Introduction

In May 1998, the Government replaced the Commonwealth Employment Service with the Job Network Program, which is now managed by the Department of Education, Employment and Workplace Relations (DEEWR). Under the Job Network Program, DEEWR does not provide employment services directly to job seekers. Rather, it purchases the provision of services to job seekers from a national network of government and non–government organisations.

These are:

• Centrelink, the Australian Government organisation responsible for administering social security entitlements. DEEWR pays Centrelink for services it delivers to job seekers under a Business Partnership Agreement. Centrelink provides services to job seekers, including assessing job seekers' relative labour market disadvantage and referring job seekers to Job Network Members (JNMs); and
• JNMs, which comprise not-for-profit and commercial organisations that have been contracted by DEEWR to help eligible job seekers gain employment. There are currently some 100 JNMs operating at approximately 1 150 locations throughout Australia. Under Employment Services Contracts (ESC), DEEWR paid JNMs $1 030 million in 2007–08 to deliver Job Network services.

The Active Participation Model

The Job Network Program is in its eleventh year of operation and is currently based on the Employment Services Contract 2006–2009 (ESC 2006–2009). The ESC 2006–2009 gives effect to the Active Participation Model (APM) which was designed to simplify access to services for job seekers and to link services provided by Centrelink, JNMs and related service providers.
Under the APM, job seekers remain continuously engaged in employment assistance until they find suitable employment or undertake a qualifying education course. After three months, most job seekers who remain unemployed receive specialised one-on-one assistance from a JNM. This assistance, referred to as Intensive Support, starts with job search training. Job seekers who remain in a position of being unable to find work after six months of unemployment move into a period of mutual obligation, involving participation in Work for the Dole or other programs, and then move onto customised assistance involving a more intensive form of personalised assistance to disadvantaged job seekers.
The services provided by JNMs and the mutual obligation activities form a continuum of service which increases with intensity the longer a job seeker remains unemployed. The APM continuum is illustrated in Figure 1 and includes Job Search Support and Intensive Support (job search training and customised assistance).

Figure 1 Service delivery continuum

Source: ANAO Audit Report No. 51 2004–05, DEWR's oversight of Job Network services to job seekers.
Note: Job seekers who are most disadvantaged in the labour market receive immediate access to Intensive Support customised assistance (ISca).

Job Network Program payments

Under Job Network a JNM can receive four major types of payment/reimbursement:

• job placements—fees paid to a JNM when a job seeker secures ongoing sustainable employment through a job placement organisation such as a JNM;
• jobseeker account—reimbursement of costs associated with assisting a registered job seeker to obtain sustainable employment;
• service fees—payments made to JNMs for specific services delivered to individual job seekers including: commencement of Intensive Support job search training (ISjst); commencement of both the first and second periods of Intensive Support customised assistance (ISca); and a set fee called the Quarterly Service Fee; and
• outcome payments—the subject of this audit.

Outcome payments

DEEWR pays JNMs an outcome payment when a job seeker allocated to them achieves an employment or education outcome that meets the contractual requirements as detailed in the department's Employment Services Contract (ESC) 2006–2009.
Where a JNM actively matches a job seeker to a vacancy, DEEWR characterises this as a positive outcome. After the job seeker has remained in continuous employment or a qualifying education course for a set period and satisfied their participation requirements and/or reduced their reliance on income support, DEEWR pays the JNM an outcome payment for the placement. An interim outcome payment is paid to the JNM after the job seeker has been in continuous employment for 13 weeks or has undertaken a qualifying education course for one semester. A final outcome payment is paid after 26 weeks continuous employment or two semesters of a qualifying education course.

Outcome payments form a large proportion of the expenditure made as part of the Job Network Program. In 2007–08, DEEWR paid approximately $386 million to JNMs for outcome payments out of a total program expenditure of $1 030 million.

The amount DEEWR pays an individual JNM for assisting a job seeker into employment or qualifying education course is determined by the length of time the job seeker has been unemployed and the job seeker's level of disadvantage. DEEWR uses four different periods of unemployment when paying an outcome payment. The first commences after a job seeker has been unemployed for three months and has commenced receiving Intensive Support services. The four periods are: four months to 12 months; 13 months to 24 months; 25 months to 36 months; and registered for 37 months or longer. The purpose of dividing the outcome payments into the different periods is to encourage and reward JNMs for achieving sustainable employment or education outcomes for the longer term unemployed and those job seekers considered to be Highly Disadvantaged.

This approach was adopted to provide a financial incentive to JNMs to encourage them to focus on finding jobs for the longer term unemployed rather than focus the majority of their efforts on the shorter term unemployed, who have a better chance of gaining employment.

DEEWR's summary response to the audit

The Department of Education, Employment and Workplace Relations (DEEWR) welcomes the ANAO's finding that the department has adopted a successful approach to specifying, payment and monitoring of Job Network Outcome payments. DEEWR has accepted the ANAO recommendation regarding further opportunities to improve external understanding of the efficiency and cost effectiveness of employment services.

The Government has announced a new integrated employment service will be implemented from 1 July 2009. This new Employment Services Contract 2009–2012 will supersede the specific Job Network Outcome Payments that are the subject of this audit. DEEWR will address the report recommendation in determining its future reporting arrangements for the new Employment Services Contract 2009–2012.

Audit scope and objective

The objective of this audit was to assess the effectiveness of DEEWR's administration of Job Network outcome payments. The ANAO examined DEEWR's arrangements to:

• specify Intensive Support outcome payments, the purpose of the payments and how Job Network Members (JNMs) can access/claim the payments;
• provide assurance that outcome payments are made in accordance with contractual obligations, and that JNMs who are entitled to receive Intensive Support outcome payments do so; and
• obtain adequate assurance that Intensive Support outcome payments are achieving their stated purpose.

The audit covered outcome payments associated with Intensive Support services delivered under the ESC 2006–2009 for eligible job seekers. The audit did not include outcome payments relating to Australian pensioners or payments relating to Community Development Employment Projects (CDEP) participants.

Overall audit conclusion

The Job Network is the principal labour market program administered by the Department of Education, Employment and Workplace Relations (DEEWR). Outcome payments are made to Job Network Members (JNMs) when a registered job seeker obtains sustainable employment or completes an approved education course. In 2007–08, outcome payments represented 38 per cent of total payments to JNMs.

The Job Network is in its eleventh year of operation and DEEWR administers this mature program effectively. In doing so, the department has adopted a successful approach to specifying, paying and monitoring outcome payments.

DEEWR pays JNMs an outcome payment when a job seeker allocated to them achieves an employment or education outcome that meets the contractual requirements as detailed in the department's Employment Services Contract (ESC) 2006–2009. The outcomes that JNMs are contracted to provide to job seekers are appropriately specified in ESC 2006–2009 and these requirements are translated into clear guidance material.

Overall, the controls used by DEEWR to administer outcome payments are effective. These controls are reflected in: the functionality of DEEWR's IT system, Employment Assistant 3000 (EA3000); data from Centrelink based on the information that job seekers provide in their fortnightly Application for Payment Form; JNMs certifying that they have the evidence to substantiate their outcome claims; and the department's contract monitoring activities to oversight contractual compliance by JNMs. These controls provide sufficient assurance that outcome payment amounts are made in accordance with contractual obligations and that actual outcome payments made to JNMs are based on a job seeker being placed in continuous employment for 13 or 26 weeks or undertaking a qualifying education course for one or two semesters.

An area that could be strengthened by DEEWR is the clarity of Job Network performance information provided to external stakeholders. A key feature in the management of the Job Network has been an increasing emphasis on paying for outcomes (placements) rather than paying for services (process). Internally, DEEWR monitors Job Network expenditure outcome payments and service fees separately. For external reports, including Portfolio Budget Statements and Annual Reports, DEEWR reports its annual aggregated expenditure on the Job Network. In this regard, DEEWR could strengthen its reporting of Job Network performance. This could be achieved through publishing sufficiently disaggregated and appropriately disclosed Job Network financial and performance information in the department's Portfolio Budget Statements and Annual Reports.

Key Findings

Nature and level of outcomes (Chapter 2)

DEEWR utilises three approaches to specify and describe Job Network outcome payments. The first approach is based on the detail contained in the ESC 2006–2009. The second is through the use of DEEWR's range of Job Network companion guides. The third is based on the functionality contained within DEEWR's IT system EA3000.

DEEWR relies on its standard contract, ESC 2006–2009, as the primary means for specifying the nature and level of outcomes to be achieved by JNMs when assisting job seekers. In addition, the department has a proven process in place for incorporating the latest updates and improvements to the contract through the use of General Contract Variations (GCVs).
While there is no clear definition of the purpose of outcome payments contained in the ESC 2006–2009, the description of outcome payments, the outcome payment fees and the performance management framework indicate that the intent is to encourage JNMs to get the longer term unemployed into sustainable employment or education.

DEEWR has developed a range of Job Network companion guides, a number of which specifically address outcome payments. Overall, the quality of the guides in terms of clarity and consistency with the relevant clauses of the contract was good. JNMs interviewed during this audit confirmed this view.

DEEWR utilises its IT system EA3000 for the processing of the majority of the outcome payment claims. EA3000 was developed by DEEWR for use by JNMs and departmental staff to manage the operation of Job Network services, including outcome payments, and to enable the department to monitor and regulate job seeker flows.

EA3000 is the IT system DEEWR uses to capture data in relation to each job seeker's progression through the APM continuum. EA3000 has inbuilt functionality that assists in monitoring job seeker contacts with the JNM. The IT system also has a range of business controls that give affect to the relevant clauses of the contract. One example is where the IT system ensures job seekers have met the eligibility requirements before JNM staff can progress a job seeker along the APM continuum, such as prior to receiving Intensive Support services. In addition, the IT system captures the data needed to ‘anchor' a job seeker into a suitable employment position or qualifying education course and then track their progress. However, the IT system was not designed to collect evidence to substantiate that the job seeker was in ongoing paid employment or continuing to attend a qualifying education course. This requirement is addressed through the collection of evidence by JNMs as a component of substantiating that an outcome has been achieved (see Chapter 3 of this report).

Substantiating outcome payments (Chapter 3)

Outcome payments are comprised of: interim outcome payments; final outcome payments; interim intermediate payments; and final intermediate payments. Actual payment to a JNM is contingent upon the JNM being able to substantiate that an outcome has been achieved, that is, a job seeker has been continuously employed for 13 weeks or has completed one semester of a qualifying education course (an interim outcome) and, where applicable, has been continuously employed for an additional 13 weeks or completed a second semester of a qualifying education course (a final outcome).

The use of an outcome as the basis for a contractual payment has clear benefits but introduces a number of challenges. In particular, one challenge is being able to substantiate that the outcome has been achieved. Being able to adequately substantiate that the outcome has been achieved then enables the timely and efficient payment of an appropriate outcome claim.

DEEWR processes most outcome payments automatically using the department's IT system, EA3000. When an outcome payment claim cannot be processed using the auto-claim process then a special claims process is used.

Auto claims

The majority of claims for outcome payments are made using the auto-claims process. Approximately 92 per cent of the annual 267 000 outcome claims are processed this way. An auto-claim relies on information provided by Centrelink to verify that the job seeker has been off income support allowances for the relevant 13 week period or, in the case of an intermediate claim, that their income support has been reduced to an appropriate level (60 per cent or more), for the required 13 week period.
DEEWR also requires JNMs to collect similar evidence to substantiate that the job seeker has been in continuous ongoing employment or has completed one semester of the qualifying education course associated with the outcome payment claim.

While DEEWR currently relies on some information provided by Centrelink to substantiate auto-claims using the Jobseeker Rate Reduction Report (JRRR), it does not make optimal use of other information held by Centrelink. The information DEEWR requires JNMs to collect from job seekers and/or an employer/educational institution is the same information that the job seeker is already required to submit when they lodge their Application for Payment Form (SU19) with Centrelink. This in effect requires the JNM to collect information already provided. The job seeker has an obligation to provide the same information to Centrelink and has an incentive to do so. JNMs, on the other hand, must rely on the job seeker and the employer's good will. DEEWR could achieve the same level of assurance, especially for activity tested job seekers, if JNMs were able to rely on the Centrelink information contained in the job seeker's SU19. This is partially achieved at present as the JRRR is based on information contained in the job seeker's SU19.

Special claims

A special claims process is used when the JNM is unable to use the auto-claim process to achieve an acceptable result. In essence this means that the JNM is unable to rely on the Centrelink information pertaining to the job seeker's reduction in income support benefits. The majority of special claims, which concern outcome payments, involve non-activity tested job seekers.

The special claims process involves the use of a systems override module which in effect turns off all of the related business controls present in EA3000. A special claim is submitted by a JNM to the relevant DEEWR contract manager who then has responsibility for processing the claim. All the evidence to substantiate the claim is required to be supplied with the claim. While the number of special claims are relatively small at present, representing less than eight per cent of all outcome claims (approximately 23 000 claims), processing special claims represents a significant work load for both JNMs and DEEWR contract managers. Should the number of non-activity tested job seekers rise then DEEWR could consider addressing this issue by the development of functionality within EA3000 to process routine non-activity tested claims in a standard manner using functionality within EA3000.

Contract monitoring (Chapter 4)

DEEWR's approach to monitoring outcome payments is based on its National Contract Monitoring Framework (NCMF) and the associated elements that address contractual compliance. These include: risk management; contract and account managers; desk top monitoring; site visits; performance management; program assurance and governance arrangements. Specifically, DEEWR relies on its contract monitoring to ensure that the JNM can adequately demonstrate that JNMs have collected evidence to substantiate an outcome and are, therefore, eligible to make a claim for an outcome payment.

DEEWR monitors outcome payment claims in a satisfactory manner. The process relies on DEEWR checking a sample of claims for payment during site visits, using desk top monitoring and program assurance activities at both State and Head Office level to determine if there is sufficient evidence available to substantiate that the employment or education outcomes have been achieved. Contract monitoring based on site visits, desk top monitoring and program assurance activities, within DEEWR's NCMF, is considered to be an appropriate approach for monitoring contractual compliance.

Performance information (Chapter 5)

The current level of aggregation of DEEWR financial information does not allow external stakeholders to identify the contribution that outcome payments (placements) and service fees make to Job Network expenditure and any trends that reflect DEEWR's success in making the program outcome-focused.

In particular, DEEWR does not report outcome payments and service fees separately. Instead, DEEWR reports its annual total expenditure on Job Network expenditure. This level of aggregation of financial information does not allow external stakeholders to identify the contribution that outcome payments and service fees make to Job Network expenditure and any trends that reflect DEEWR's success in making the program outcome-focused.

Care needs to be taken in interpreting DEEWR's performance information relating to the Job Network. DEEWR has a Job Network efficiency indicator, which gives ‘cost per employment outcome' for those who are employed or studying three months after leaving the Job Network. Using DEEWR internal data, prima facie, DEEWR achieved 161 735 ‘interim outcomes' in 2007–08 at a cost of $1 030 million, yielding an indicative figure of around $6 370 an outcome (placement).

DEEWR's published ‘cost per employment outcome' is $3 643. The way in which DEEWR reports positive outcomes includes paid outcomes where a Job Network member has actively matched a job seeker to a vacancy as well as employment results for job seekers who did not attract a Job Network outcome payment and have exited the system. The latter group may have found employment or entered training from their own efforts and of their own volition. However, they have responded ‘positively' about their circumstances in DEEWR's Post Program Monitoring survey. This definition may not be clear to readers of DEEWR's annual reports.

It would improve transparency if DEEWR provided a clearer distinction between gross and net outcomes. Gross outcomes include those people who found jobs with and without the assistance of the Job Network Program. Net outcomes include only those people who secured employment as a direct result of the Job Network program. The ANAO acknowledges that it is methodologically difficult to determine net outcomes and it is likely that they can be estimated only in a major evaluation. However, it would be helpful for users of the department's published Job Network performance information to clearly understand the methodology used to calculate ‘cost per employment outcome'.