO and his department.
"As we can see with things like Novopay, if you get it wrong it can be a very painful experience."
Internal Affairs Minister Chris Tremain said if a project failed, both the GCIO and the chief executive of the individual department or ministry would be held to account.
State Services Commissioner Iain Rennie would be revising job descriptions of chief executives across government to include new responsibilities as part of their key performance indicators.
Mr Tremain said the recent Ministerial Inquiry into Novopay highlighted ICT needed to be better managed.
He said privacy breaches at the Ministry of Social Development and the Earthquake Commission had also dented the Government's reputation.
"Yes, it's made us take a step and consider that we need to lift the bar - but it hasn't stopped the demand for ICT projects."
He said the chief information officer's team will receive an additional $1.5 million for additional staff and resources.
"This builds on the extra funding agreed to last year, of $3 million in 2012/2013 and $4 million thereafter."
Mr Tremain said he would give independent advice regarding major projects, like the Novopay school payroll system.
The GCIO will have sector-wide oversight of ICT plans, projects and risks.
"This will identify areas where early intervention is required, and provide ministers with independent advice on whether projects should proceed."
Mr MacDonald would now report to ministers on any security risks, and implement privacy and security standards and controls across the public sector.
Mr Key said the wider Government ICT strategy and action plan, released today, would save up to $100m a year by 2017.
The plan includes offering all new services online by 2017.
Mr Tremain said New Zealanders' information would be better managed.
"Sensitive information will be protected through clear security and privacy controls, while non-sensitive information will be shared between departments."