Introduction

Youth Allowance

1. Youth Allowance (YA) was introduced on 1 July 1998, through the Social Security Legislation Amendment (Youth Allowance Consequential and Related Measures) Act 1998.

2. The YA payment was designed to provide income support for eligible young people to encourage them to undertake further education or training or to look for paid employment. With an expected expenditure of over $2.5 billion in 2009–10, YA payments are one of the more significant government income support payments.

Eligibility

3. There are two distinct types of YA:

• Youth Allowance (student): YA (student) is a means–tested income support payment available to eligible young people aged 16 to 24 years who are undertaking full time study, an Australian apprenticeship or students who are temporarily unable to study; and
• Youth Allowance (other): YA (other) is a means–tested income support payment available to eligible young people aged 16 to 20 years who are seeking or preparing for paid employment or are temporarily unable to work.

4. Students are the main group of YA recipients and represent 80 per cent of the total YA population. While recipients of YA are required to meet age, residency, activity, and personal asset requirements, the parental means test has the largest bearing on who is eligible and the rates of payment. The parental means test has three elements: a family assets test, the combined parental income test threshold and the family actual means test.

5. Parental means testing does not apply if a YA applicant is assessed as independent. While independence for YA can be obtained in a number of ways one of the criteria can be that the applicant is aged 25 years or more.

Administrative arrangements

6. Under current Administrative Arrangements, the Department of Education, Employment and Workplace Relations (DEEWR) is responsible for income support and benefit payments such as YA, and a range of other education and employment programs.

7. Centrelink, as the Australian Government statutory agency responsible for delivering income support and benefit payments, is the principal service delivery agency for DEEWR's social security programs, including YA. DEEWR purchases services from Centrelink on behalf of the Government, with purchaser–provider terms agreed through agreements.

8. At the time this audit commenced, in September 2008, Business Partnership Agreement (BPAs) of particular relevance to YA were in place between Centrelink and: the former Department of Education, Science and Training, including YA(student) for the period 2005–08; and the former Department of Employment and Workplace Relations, including YA(other) for the period 2006–09. In December 2007, DEST and DEWR were amalgamated into DEEWR, and an Interim BPA between DEEWR and Centrelink (for the period 2008–09) was signed on 31 December 2008.

9. From the customer's perspective, YA services are accessed/delivered through the Internet, Centrelink's 25 call centres and over 300 customer service centres. The call centres are managed centrally as a virtual single call centre. Customer service centres are grouped into 15 geographically based areas that provide oversight of Centrelink operations in that area and coordinate the implementation of new initiatives or processes emanating from Centrelink's National Support Office (NSO).

Program description

10. Beginning with the 2009–10 Budget, the Australian General Government Sector adopted an Outcomes and Program Reporting Framework. As part of its transition to the new arrangements, DEEWR rationalised its nine Outcomes into five and adopted a program structure in which YA is located within three discrete programs. DEEWR's budgets for its YA-related programs: Program 2.11, School Student Assistance; Program 3.3, Tertiary School Assistance; and Program 4.4, Working Age Payments are shown in Table 1. Included in the table is the budget for the YA component of each program.

Table 1 Budget for YA-related programs in 2009–10

Source: DEEWR, Portfolio Budget Statements, 2009–10.

Recent initiatives

11. On 12 May 2009, the Australian Government announced a package of reforms to student income support to respond to the recommendations and findings of the Bradley Review of Australian Higher Education. The package of reforms is intended to increase access to, and better target, income support for students who need it most, through a fairer and more equitable allocation of existing resources.

12. The measures in the package included changes to the parental income test, the age of independence personal income test, extension of income support to students enrolled in a masters degree by coursework, and changes to scholarships. The measures are to be implemented from 2010.

13. As part of the 2009–10 Commonwealth Budget the Government also announced that, from 1 July 2009, Centrelink will receive all of its departmental funding directly from the budget. While policy agencies, such as DEEWR, remain accountable for the oversight of social security outcomes, Centrelink will be directly appropriated to deliver income support and benefit payments.

14. For this reason, new arrangements including key performance measures, covering the period 2009–12 are in the process of being established between DEEWR and Centrelink.

Audit objective and scope

 15. The audit objective was to assess the effectiveness of administrative arrangements for YA, including service delivery. The ANAO assessed DEEWR's and Centrelink's performance against three main criteria:

• objectives and strategies for the ongoing management and performance measures for YA provide a firm basis for measurement against outcomes (Chapters 2 and 3);
• YA services delivered are consistent with legislative and policy requirements, (Chapter 4); and
• monitoring arrangements provide appropriate information for assessing service delivery performance (Chapter 5).

16. The scope of the audit was designed to complement previous ANAO audits including Audit Report No. 43, 2005–06 that assessed Centrelink's use of Random Sample Surveys to measure payment correctness and accuracy.

17. While the audit examined the monitoring and reporting of service delivery through KPIs, such as the timeliness of processing claims, the ANAO did not assess the adequacy of YA payments. Detailed examination of administrative arrangements for supplementary assistance (which YA recipients may be eligible for) was also out of scope for this audit.

Overall audit conclusion

18. Youth Allowance (YA) was first introduced in July 1998 and is a significant government income support payment providing over $2.5 billion a year to eligible young people who are either studying full-time or seeking paid employment. Students are the main group of YA recipients and represent 80 per cent of the total YA population.

19. Under current administrative arrangements the Department of Education, Employment and Workplace Relations (DEEWR) is responsible for YA payments. An Interim Business Partnership Agreement (BPA) is in place with Centrelink to deliver YA services to eligible customers on behalf of DEEWR.

20. Overall, there are effective administrative arrangements in place for Centrelink to deliver YA consistent with the relevant legislation and DEEWR's service delivery requirements. Key operational processes such as means testing, establishing proof of identity, activity testing, and determining independence are defined and controlled through the use of appropriate procedures. The assistance of these controls in supporting the delivery of YA service is reflected in the decline in the percentage of YA complaints received by Centrelink over the past three years, decreasing from 12.6 per cent to 9.7 per cent of all the complaints received by Centrelink. Over the same period, YA service delivery complaints decreased by 7 percentage points.

21. Particular aspects of DEEWR's administration of YA should, however, be strengthened to allow more meaningful and complete measurement of the performance of YA against its program intent, and to better inform DEEWR's program management. Three areas where enhancements would be of particular benefit are: the development and use of appropriate effectiveness measures; the capture and use of data to support program management; and adopting a more strategic approach to oversighting Centrelink's performance in delivering YA services.

The development and use of appropriate effectiveness measures

22. DEEWR's YA-related program effectiveness indicators, as described in the department's Portfolio Budget Statement (PBS), focus on YA (other), that is, young people who are seeking or preparing for paid employment. DEEWR does not have effectiveness indicators for its YA-related programs that focus on providing support to the main group of YA recipients, students. Appropriate YA–related effectiveness indicators for DEEWR's School Student Assistance and Tertiary Student Assistance programs would allow DEEWR to identify and measure the achievement of these programs in providing appropriate income support and promoting education and training. Such initiatives would also assist the department to assess the contribution that these programs make to DEEWR's broader outcomes for school and higher education.

23. The DEEWR–Centrelink Business Partnership Agreement (BPA) identifies a range of Key Performance Indicators (KPIs) designed to monitor the delivery of YA payments and services by Centrelink including the timeliness of claims processing, for which, internal DEEWR KPI reports indicated good performance. Performance against such quality indicators are likely to be of considerable interest to citizens and Parliament and there would be benefit in making key aspects of this information relating to service quality, at the broad trend level, more widely available and accessible.

The capture and use of data to support program management

24. The importance of effective management at the program level has been a focus of the Government's reform agenda to improve the openness and transparency of public sector budgetary and financial management.

25. Program management requires the information and capability to assess whether objectives have been met. Since the introduction of YA only one formal evaluation has been conducted, and this was published in 2001. In this regard, the objectives of YA have not been formally reviewed since the allowance commenced over 10 years ago.¹ A strategy to evaluate YA over time, including reviewing the objectives, would assist in determining if YA is meeting its stated purpose and provide the means by which to measure and assess the contribution YA makes to DEEWR's YA-related programs.

26. Sound financial information is also an important tool for management and accountability purposes. In particular, monitoring the costs associated with managing a program informs a department how efficiently it is administering a government initiative over time.

27. Because Centrelink delivers YA services on behalf of DEEWR through a BPA, service delivery costs are known and managed. However, DEEWR captures the costs associated with its departmental expenditure at the broad outcome level, not at the program level. While DEEWR recorded its departmental expenditure in accordance with the previous guidance provided by the Department of Finance and Deregulation, aggregation of departmental expenditure to the outcome level limited the department's ability to monitor its efficiency in administering YA payments that involve an annual expected expenditure of over $2.5 billion.

Adopting a more strategic approach to oversighting Centrelink's performance

28. DEEWR is not a direct provider of YA services, but administers YA payments through a BPA with Centrelink. Until recently, there has been a strong focus within DEEWR on the operational aspects of managing YA, that is, the day-to-day issues of Centrelink's delivery of YA services. Given Centrelink's role in providing on-the-ground YA services, there would be value in DEEWR focusing on higher level aspects, such as program effectiveness and measuring the overall outcomes of the department's YA-related programs.

29. The BPAs reviewed as part of this audit were undergoing transition to the 2008–09 Interim BPA prior to new arrangements for 2009–12. Since the audit was undertaken, new funding arrangements have been implemented resulting in changes to the DEEWR–Centrelink purchaser/provider relationship. In particular, from 1 July 2009, Centrelink has been directly appropriated departmental funding including for YA. This change in Centrelink and DEEWR responsibilities provides an opportunity for the two agencies to better focus their bilateral arrangements for the delivery of YA services.

Key Findings

DEEWR's outcomes and YA-related Programs (Chapter 2)

30. Beginning with the 2009–10 Budget, the Australian General Government Sector adopted an Outcomes and Program Reporting Framework. As part of its transition to the new arrangements, DEEWR rationalised its nine Outcomes into five and adopted a program structure in which YA is located within three discrete programs that make a contribution to three distinct DEEWR outcomes:

• Outcome 2: School Education—YA is one of four payments included in Program 2.11: School Student Assistance;
• Outcome 3: Higher Education—YA is one of five payments included in Program 3.3: Tertiary School Assistance; and
• Outcome 4: Labour Market Assistance—YA is one of fourteen payments included in Program 4.4: Working Age Payments.

31. As part of the Australian Government's Outcomes and Programs Framework, departments are required to establish a performance management regime that enables the measurement and assessment of the contribution of programs to their respective outcomes. This includes providing relevant performance information in the form of effectiveness indicators.

32. While DEEWR has monitored trends in YA recipient numbers at school and tertiary levels, it has not put in place specific YA (student) effectiveness indicators for Program 2.11: Secondary Student Support or for Program 3.3: Tertiary Student Support. As a result, stakeholders are unable to assess the extent to which YA (student) contributes to the achievements for Outcome 2 and 3. As an example, while the department monitors the trend in the number of undergraduate completions (at the broad Outcome 3 level), it does not report on the number of undergraduate completions that were in receipt of YA (student) or any other form of income support. As a result stakeholders will have some difficulty in determining the contribution YA (student) has made to Outcome 3 achievements.

33. DEEWR does have effectiveness measures for YA (other) as part of Program 4.4: Working Age Payments. These program level performance indicators monitor the average duration that income support recipients are in receipt of the different types of income support payments, such as YA (other).

34. From 2009–10, departments are also required to report on the deliverables for each program. This includes setting quantity and quality indicators in PBS and reporting against these indicators in annual reports.

35. While DEEWR monitors the number of YA (student) and YA (other) recipients over time, the department does not provide and report on measures of quality in relation to the delivery of its YA-related programs in its PBS or annual reports. However, quality measures for the service delivery component of YA-related programs, which is undertaken by Centrelink on DEEWR's behalf, are known and managed as part of the BPA between the two organisations. These measures include the timeliness of processing; the correctness of payments; fraud and compliance activities; service profiling activity; and debt raising and recovery.

DEEWR's Management of YA (Chapter 3)

36. How departments manage ongoing programs is central to the efficient and effective delivery of government initiatives. Program support activities undertaken by departments incorporate program management, and policy development including evaluation. In relation to DEEWR's management of YA-related programs:

• appropriately disaggregated internal funding arrangements would enable DEEWR to identify the portion of its program support costs that relate to its YA-related programs; and
• an evaluation strategy would assist DEEWR to inform government and the Parliament about the continued relevance and priority of YA-related programs objectives.

Program support costs

37. As a part of the 2009–10 Budget, agencies were required to identify their program support costs, detailing the resources required for each program in their Portfolio Budget Statements. DEEWR's 2009-10 PBS did not provide information that would allow an assessment of the department's cost associated with supporting individual programs, including YA–related programs. The purpose of program cost performance information is to allow judgements to be made about the cost of production and to ascertain whether there are better ways of achieving program objectives.

38. DEEWR's approach to monitoring its efficiency is at the outcome level. Financial information on the cost associated with providing program management, policy services, and service delivery is available at the aggregated level for each of the department's outcomes.

39. Sound financial information is an important tool for management and accountability purposes. It should provide, along with non-financial data, a picture of an agency's performance to demonstrate the overall value of programs, including the efficiency of DEEWR's operations and the cost effectiveness of programs delivered. Appropriately disaggregated internal funding arrangements would enable DEEWR to identify the portion of its program support costs that relate to its YA-related programs.

The use of an evaluation strategy

40. One formal evaluation of YA has been conducted since the introduction of YA in 1998. This was published in 2001 and took the form of a three year study to assess the short and medium-term impact of YA against the original program objectives. A lack of consistency in the identification of YA objectives and the absence of appropriate performance indicators for evaluating program effectiveness, impacts on DEEWR's ability to provide clear program intent to guide program management and service delivery activities.

41. Since 2001, circumstances affecting Australia's young people have changed and an evaluation strategy would assist DEEWR to test whether YA is achieving its stated objectives. Evaluations assist managers and other decision makers to: assess the continued relevance and priority of program objectives in the light of current circumstances, including government policy changes; test whether the program is targeting the desired population; and ascertain whether there are more cost-effective ways of assisting the target group. Evaluations also have the capacity to establish causal links. Over time, an evaluation strategy has the potential to provide credible, timely and objective findings, conclusions and recommendations to aid in resource allocation, program improvement and program accountability.

Delivery of YA Services by Centrelink (Chapter 4)

42. Centrelink uses a standard service delivery model that was designed to enhance the consistency of service delivery across payment types, including Youth Allowance. Overall, there is a strong alignment between the operational policies and processes put in place by Centrelink to deliver YA services and the relevant legislation. This results largely from the development and maintenance of the Guide to Social Security Law (with YA content being a DEEWR responsibility) and Centrelink's e-Reference tool.

43. In order to ensure that on-the-ground service delivery meets legislative objectives, it is important that operational processes are appropriately managed and controlled. In examining Centrelink's management of processes central to YA service delivery – means testing, establishing proof of identity, activity testing, and determining independence – the ANAO considered that Centrelink had:

• defined key processes and associated requirements;
• controlled key processes through the use of appropriate procedural documentation;
• established adequate performance measures; and
• assigned responsibility for monitoring and improving key processes.

44. YA customer feedback is available from a variety of sources including; Centrelink's complaint handing system and customer relations units, internal and external reviews of Centrelink decisions, and ministerial correspondence. An analysis of Centrelink customer complaints over the last three financial years has shown a decline in the percentage of YA complaints compared to all complaints. In 2005–06, the percentage was 12.6 per cent, in 2006–07 it was 9.6 per cent and in 2007–08 it was 9.7 per cent. Over the same period, YA service delivery complaints decreased by 7 percentage points.

Monitoring of Service Delivery through KPIs (Chapter 5)

45. Since 1998, there have been several BPAs between relevant policy agencies and Centrelink relating to the delivery of income support and benefit payments, including those for YA. At the time of the audit, the most recent BPAs identified eight KPIs with direct relevance to YA. These KPIs were designed to monitor: the timeliness of processing; the correctness of payments; fraud and compliance activities; service profiling activity; and debt raising and recovery.

46. DEEWR and Centrelink performance reports indicated that Centrelink was meeting its performance targets for the majority of the KPIs directly relevant to YA. An ongoing area of concern being Centrelink's performance against the ‘debt under management KPI' where performance results for the recovery of debt have been below target. DEEWR is working with Centrelink, the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and the Department of Human Affairs (DHS) on initiatives to address the underlying drivers and advised that existing KPIs are being reviewed in the context of developing new arrangements with Centrelink for 2009–12.

47. The BPAs between DEEWR and Centrelink have provided a strategic framework for DEEWR's program managers to concentrate on specifying YA services to be provided by Centrelink and to monitor Centrelink's progress against appropriate performance measures. However, DEEWR's teams have adopted an operational approach to monitoring Centrelink's inputs and YA processes. While formally a Centrelink responsibility under recent BPAs, DEEWR's Centrelink Reporting team assumed responsibility over the preparation of these reports. At the same time Centrelink continued to separately record all, and analyse much, of the same data set.

48. Following the reporting arrangements set out in the recent BPAs would minimise duplication of effort between the agencies and the resulting monthly reports would more apparently reflect the agreed balance between DEEWR's purchasing oversight and operational assurance provided by the service provider, Centrelink. Taking a longer term perspective, it would be prudent to minimise any ongoing duplication of effort and ensure that monthly KPI reports effectively support program management.

Recommendations

49. The ANAO made two recommendations designed to assist DEEWR to report on the effectiveness of its YA related programs and to place greater emphasis on its role in oversighting YA program outcomes.

Summary of agencies' responses

The Department of Education, Employment and Workplace Relations

50. The Department of Education, Employment and Workplace Relations responded to the audit as follows.

The Department of Education, Employment and Workplace Relations (DEEWR) appreciates the opportunity to participate in the ANAO's performance audit of the Administration of Youth Allowance (YA).

DEEWR welcomes the ANAO's overall conclusion that there are effective administrative arrangements in place for Centrelink to deliver YA consistent with the relevant legislation and DEEWR's service delivery requirements.

DEEWR notes that the ANAO's findings and recommendations primarily relate to enhancing the existing effective program management practices - specifically the need for measures to better able DEEWR to report on the effectiveness of YA related programs and also to provide more meaningful and complete measurement of the performance of YA against its program intent.

51. The full text of DEEWR's response is at Appendix 1.

Centrelink

52. Centrelink's responded to the audit as follows

Centrelink welcomes this report and will continue to work with DEEWR to enhance its service delivery of the Youth Allowance program.
 

Footnotes

¹ DEEWR advised the ANAO that while the department had not undertaken a formal review the YA program, policy development had been, and is being, informed through a number of initiatives including the National Youth Participation Requirements for Young Australians.