Introduction

The Australian Government has provided employment services to unemployed job seekers since 1946. 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).¹

Under the Job Network Program, DEEWR does not directly provide services 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 Arrangement. 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 into employment. There are currently around 100 JNMs operating at approximately 1150 locations throughout Australia. Under Employment Services Contracts (ESC), DEEWR paid JNMs $1056 million in 2006–07 to deliver Job Network services.

The Active Participation Model

The Job Network Program is in its tenth year of operation and is currently based on the Employment Services Contract 2006–2009 (ESC 2006–2009). The ESC 2006–2009 continues 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.²

Under the APM, job seekers remain continuously engaged in employment assistance until they find suitable employment. 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 the 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 including:

• Job Search Support; and
• Intensive Support, including 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

The balance between the major types of fees a JNM could potentially earn under ESC 2006–2009 was designed to create a mix of incentives to encourage increased placements and sustained employment outcomes, increased job seeker activity and improved service and assistance. It was designed to encourage JNMs to focus on getting the long-term unemployed and Highly Disadvantaged job seekers into the labour market by providing more assistance and support. Under ESC 2006–2009, a JNM can receive four major types of payment:

• job placements – fees paid when a job seeker secures sustainable employment through a job placement organisation such as a JNM (the subject of a previous ANAO audit: Job Placement and Matching Services, Audit Report No.49 1999–2000);
• jobseeker account – reimbursement of costs associated with assisting a registered job seeker to obtain sustainable employment (the subject of a previous ANAO audit: Management of Job Network Contracts, Audit Report No.44 1999–2000);
• 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 (the subject of this ANAO audit); and
• outcome payments – payments made to JNMs after a registered job seeker starts and remains in continuous paid employment or education for a period of at least 13 weeks ‘interim outcome' or 26 weeks ‘final outcome' (the focus of a current ANAO audit scheduled to table by early 2009).

Service Fees

JNMs are paid service fees for each registered and eligible job seeker based on the: classification of the job seeker as Highly Disadvantaged or not; length of time the job seeker has been registered as looking for work; and type of service being provided.

Service fees form a significant portion of the expenditure made under the Job Network Program ($404 million from a total of $1056 million in 2006–2007). The types of services that attract service fees are:

• Employment Preparation⁴ (paid at commencement of Job Search Support) -  $3 million in 2006–07;
• Intensive Support job search training (ISjst) or Intensive Support job search training refresher (ISjstr). This fee is paid to JNMs in advance to cover the cost of job seekers participating in a program of structured job skills training - $78 million in 2006–07;
• Intensive Support customised assistance periods 1 and 2 (ISca1, ISca2). This fee is paid to JNMs in advance to cover the cost of job seekers participating in intensive work preparation, training, work experience and counselling - $194 million in 2006–07; and
• a set fee called the Quarterly Service Fee (QSF). The fee is paid in advance to cover the cost of the Intensive Support reviews, maintaining resumes and activity agreements, and the scheduling and conduct of appointments that occur as the job seeker progresses through the APM continuum when not receiving Intensive Support services - $129 million in 2006–07.

Audit objective and scope

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

• specify the nature and level of services to be supplied by JNMs and to communicate this to the JNMS;
• calculate and pay service fees in accordance with the Employment Services Contract (ESC) 2006–2009 it has with JNMs; and
• obtain assurance that JNMs have delivered services in accordance with the contract.

The audit covered service fees associated with Intensive Support services delivered under the ESC 2006–2009 for job seekers eligible for ISjst, ISjstr and both periods of ISca. The audit did not include the funding of job search touch screen kiosks available at Centrelink Customer Service Centres and JNM sites or the provision of Employment Preparation assistance.

Overall audit conclusion

The Job Network Program is in its tenth year of operation and is an established and mature program. Overall, the Department of Education, Employment and Workplace Relations (DEEWR) was effectively administering Job Network service fees. DEEWR's business model for specifying, paying and monitoring service fees paid to Job Network Members (JNMs) is based on:

• a contract that specifies the services to be delivered by JNMs, supported by DEEWR's IT system and guidelines to assist JNMs to understand their contractual obligations;
• mechanisms to calculate and provide advance payments made to JNMs; and
• a contract monitoring program designed to provide assurance that the JNM services have been appropriately delivered.

Clarity of contractual obligations and guidelines

The services that DEEWR requires JNMs to provide to job seekers are appropriately specified in Employment Services Contract (ESC) 2006–2009. DEEWR's contract with JNMs clearly sets out the obligations of JNMs to adequately deliver Intensive Support services for Intensive Support job search training (ISjst) and Intensive Support customised assistance (ISca). DEEWR provides additional means, including the functionality of DEEWR's IT system EA3000, to assist JNMs to understand their contractual obligations.

Mechanisms to calculate and provide advance payments made to JNMs

DEEWR relies on the functionality of its IT system EA3000 to assist JNMs in determining the eligibility of job seekers to receive Intensive Support services, and to both raise and process claims for payment. EA3000 automatically assigns a completion date to signify the completion of service delivery and does not require the JNM to confirm that the services have been delivered. DEEWR's payment strategy is based on paying JNMs to provide ISjst and ISca in advance of these services being provided to job seekers. Payment at the commencement of Intensive Support services was designed to provide JNMs with the ongoing capacity to schedule, to conduct and if need be follow-up job seekers who fail to attend the scheduled appointments. The fees are not subjected to a formal acquittal process. This approach increases DEEWR's reliance on the effectiveness of its contract monitoring activities for assurance that services paid for have been delivered.

DEEWR also pays JNMs a Quarterly Service Fee (QSF), provided to JNMs in advance based on their national business allocation. The QSF was introduced in mid 2003 and recognises the expenses incurred by JNMs in terms of infrastructure, staffing and other costs required to accommodate anticipated job seeker flows. The QSF is not subject to acquittal, but ongoing payments to JNMs are subject to the satisfactory provision of the services as assessed by DEEWR's contract monitoring activities.

A benefit of DEEWR's advance payment model is the reduced administration costs associated with JNMs not being required to make claims for thousands of individual appointments. However, this payment model requires an effective administrative framework to ensure that service fees paid to JNMs have been used for the purpose for which they were provided.

Contract monitoring

To effectively manage the Job Network and the advance payment of service fees, DEEWR requires reliable feedback on the performance of JNMs in meeting their contractual commitments. Accordingly, DEEWR has developed a corporate framework for managing its employment contracts which is called the National Contract Management Framework. This framework is underpinned by risk assessments of JNMs and JNM sites by DEEWR contract managers, and a range of monitoring activities. The department's post-payment monitoring is based on checking a sample of service fee payments to determine if there is sufficient evidence available to substantiate that the services have been delivered.

DEEWR relies on its monitoring activities to ensure contractual compliance by JNMs and, as a result, obtain assurance that service fees have been used for the purpose for which they were provided. Overall, the post-payment checking model adopted by DEEWR to administer the service fees of the Job Network Program is adequate. Consequently, the ANAO has not made any recommendations in this audit.

Nevertheless, in the absence of a formal acquittal process, a higher level of risk is being carried by the Commonwealth under the payment arrangements in place and the model requires ongoing vigilance. A risk going forward is the potential for changes in the status or competence of JNMs that adversely affects their ability to deliver contracted Job Network services. Should DEEWR's contract monitoring detect such a trend, an appropriate mitigation strategy would be to introduce more formal acquittal arrangements for all or part of the Job Network Program depending on the risk to compliance or service delivery.

Key findings

Nature and Level of Services (Chapter 2)

The ability of Job Network Members (JNMs) to provide the required services to job seekers is contingent upon DEEWR's Employment Services Contract (ESC) 2006–2009 and associated guidelines clearly articulating the services that are required, when the services are to be provided and under what circumstances. In addition, information/documentation is required from JNMs to enable DEEWR to substantiate that the services have been provided.

DEEWR's contract ESC 2006–2009 contains clauses that adequately address the Intensive Support services to be provided to job seekers. DEEWR also makes available additional guidance for JNMs in the form of companion guides that provide a greater level of detail. The guidelines are consistent with the contractual clauses and are regularly updated to ensure their ongoing relevance.

In addition, DEEWR provides on-line resources including access to previous JNM questions, reports and reviews to assist JNMs to find the answer to their queries. JNMs are also able to discuss any issues and seek clarification through DEEWR contract managers at site level and DEEWR account managers through the JNM's head office. Further, DEEWR has in place a well developed process of incorporating the latest updates and improvements to the contract through the use of General Contract Variations (GCVs).

The requirement for JNMs to collect and maintain documentary evidence to substantiate service delivery for Intensive Support job search training (ISjst) and Intensive Support customised assistance (ISca) is set out in the Employment Services Contract. DEEWR has also developed a guide addressing documentary evidence that assists JNMs to identify the evidence they need to collect and make available to DEEWR when requested. DEEWR adequately monitors the claims for these fee payments to JNMs by examining a small sample of this documentation during site visits which are undertaken by DEEWR contract managers as part of contract monitoring. See Chapter 4 for an examination of DEEWR's approach to contract monitoring.

Payment of Service Fees (Chapter 3)

Service fees form a significant portion of the expenditure made under the Job Network Program, $404 million from a total of $1056 million in 2006–07. Job Network service fee payments in 2006–2007 include: $78 million for Intensive Support job search training (ISjst) and Intensive Support job search refresher (ISjstr); $194 million for Intensive Support customised assistance (ISca) periods 1 and 2; and $129 million for Quarterly Service Fees.

Service fees are paid for specific services to be delivered to individual job seekers. DEEWR has a set fee structure in relation to Intensive Support service fees that are fixed for the term of the contract. Payment of ISjst/ISjstr and ISca1/ISca2 are made in advance of these services being provided to job seekers. The fees are not subjected to a formal acquittal process. The stated purpose of these service fees is to fund the capacity to schedule and conduct the training/appointments.

There is no requirement for JNMs to certify that they have successfully delivered either ISjst or ISca services for each individual job seeker. EA3000 automatically assigns the completion date for ISjst or ISca based on the length of time from commencement rather than requiring a definitive action on behalf of the JNM to confirm that the services have actually been successfully delivered. This approach increases DEEWR's reliance on the effectiveness of its program assurance activities, which include site visits and desktop monitoring, to ensure services have been adequately delivered or service fees are recovered when appropriate. See Chapter 4 for an examination of DEEWR's approach to contract monitoring.

DEEWR also pays JNMs a set fee called the Quarterly Service Fee (QSF). The QSF is paid quarterly in advance to cover the cost of the Intensive Support reviews, maintaining resumes and activity agreements, and arranging and conducting appointments that occur as the job seeker progresses through the Active Participation Model continuum when not receiving Intensive Support services. The department bases the QSF payment on its modelling of job seeker flows rather than actual attendance at appointments.

The department's modelling for job seeker flows and expected take-up of Job Network services is based on DEEWR's Forward Estimates Model (FEM). The ongoing internal validation by DEEWR and external scrutiny by the Department of Finance and Deregulation provides assurance that the FEM remains an appropriate tool for calculating QSF payment amounts.

A benefit of DEEWR's advance payment model is the reduced administration costs associated with JNMs not being required to make claims for thousands of individual appointments. However, the absence of a formal acquittal process means that a higher level of risk is being carried by the Commonwealth.

In order to manage advance payments of this kind, DEEWR requires assurance that Intensive Support payments and Quarterly Service Fees are being used for the purposes for which they were provided. To obtain this assurance, DEEWR undertakes a range of monitoring activities as part of its contract assurance. DEEWR's National Contract Management Framework, which includes contract monitoring, is examined in detail in Chapter 4.

Contract monitoring (Chapter 4)

The central objective of contract management is to ensure goods and services are delivered as specified in the contract according to time, cost, quantity and/or quality standards specified in the contract.

As stated above, DEEWR does not acquit service fees for Intensive Support job search training (ISjst); Intensive Support customised assistance (ISca) or for the services covered by the Quarterly Service Fee. Instead, DEEWR relies on its contract monitoring to ensure that the Intensive Support services for which it has paid in advance have been appropriately delivered.

Accordingly, DEEWR has developed a corporate framework for managing all employment program contracts, such as the Job Network contract, which is called the National Contract Management Framework. This approach is underpinned by risk assessments and monitoring activities such as regular site visits, monitoring of performance data, quality audits and program assurance activities.

DEEWR adequately monitors the claims for Intensive Support service fee payments that are made by JNMs. The process relies on DEEWR checking a sample of service fee payments during site visits, and 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 services have been delivered. This consists of reviewing the case files of up to 15 job seekers who have completed either ISjst and or ISca at each JNM site. This represents approximately 15 000 claims for payment out of a possible 135 000 claims for ISjst and 235 000 claims for payment for ISca each year. The JNMs can also be asked to provide the evidence as part of quality audits and program assurance activities. Of the 600 job seeker files reviewed in detail during this audit, the ANAO did not find discrepancies that had not already been identified and dealt with by the relevant DEEWR contract manager.

When DEEWR identifies that there is an issue with a service fee payment through either: a site visit; desk top monitoring; program assurance projects; or any other means such as customer feedback lines, a letter may be sent to the JNM requesting sufficient evidence to justify the retention of the service fee. Depending on the response from the JNM and the adequacy of the documentation provided, DEEWR's account manager will decide whether to recover the service fee or not. When the decision is made to recover the service fee the process consists of issuing a debit notice and offsetting the amount against a future payment to the JNM or by issuing a tax invoice for payment by the JNM.

The recovery rates for ISjst and ISca is now quite low, in the order of three to five per cent of all claims. This represents a decrease from approximately 12 000 claims per year four years ago to just over 4000 in 2006–07. This decrease in recoveries has occurred over a period when DEEWR has placed considerable attention on refining the effectiveness of its National Contract Management Framework which includes its approach to monitoring contractual compliance and the administrative arrangements used to manage the contract.

DEEWR relies on its monitoring activities to ensure contractual compliance by JNMs and, as a result, obtain assurance that service fees have been used for the purpose for which they were provided. Overall, the post-payment checking model adopted by DEEWR to administer the service fees of the Job Network Program is adequate. Consequently, the ANAO has not made any recommendations in this audit.

Summary of DEEWR's response

The department welcomes the ANAO's conclusion that 'DEEWR has been effectively administering Job Network Service Fees'.

DEEWR notes that, since the audit fieldwork, the Government has announced a new integrated employment services model for implementation from 1 July 2009. This will mean very significant change to the Job Network program that is the subject of this audit. The work of the ANAO in this audit, together with consultations with and input from stakeholders, will assist in informing the department's ongoing work in order to continuously improve the administration of current and future employment service programs.

Footnotes

^{1 The Department of Education, Employment and Workplace Relations (DEEWR) was established on 3 December 2007. During the fieldwork for this audit, the former Department of Employment and Workplace relations (DEWR) was responsible for managing the Job Network Program. This change did not affect the conclusions in this audit report.}

^{2 The Government announced the Active Participation Model in the 2002-03 Budget.}

^{3 A Highly Disadvantaged job seeker is one who has been identified through the Job Seeker Classification Instrument as having a high risk of long-term unemployment or as having greater difficulty relative to other job seekers in the labour market in finding employment because of the job seeker's personal circumstances and labour market skills.}

^{4 The Employment Preparation component of Job Network commenced on 1 June 2006 and was not included within the scope of this audit.}