Part 2: Management and accountability
Right payments to the right people
As part of the Alliance 2004 project governing the relationship between FaCS and Centrelink (see pages 270–271), the Outcomes and Outputs Framework (OOF) sets out the performance framework that reflects the organisations' roles in achieving government outcomes. It also sets out the measures that will be used to assess the organisations' respective contributions to the FaCS departmental outputs of service delivery and policy advice. FaCS and Centrelink are jointly accountable to Parliament for the payments and services that Centrelink delivers to the community.
The 2001–04 Business Partnership Agreement, governing the relationship between FaCS and Centrelink, specifies a monetary compliance benchmark of $980 million in savings, which was achieved by Centrelink in 2003–04.
New debt-raising and recovery performance measures included as part of the OOF have been developed under the Alliance 2004 project for implementation in 2004–05.
The 2004–05 financial year will be used to benchmark performance with a view to setting compliance performance targets in 2005–06.
Control of program fraud and incorrect payment
On behalf of FaCS, Centrelink ensures that controls are in place to minimise the risk of fraud and payment incorrectness. The agencies' Business Partnership Agreement details these controls and provides a framework for maximising correct payment.
This framework consists of three key strategies:
- prevention—through systems and procedures to minimise the risk of incorrect payment
- detection and recovery—through processes to detect incorrect payments as soon as possible and to correct them promptly
- deterrence—promoting voluntary compliance through creating a public recognition of the risks and penalties involved in attempting to fraudulently receive payments, including likelihood of detection, recovery of debts and possible prosecution.
Under these key strategies FaCS requires Centrelink to:
- develop, implement, and support systems and procedures to prevent, identify, investigate and deter incorrect payments and fraud
- undertake activities in debt prevention; reviews; debt identification, raising and recovery; and prosecution
- monitor, analyse and report on performance.
Control strategies aim to prevent incorrect payments rather than detect them later. The controls are risk-based and Centrelink gives due consideration, in consultation with FaCS, to cost efficiency and good customer service.
The relevant legislation and the key performance indicators for debts seek to ensure that debts are identified and raised in an accurate and timely manner. Affected customers are notified of adverse determinations resulting from reviews that affect a rate of payment, result in a debt or action to recover a debt, or institute prosecution proceedings.
Reviews apply natural justice; in adverse determinations the customer can comment on the reasons for action taken. FaCS also requires Centrelink to provide an assurance of correct payment by:
- adhering to agreed procedures and processes to maximise correct payments, and providing ongoing assessment of control framework effectiveness, particularly proof-of-identity procedures to minimise identity fraud
- undertaking, in consultation with FaCS, comprehensive risk assessments of service and payment delivery for each income support program
- providing data on the accuracy of decision making to assure FaCS that the incidence of incorrect payment arising through incorrect decisions is minimal.
FaCS continually monitors performance to measure the success of the control framework and service provider performance. At a departmental level, the impact of compliance activities on outlays indicates performance.
Random samples
Rolling random sample surveys provide a key measure of the effectiveness of compliance and other review activity. The primary purpose of the random sample surveys is to provide a measure for accuracy of outlays, and a means to facilitate external assurance as required under the business assurance framework.
Random samples are a point-in-time analysis of customers' circumstances, designed to establish whether customers are being correctly paid in accordance with the Business Assurance Framework's 'four pillars' of payment correctness. During 2003–04 Centrelink undertook, on FaCS' behalf, rolling random sample surveys of 10 050 customers receiving benefits, including the Age Pension (1500), Youth Allowance (1500), Parenting Payment Partnered (1500), Parenting Payment Single (1500), Disability Support Pension (DSP) (1500), Newstart Allowance (1500), Wife Pension Age and DSP (350), Widow Allowance (350) and Partner Allowance (350). The ongoing program of random sample surveys will provide continuous information on the level of, and reasons for, incorrect payment as well as on the effectiveness of the overall control framework for managing payment accuracy. The results of random sample surveys undertaken to 31 December 2003 are provided in Table 73.
| Payment type | Residual inaccuracy |
|---|---|
| Age Pension | 1.29% |
| Disability Support Pension | 1.83% |
| Newstart Allowance | 6.73% |
| Parenting Payment Partnered | 6.80% |
| Parenting Payment Single | 4.39% |
| Youth Allowance | 8.45% |
| Widows Pension B | 1.73% |
| Overall rate of inaccuracy | 3.30% |
- The rate of inaccuracy is derived from the ratio of inaccurate payment to the amount being paid to the sample populations adjusted for the existing control framework. The overall inaccuracy rate of 3.3% is estimated by weighting by payment population and includes upward and downward variations. A similar proportion of inaccuracy would be expected across the entire population.
Maximising correctness of payments
Debt prevention
Through its business partnership with Centrelink, FaCS emphasises preventive measures for all dealings with customers by ensuring a framework of procedures, controls and systems, including:
- undertaking identification checks
- issuing appropriate claim forms to customers and alerting customers to their obligations and existing detection mechanisms
- verifying critical facts that customers supply
- selectively applying risk-based admission procedures to ensure resources go to those cases where perceived risk of incorrect payment is greatest
- requiring customers to provide their tax file numbers and where appropriate their partners' tax file numbers as a condition for receipt of payment
- requiring benefits be paid directly into customer accounts to reduce the occurrence of cheque fraud.
Detection and recovery
Review activity
FaCS funds Centrelink to undertake particular review activities to target identified risks. All review activity is conducted in accordance with the Privacy Act.
Profiling
Service profiling is a method of selectively identifying and reviewing customers who need a more focused level of service to help them meet program outcomes, including payment correctness, activity testing and economic and social participation.
Further Budget measures in 2003–04 provided for the introduction of service profiling for Disability Support Pension and Austudy, as well as providing additional resources to conduct more profiling reviews for Youth Allowance, Age Pension and Parenting Payment.
Data matching
Data matching involves comparing customer identity details, including in some cases tax file numbers, with records from other federal and state bodies, to identify declared income or assets changes. Data-matching activities include:
- Tax Office individual and partners' tax data
- Tax Office employment declaration forms
- Tax Office rental assets data
- Tax Office Pay-As-You-Go payment summary information
- Tax Office Australian Business Number information
- state and territory registrars general deaths data
- Department of Immigration and Multicultural and Indigenous Affairs immigration records
- state and territory departments of corrective services data
- Defence Housing Authority data
- Commonwealth Superannuation Administration (ComSuper) data
- Department of Employment and Workplace Relations data
- enrolment status of Youth Allowance and Austudy customers.
Other activities
Other methods to identify possible incorrect payments include:
- joint case work between Centrelink and the Tax Office
- information from members of the public
- risk-based review selections generated from statistical analysis of customer characteristics
- reviews to examine customer entitlements at a specific time in their duration on payment.
Identity fraud
FaCS and Centrelink continue to build relationships with other organisations with customers in common and where fraud prevention is of mutual interest. FaCS was involved in whole-of-government activities by participating in various committees to combat identity fraud through mutual cooperation in investigating the cash economy. Legislation was passed in November 2003 enabling Centrelink access to AUSTRAC financial transactions reporting information. Use of these data will enhance the ability to detect identity fraud and misrepresentations by Centrelink customers.
Sophisticated computer detection methods continue to detect identity-related fraud. In 2003–04, these methods identified 171 cases of identity fraud. This relates to 729 claims for payment, as a single fraudulent identity may be used to make a number of claims.
Debt recovery
FaCS, through Centrelink, recovers debts by withholding ongoing payments and recovering cash repayments. In certain cases, garnishee action recovers debts from tax refunds and other lump-sum payments. Care is taken that customers are not placed in undue hardship from ongoing witholdings of payments or garnishee action.
A contracted mercantile agent collects debts when the debtor's whereabouts are unknown to Centrelink or it is not cost-effective to pursue the debts through standard debt recovery processes.
Compensation
Compensation provisions reflect the principle that income support for people who suffer compensable injuries mainly lies with relevant compensation authorities rather than with the taxpayer-funded social security system. Compensation provisions provide for:
- recovery of past payments of social security from arrears payments of periodic compensation payments and lump-sum compensation payments
- preclusion periods within which social security payments cannot be paid due to the receipt of lump-sum compensation payments
- periodic payments, such as weekly workers' compensation payments, to reduce directly, dollar-for-dollar, the rate of social security payments otherwise payable. Any excess is treated as income for partners of compensation recipients.
To ensure the community understands the social security implications of receiving compensation, Centrelink provides a high-level outreach and information service to compensation authorities and to legal, insurance, union and community representatives.
In 2003–04, application of the compliance provisions achieved estimated savings to outlays of $404 million.
Deterrence
Dealing decisively with detected cases of incorrect payment encourages voluntary compliance. This helps the public recognise the risks and penalties involved in attempting to fraudulently claim payments. Centrelink must:
- promptly identify and investigate (or refer to the Australian Federal Police) possible offences
- refer appropriate cases to the Director of Public Prosecutions for possible prosecution.
Procedural requirements make customers aware of their obligations, and prosecution outcomes are publicised.
Customer Account
The Customer Account is a web browser interface to customer data currently stored in the Centrelink mainframe computer. Its purpose is to simplify, streamline and standardise the way staff use and manage customer data. The Customer Account re-uses customer information and offers staff a single-screen summary of customer data that would normally be accessed via 24 mainframe screens. Customer Account provides links to other tools and applications, including the mainframe. New claims processing software for Parenting Payment Single and Newstart Allowance/Youth Allowance continues to be developed for this financial year.
FaCS expects that by July 2006 customers will be able to view, update and in some instances make a claim via their personal accounts and supply simple updates via the Internet. FaCS keep a watching brief on Customer Account to monitor budgeted savings and ensure that policy is correctly applied within the technology.
Business Assurance Framework
The Business Assurance Framework (BAF) has been developed by FaCS and Centrelink to provide a comprehensive picture of the operation of controls and of the effectiveness of the risk management framework for the delivery of programs and services to customers through Centrelink. The BAF recognises that many controls are managed through the service delivery arrangements with Centrelink; it assigns responsibility for managing risks to the agency best placed to do so while seeking assurances that the management of those risks is effective.
The BAF builds on existing mechanisms of quality control and quality assurance to measure the quality of controls against key risks in the delivery of services to customers. It also relies on external assurance, such as ANAO audits and validation of data, to provide confidence in the quality assurance process and in the information upon which assurances are based.
The basic principles of the BAF are the following:
- there should be agreement between stakeholders about the outcomes to be achieved
- there should be alignment and consistency between quality control, quality assurance and external assurance processes through common definitions and agreement on what is to be measured and how
- the focus should be both retrospective (risks to outcomes are being effectively managed) and prospective (emerging risks are being identified and treated).
The rolling random sample surveys of payment correctness form an integral part of the BAF in relation to accuracy of outlays and payment correctness. Implementation of these surveys was completed during 2003–04. The surveys use definitions of accuracy of outlays, payment correctness and sources of error agreed between FaCS and Centrelink under the BAF. The information from the surveys is also used in identifying and analysing program steps deemed critical to payment correctness.
Further development of the BAF has been undertaken as part of the Alliance 2004 project with Centrelink and focuses on services to customers provided through Centrelink such as referrals to services, participation support and information on rights and responsibilities. FaCS and Centrelink have agreed key risks to the delivery of these services and are working together to develop definitions and methodologies for measurement of the quality of controls. The work is expected to be completed during 2004–05.
The development of the FaCS service delivery framework will guide program managers in establishing and managing service delivery arrangements with other providers. This will be informed by the work on the development of the BAF with Centrelink to support risk management within FaCS.
Achievements
Savings to outlays
- In 2003–04, the Integrated Review System and an interrogation of the Centrelink mainframe data indicated that review activity achieved $104.16 million in savings to future fortnightly outlays.
- Review activity raised debts of $452.82 million.
Review activity
- In 2003–04, the Integrated Review System and an interrogation of the Centrelink mainframe data indicated that Centrelink reviewed 4 108 593 social security payments. Of these, 958 772 were compliance reviews.
- It is estimated that compliance review activity resulted in 157 977 social security payments (16.48 per cent) being reduced. Overall, 18.72 per cent of compliance reviews identified an incorrect payment.
Debt raising and recovery
- Centrelink raised 1 538 486 FaCS and Family Assistance Office debts, valued at $922.18 million. Of these, debts raised for recovery totalled $891.82 million, with the balance being waived at determination.
- Recoveries of FaCS and Family Assistance Office debts by cash and withholdings amounted to $678.55 million. These figures include compensation debts.
- Total recoveries were equivalent to 76 per cent of the amount of new debt raised over the same period, and 91 per cent of total recoveries were raised within 56 days (target: 80 per cent).
These figures exclude Child Care Benefit and Family Tax Benefit reconciliations and tax return non-lodger debts.
Prosecutions
In 2003–04, 4462 cases of alleged social security fraud were referred to the Director of Public Prosecutions. The courts dealt with 3043 cases resulting in 2977 (98 per cent) convictions. 87 per cent of cases met the quality requirements of the Director of Public Prosecutions (target: at least 80 per cent).
Budget measures
Prevention
Risk profile review activities for Youth Allowance and Austudy were aligned with those of other payments to minimise incorrect payments and debts for these customer groups. Face-to-face reviews of Parenting Payment customers were introduced to enable timely interventions for customers at risk of being incorrectly paid.
Detection
Expanded data matching enabled newly available data sources—such as income reported against Australian Business Numbers, Pay-As-You-Go payment summaries from the Tax Office and Job Network placements in casual employment data—to be accessed.
Risk profiling capability for the Age Pension program was expanded to review arrangements for customers at risk of failing to declare changes in their real estate holdings.
An increased focus on identity fraud investigations using increased external and internal data sources occurred. Additional services from the Australian Federal Police and the Director of Public Prosecutions were purchased.
Research and development
As part of the 2003–04 Budget, FaCS was provided with funding to coordinate the research, development and analysis of perceived risks to FaCS outlays, including:
- research into awareness and community awareness and attitudes towards biometric technologies
- research into the impact of the cash economy on FaCS outlays
- exploring the use of geographical risk mapping software to enhance existing profiling measures
- exploring the effectiveness of current prosecution arrangements in deterring fraud
- involvement in a cross-agency data-cleansing project to quantify dubious records in identity registers of the Australian Government and state and territory governments
- research into study-related debt.
An independent review of compliance arrangements was conducted as requested by ministers for consideration in the 2004–05 budget process.
Other projects included the purchase of data-mining software, research into compliance motivation, assessment of random sampling methodology, research into prosecution, marriage-like relationships, and research by the Securities Industry Research Centre of Asia–Pacific (SIRCA) to investigate and manage identity fraud.