Social security and welfare payments

1.1 Services Australia is the Australian Government’s primary service delivery agency. Its purpose is to support Australians by delivering high-quality, accessible services and payments on behalf the Australian Government (in partnership with other government entities). Its vision is to make government services simple. In 2021–22, Services Australia made $226.7 billion in payments under three key program areas³ as shown in Table 1.1.

Table 1.1: Services Australia’s program areas 2021–22

Note a: Services Australia refers to a recipient of a payment under the social security and welfare program as a ‘customer’.

Note b: Centrelink refers to payments and benefits made under Program 1.1 Services to the community — Social security and welfare.

Source: Services Australia Annual Report 2021–22, p. iii.

1.2 Program 1.1 Services to the community — Social security and welfare is the focus of the audit. Sixty-seven per cent ($152.2 billion) of payments made in 2021–22 were administered under this program. The social security and welfare program provides income support and benefits to older Australians, carers, people with disabilities, families, jobseekers and students.

1.3 Services Australia’s aim is to ‘pay the right person, the right amount through the right program at the right time’.⁴ Where incorrect information is supplied by customers, there are delays in notification of customers’ changes in circumstances or Services Australia makes an administrative error, overpayments or underpayments can occur.⁵ Where there is an overpayment, a debt may arise and legislation generally requires Services Australia to recover the debt.⁶

Management of debt

1.4 Debt management is an important part of Services Australia’s core business. It is central to achieving customer service and policy entity efficiency goals. Services Australia aims to manage debt ‘quickly, accurately and in a sensitive manner’.⁷ Through effectively managing debt in accordance with policy decisions of the Australian Government and relevant legislation, Services Australia seeks to maintain public confidence and support the efficient, effective and ethical use of Commonwealth resources.

1.5 Figure 1.1 shows the high-level process that Services Australia follows in the management of debt.

Figure 1.1: Debt management process

Source: ANAO summary and analysis of Services Australia’s policy and procedures.

1.6 The detection process involves identifying that an overpayment has occurred. This can occur when a customer notifies Services Australia of a change in their circumstances or through other activities including: annual reconciliations; data matching; regular payment reviews; and tip-offs. Where a potential overpayment has been detected it is classified as an undetermined debt and registered in the Debt Management Information System (DMIS).

1.7 The determination process involves undetermined debts being investigated to confirm if there is an overpayment that is legally recoverable. Where this condition is met, the value of the debt is calculated, a debt is raised and the customer is notified of the debt. When raising the debt, the delegate will establish whether the debt should be waived or recovered. If an overpayment is not legally recoverable, no debt exists (see footnote 6).

1.8 At the conclusion of the determination process, the undetermined debt is classified as a determined debt and the recovery of any outstanding debt balances is managed by Services Australia. Arrangements are made between the customer and Services Australia to repay the debt. If the debt is not paid by the due date (28 days from notification), there are a number of debt recovery arrangements that can be entered into such as cash repayments and withholdings from customer benefit payments. The type of recovery action is considered by the customer’s status, for example, Services Australia can make withholdings from benefits and payment for current customers, whereas alternate arrangements are needed for non-current customers.⁸ Further recovery action can be taken where a suitable recovery arrangement is not entered into by the customer including Services Australia engaging external collection agents to recover debts of non-current customers. Where a person is in a vulnerable situation or experiencing financial difficulties, Services Australia aims to work with the person to determine a suitable way forward.

Debt raising legislative framework

1.9 Services Australia detects, determines, waives and recovers debt for Program 1.1 under the following legislation⁹:

• Social Security Act 1991;
• Social Security (Administration) Act 1999;
• A New Tax System (Family Assistance) (Administration) Act 1999;
• Student Assistance Act 1973;
• Paid Parental Leave Act 2010;
• Data-matching Program (Assistance and Tax) Act 1990;
• Farm Household Support Act 2014 and Minister’s Rules;
• Public Governance, Performance and Accountability Act 2013; and
• Public Governance, Performance and Accountability Rule 2014.

Policy entities

1.10 In 2021–22 Services Australia partnered with a range of entities to deliver social security and welfare payments and manage debts. Policy entities for Program 1.1 included the Department of Social Services (DSS), Department of Education, Skills and Employment (DESE)¹⁰, Department of Agriculture, Water and Environment (DAWE)¹¹, Department of Home Affairs, the National Recovery and Resilience Agency (NRRA)¹², Australian Trade and Investment Commission, Department of Veterans’ Affairs (DVA), Department of Infrastructure, Transport, Regional Development and Communications (Infrastructure)¹³ and the Australian Taxation Office (ATO).

1.11 Where Services Australia manages a policy entity’s debt, the value of debt accrued is reported in the policy entity’s annual financial statements (rather than in Services Australia’s). Bilateral arrangements between the policy entities and Services Australia aim to support debt management, oversight, reporting and data sharing arrangements.

Value of debt

1.12 Table 1.2 sets out the undetermined and determined levels of social security and welfare debt as at 30 June 2022. It is set out by debt benefit type which is the equivalent of the payment type under which the debt occurred. Around 90 per cent of social security and welfare debt raised is managed by Services Australia on behalf of DSS.

1.13 Figure 1.2 shows the total levels of debt since 2016. Since 2016 undetermined debt has risen by around $2 billion, while the total debts raised and recovered have fallen by more than $1 billion. Debt pauses have influenced debt balances. During debt pauses, Services Australia does not:

• actively pursue recovery of debts (and temporarily writes-off the debt); and
• does not raise new debts for customers in the affected regions, except in the case of fraud, serious non-compliance or at the request of the customer who would like the debt to be raised (meaning a potential overpayment remains undetermined during this period).

1.14 Since 2019, natural disasters such as bushfires and floods, combined with the impacts of the COVID-19 pandemic, led the Australian Government to implement debt pauses, either for all customers or customers within a specified local government area.¹⁴

• The first national debt pause commenced on 3 April 2020, announced by the Minister for Government Services. In November 2020, debt raising activity recommenced.
• Between February 2021 and February 2022, Services Australia implemented further pauses to debt raising and recovery in specific regions impacted by natural disasters.¹⁵ Services Australia gradually recommenced debt raising from January 2022 and recovery from July 2022.

Figure 1.2: Debts raised for recovery, debts recovered and undetermined debts from customers who received social security and welfare payments 2016 to 2022

Note: All values reflect the amounts reported in each year. No adjustments have been made for inflation.

Note:  The reported number and value of undetermined debts includes parked and Family Tax Benefit qualification debts. See footnote 68 and Appendix 5 for further information about these debts.

Note: The undetermined debts (potential overpayment) value reported for 2017 is the value reported at 30 April 2017 in Services Australia’s Debt Profile Report. The 30 June 2017 value was not available.

Note: The total value of debt raised and the total value of debt recovered in a financial year reflect amounts reported in Services Australia’s annual reports between 2016–17 and 2021–22. These amounts are rounded to the nearest $10 million.

Source: ANAO analysis of Services Australia’s annual reports and internal debt reports.

1.15 From August 2022 under phase one of the Situational Hardship Project¹⁶, disaster affected customers are no longer subject to automatic debt pauses. Customers impacted by disasters, or in receipt of a crisis payment, can choose how they manage their debt repayments and can request a debt repayment pause of 1, 2 or 3 months through staff assisted or self-service channels.¹⁷ Customers are able to request two pauses in a 12 month period. Phase two of this project has been delayed 12 months and is due for completion in September 2023. It is expected to incorporate other hardship events and explore the feasibility of enhanced digital channels such as two-way SMS. A post implementation review is planned for completion in 2023.

Rationale for undertaking the audit

1.16 At 30 June 2022 there was $4.6 billion outstanding social security and welfare debt that has been determined (1,668,870 individual debt cases), and $1.9 billion undetermined debt¹⁸, across more than 47 debt benefit groups. Of the total outstanding debt, $3.7 billion was temporarily written-off at 30 June 2022 (1,344,838 individual debt cases). As shown in Figure 1.2, debt balances and the value of undetermined debt have been increasing since 2018. This audit was identified as a Joint Committee of Public Accounts and Audit (JCPPA) priority for the Parliament for 2022–23. This audit provides the Parliament with assurance that Services Australia is managing and recovering debt effectively with fit-for-purpose arrangements.

Audit approach

Audit objective, criteria and scope

1.17 The objective of the audit is to assess the effectiveness of Services Australia’s management of social security and welfare debt.

1.18 To form a conclusion against the objective, the following criteria were applied.

• Does Services Australia have fit-for-purpose debt management governance arrangements?
• Has Services Australia developed and implemented effective strategies and processes to manage debt?
• Does Services Australia assess and accurately report on the effectiveness of its debt management and performance activity?

1.19 The audit focused on social security and welfare debt management and recovery activities and did not examine Medicare or Child Support debt. In some parts of the audit, analysis was narrowed to a selection of payment types. Services Australia does not provide debt management and recovery services for all social security and welfare payments, only payments where overpayments were detected were examined. The audit focused on Services Australia’s debt governance and undertook testing of debt detection, determination and recovery activities in 2021–22. The audit had regard to debt governance, strategy and reporting and performance measurement in prior years and 2022–23. The audit did not examine the Online Compliance Intervention System For Debt Raising and Recovery (colloquially known as Robodebt).

Audit methodology

1.20 The audit involved:

• examination of documentation held by Services Australia, and where necessary policy entities, related to debt management and recovery, including bilateral arrangements, governance/committee papers, strategies, policies and procedures and debt reporting;
• meetings with relevant Services Australia and selected policy entity staff;
• examination of the operation and key controls of Services Australia’s financial and debt systems used to manage debt; and
• extraction and analysis of debt data and reports on debt from key Services Australia financial and debt systems.

1.21 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $941,000.

1.22 The team members for this audit were Tracey Martin, Renina Boyd, Leah Farrell, Sonya Carter, Ewan McPherson, Aiden Williams, Lauren Huning, Anne-Sophie Colin and Alexandra Collins.

2.1 Governance arrangements are critical to the success of program administration. It is important that governance arrangements are documented, mapped across an organisation to show interrelated functions and, where more than one entity is involved, agreed responsibilities between the relevant entities. Robust governance arrangements set out governance structures, roles and responsibilities, lines of accountability and delegation, internal controls¹⁹, reporting arrangements and performance expectations. Effective arrangements can limit ambiguity in terms of roles and responsibilities and establish clear governance and controls.

2.2 This chapter examines whether Services Australia clearly articulated and implemented governance structures and roles and responsibilities to support oversight and coordination of debt management. It also examines whether fit-for-purpose policies and procedures were developed to address requirements set out in legislation. Reporting and performance arrangements for debt are examined in Chapter 4.

Has Services Australia established arrangements to support oversight and coordination of debt management and recovery?

Delegated functions and powers

2.3 The accountable authorities of the policy entities that are responsible for social security and welfare payments and benefits²⁰ delegate their debt management functions under relevant legislation to the Chief Executive Officer (CEO) of Services Australia.²¹ The policy entities did not impose limitations on Services Australia’s exercise of the delegated debt powers and functions. As a result, there is no requirement for Services Australia to consult policy entities when making delegated decisions such as waiving debts.

2.4 Services Australia’s Legal Services Division holds the policy entity delegations. It is unclear what practices are in place for the Legal Services Division to communicate with relevant business areas when updates or amendments to these instruments are required. In June 2022, Administrative Arrangement Orders made changes to the composition of policy entities for whom Services Australia manages payments (following machinery of government changes). All but one of the delegation instruments from the affected policy entities were updated in June 2022, with the delegation from the Department of Education not updated until November 2022.

2.5 The CEO of Services Australia delegates responsibilities for debt management activities on behalf of policy entities to Services Australia staff (see Figure 2.1). The CEO’s delegations, referred to as internal delegations, are kept within the Delegations and Authorisations Register (the register). A review of the register found:

• Services Australia officials that were delegated debt management functions ranged in level from APS 1 and above; 88 per cent of debt powers were delegated at APS1 to APS6 levels.
• In 2021–22, internal delegations generally did not limit debt management functions and powers to staff carrying out specific debt activities or those working within specified debt related branches or divisions of Services Australia. The internal delegations imposed limitations based on the value of the debt.

Debt management governance

2.7 There are three components to Services Australia’s governance of debt.

• Bilateral arrangements are in place at a broad relationship level between Services Australia and each policy entity.
• Internal governance arrangements involving senior executive governance committees, a debt specific operational committee and various divisions and branches carrying out debt management activities.
• Officer level contact between Services Australia’s branches with debt management responsibility and the branch within the policy entity responsible for administering the relevant payment type managed by Services Australia.

Bilateral arrangements

2.8 The key purpose of Services Australia’s bilateral arrangements is to provide a robust basis for service delivery expectations and establish clear deliverables, performance measures (service levels) where required, and issues management and resolution processes.²²

2.9 Services Australia’s responsibility for the management of debts arising from payments that it delivers were set out in bilateral arrangements with seven policy entities reviewed by the ANAO.²³ Services Australia’s role in relation to debt varied by entity, see Table 2.1, and are subject to the delegations from policy entities.

Table 2.1: Services Australia’s debt management role set out in bilateral arrangements

Source: ANAO analysis of bilateral arrangement documents between Services Australia and policy entities.

2.10 The seven sets of bilateral agreements did not contain debt specific governance arrangements. Services Australia advised the ANAO that the general governance arrangements²⁴ outlined in the head agreements and service schedules of the bilateral arrangements could be used for the management of debt.²⁵ The application of general governance arrangements to debt activities conducted by Services Australia is not clear because agreements do not always record the payments and services delivered by Services Australia for the relevant policy entity.

2.11 The terms of reference for the committees established under the bilateral arrangements did not include the oversight of debt. Between June 2021 to June 2022, debt was mentioned in the minutes or papers of eight strategic or operational committees between Services Australia and five policy entities (DSS, DESE, DVA, ATO, DAWE). The debt related items primarily discussed updates from Services Australia, with four instances of decisions made about debt and three instances of issues regarding debt raised or escalated to other committees. With the exception of the bilateral committees with DSS and DAWE which required regular performance reporting or further information about debt activities, the discussions relating to debt at other policy entity committees were minor queries and non-urgent in nature.

Services Australia’s internal governance arrangements

2.13 Services Australia advised that eleven branches are involved in debt detection, determination and recovery of social security and welfare debt (see Figure 2.1). The responsibilities of these branches are not documented in delegations or supporting policy and procedures. Services Australia’s organisation chart depicts lines of responsibility for branches, divisions and groups, with the Deputy Chief Executive Officer, Payments and Integrity and the Deputy Chief Executive Officer, Customer Service Design responsible for the various branches carrying out debt management activities. Services Australia advised the ANAO that responsibility for debt related matters is shared across various divisions at National and General Manager (NM and GM) levels and is driven by the payment type. The relationship and interactions between the three governance components described at paragraph 2.7 are not documented.

2.14 There is an operational committee that focuses on debt and payment accuracy, established in December 2020. The Debt and Integrity Projects Board (the Board) oversees projects and initiatives related to improving debt management. The Board is the decision-making body for the Debt and Integrity Program. The Debt and Integrity Projects Board is chaired by the GM Debt and Integrity Projects Division and reports to the Deputy CEO Payments and Integrity Group.

2.15 The Board’s terms of reference are clear and include key activities and deliverables of the Board, membership²⁶ and frequency of meetings (intend to meet fortnightly). Services Australia advised that the Board met 26 times between June 2021 and June 2022, papers or minutes were maintained for 25 meetings, two of these being extraordinary meetings.²⁷ Seven meetings of the Board have been documented between July and December 2022.

2.16 In August 2022, Services Australia’s governance structure was comprised of eight enterprise committees segregated into three tiers.²⁸

• Tier 1 comprised of the Executive Committee (CEO and Deputy CEOs, meeting fortnightly).
• Tier 2 comprised of the Enterprise Business and Risk Committee (CEO, Deputy CEOs and GMs, meeting fortnightly) and the Transformation and Integration Committee (Deputy CEOs and GMs, meeting fortnightly).
• Tier 3 comprised of the Customer Sub-Group (Deputy CEOs and GMs, meeting fortnightly), People Sub-Group (Chief Operating Officer and GMs, meeting monthly), the Security Sub-Group (Deputy CEOs and GMs, meeting fortnightly), the Portfolio Management Steering Group (GMs and NMs, meeting monthly) and the Enterprise Automation & Digital Delivery Board (GMs and NMs, meeting monthly).

2.17 Services Australia also has an Audit and Risk Committee which meets at least six times a year and provides independent assurance to the CEO on the appropriateness of the financial and performance reporting, risk management system and internal controls.

2.18 Services Australia’s enterprise committees did not have a significant role in the oversight and decision-making of debt matters. The enterprise committees discussed matters relating to debt management 15 times in 2021–22, and received supporting papers for three matters. Five of the eight committees discussed and made decisions about debt matters infrequently and generally did not deliberate on effectiveness of debt management activities.²⁹ The Audit and Risk Committee received papers or discussed debt matters three times. Except for the Enterprise Business and Risk Committee, debt was not referenced in the terms of reference for enterprise committees.³⁰

Payments-based officer contacts

2.19 There are a range of formal and informal meetings between Services Australia and policy entities on day-to-day debt operations that are not described in the bilateral arrangements.

2.20 Services Australia advised the ANAO that aspects of governance arrangements, such as issues escalation, are payment specific. The ANAO examined payment-based officer contacts for six payment types (Austudy [DSS], Age Pension [DSS], Family Tax Benefit [DSS], Child Care [DESE], Parenting Payment Single [DSS] and Farm Household Allowance [DAWE]).

2.21 Services Australia provided evidence of eleven examples of payment-based contacts with policy entities to resolve debt matters, and an additional five where the policy entity contacted Services Australia for information or clarification. The discussions primarily addressed low level issues or inquiries at an officer level. In 2021–22, across the six payment types, issues were discussed via telephone or email at the officer level for five payment types. The examples provided did not demonstrate the use of general bilateral governance arrangements (for the relevant policy entity) or payment specific escalation processes that Services Australia advised they follow. In some cases, matters raised were not resolved.

Have fit-for-purpose policies and procedures been developed to support effective debt management and recovery?

Debt policy and procedures

2.26 Services Australia’s Operational Blueprint is accessible to all staff and contains reference material to support delivery of services. Services Australia has published social security and welfare debt management policy and procedures in its Operational Blueprint. Within the Operational Blueprint there is a debt section that includes 250 documents (comprised of topics [5], sub-topics [30], procedures [179], annotations [21] and attachments [15]). An individual policy and procedure document contains up to five parts (major headings): Background; Process; References; Resources; and Training and Support.

2.27 Table 2.2 provides an overview of the structure of the debt section of the Operational Blueprint that sets out five topics that are relevant to social security and welfare debt.

Table 2.2: Structure of debt policy and procedures in the Operational Blueprint

Note a: General debt management information sub-topics include debt identification (detection), debt investigation and the debt management information system.

Source: ANAO analysis of the Operational Blueprint.

2.28 Debt guidance is generally not structured by payment type to which the debt relates. Six sub-topics under the debt raising topic relate to groups of payments: pension debts; student debts; family assistance debts; paid parental leave and dad and partner debts; child care debts; and Social Security Act 1991 debts.

2.29 The structure of debt policy and guidance does not provide a pathway for the decision-making and processing steps required when a potential overpayment is detected (see Figure 1.1). The guidance is not set out by payment type that gave rise to the debt that would allow ease of reference to the particular legislative or policy requirements for the type of potential overpayment to be actioned by a Services Australia officer. Most of the documents in the debt section of the Operational Blueprint have been in place since February 2015 and were frequently updated (three quarters of the documents had been updated 17 times or more, with some documents updated more than 60 times). The frequency of amendments requires staff to closely review and follow the relevant policy or procedure each time they complete the task.

2.30 The ANAO observed that the use of the search function within the Operational Blueprint produces a long list of material that contains the key words searched for, including material that is less relevant displayed towards the top of the search results. Finding payment related debt material is not straightforward, as a document title rarely indicates the scope of its contents.

2.31 Some documents provide links to lists of debt teams or other contacts such as partnership teams. Generally, there is limited information about where to go for help. Services Australia advised the ANAO in December 2022 that support is available to staff in locating relevant material including through a hints and tips page, Quality Development Officers, Team leaders, a Level 2 Debt Helpdesk and Level 3 Debt Policy Team, and a pilot of an Operational Blueprint Virtual Assistant (designed to help staff find the information they need).

2.32 Most (167, 79 per cent) of the Operational Blueprint documents reference legislation. References to legislation were generally current, complete and accurate, with a few exceptions.³¹ The references were usually not embedded within the description of the process and instead listed in the reference section.³² Overall, there were 13 documents that did not reference current legislation³³, 10 documents that did not have complete references to legislation and 39 documents which did not have accurate references to legislation. Examples of characteristics that did not meet current, complete and accurate references to legislation include a reference to a bill rather than an act passed by parliament, legislation title incomplete, legislation that was not in force, legislation sections not listed and the legislation section listed was incorrect.

Internal training

2.34 Debt management policy and procedures in the Operational Blueprint provide links to training courses under the ‘Training and Support’ heading in individual documents. Training courses are accessible on Services Australia’s intranet through the Learning Management System. The ANAO examined 37 debt courses available online in July and August 2022, few courses referred to legislation (10) or delegations (six) to support staff understanding of when they must comply with social security and welfare law and must have an appropriate delegation to make a decision.³⁴

2.35 Services Australia has a Debt Learning Plan for staff who are new to a debt management activity. The plan includes three training pathways. Debt raising training includes considerable payment stream training (Phase 2b in Table 2.3), involving 35 days of training, and 99 courses. The training is grouped for completion in phases by skill-level and experience. Table 2.3 sets out for each training pathway the number of days and courses to be completed and the training content.

2.36 Services Australia maintains records of self-paced learning in its Learning Management System, and advised the ANAO that it plans to record attendance at facilitated training in this system. Services Australia did not demonstrate that it monitored or determined whether debt staff had completed minimum requirements (such as the Debt Learning Plan) or individual staff training recorded in performance plans.

Quality assurance

2.37 Staff completing debt raising and recovery activities are subject to quality assurance processes within the relevant branch.³⁵ Two programs support quality checking: Quality Online (QOL) and Quality Management Application (QMA).

• QOL supports sampling and quality checking of work completed by staff in the Customer First and Customer Record systems. Proficiency levels are applied by system or benefit type, and activity type.³⁶
• QMA supports sampling and quality checking of work completed by a staff member in the Process Direct system. Proficiency is applied to a skill tag³⁷ or through an auto-sampling model.³⁸

2.38 The proficiency level determines the required correctness rate and sampling rate for work completed by staff, see Table 2.4. It is intended that staff achieve proficiency ratings of ‘proficient’ in QOL and ‘experienced’ in QMA, so that when undertaking processing they achieve a 95 per cent correctness rate or higher. After two weeks and completion of at least 20 cases for a type of debt task (for example, determining whether a potential overpayment is a debt), regular proficiency assessments are undertaken until these proficiency levels are achieved and then reviewed every 12 months. Where a staff member has a ‘proficient’ or ‘experienced’ proficiency rating and their correctness rates regularly fall below the 95 per cent level, a proficiency assessment is triggered.

Table 2.4: Quality checking minimum correctness and sampling rates by proficiency level and system

Note a: Staff undertaking new activities also have a proficiency level of ‘entry’.

Source: Services Australia, Staff Quality Management Application (QMA) Proficiency Policy, August 2021, p. 1, Quality Management Application in Process Direct 111–20010800, p. 6, and Updating Proficiency for QOL 111–20071707, p. 10.

2.39 The Compliance and Debt Operations Branch (one of the branches with responsibility for debt raising and recovery activities) provided the ANAO with the number of staff at proficiency levels for QOL by system and skill tag. Depending on the payment type or debt process, between 45 to 60 per cent of staff in that branch had not achieved a ‘proficient’ rating in QOL. Compliance and Debt Operations staff generally do not undertake processing in the Process Direct system, meaning QMA did not contain debt processing quality check records for these staff.³⁹ The proficiency ratings for QOL indicate that policy and procedures do not sufficiently support staff when processing debt.

2.40 For Compliance and Debt Operations Branch staff between August 2021 and September 2022, the number of items checked varied by fortnight from 14 to 300 quality checks for a debt activity. Over this period, 2842 debt, 3686 new debt (determination of an undetermined debt) and 1359 recoveries items were quality checked.⁴⁰

2.41 For Compliance and Debt Operations Branch staff who were assessed as ‘proficient’ in QOL for debt processing activities, Figure 2.2 shows correctness rates ranged from 83 to 100 per cent in quality checks for debt processes.⁴¹ New debt items checked had the lowest (unsatisfactory) correctness rates, while recoveries had consistently high (satisfactory) correctness rates. Quality assurance results for new debts indicated that policy and procedures, training and supervision do not sufficiently support staff to achieve desired correctness rates of 95 per cent or higher.

Figure 2.2: Quality check correctness rates in QOL for ‘proficient’ staff, debt processing fortnightly August 2021 to September 2022

Source: ANAO analysis weekly QOL correctness results between 26 August 2021 and 22 September 2022.

3.1 Regulatory functions include administering, monitoring, promoting compliance and enforcing regulation. Regulation is defined as ‘any rule endorsed by government where there is an expectation of compliance’.⁴² Services Australia fulfils a regulatory function by administering payments and recovering debt on behalf of policy entities.⁴³

3.2 A risk-based and data-driven approach to the development and implementation of compliance and enforcement activities enables an entity to:

• allocate limited resources to the greatest risks of non-compliance; and
• encourage voluntary compliance and deliver proportionate responses.

Does Services Australia have a fit-for-purpose risk-based strategy for debt management?

3.3 Services Australia’s general debt management policy and procedure states that the bilateral arrangements with the Department of Social Services (DSS) contain a debt management framework to maximise correct payments and detect and investigate debts. The framework employs three key strategies:

• prevent debt — through minimising the risk of incorrect payments;
• detect debt — through detecting and fixing incorrect payments; and
• deter debt — through promoting voluntary compliance through the recognition of risks and penalties, including the likelihood of detection, debt recovery and possible prosecution.

3.4 The bilateral agreement for payment assurance between Services Australia and DSS states that Services Australia is responsible for undertaking debt management and developing and undertaking compliance strategies. This involves identifying current and emerging risks associated with incorrect payments to inform development of joint compliance strategies.

3.5 Services Australia does not have a strategy for a risk-based approach to debt management (prevention, detection, determination and recovery). Debt management is a feature of, and influenced by, other strategies, roadmaps and the Compliance Assurance Programme that focus on payment accuracy, see Table 3.1. Except for the Payment Integrity Strategy (see paragraph 3.6), Services Australia has not mapped how any of these key documents will enable it to deliver on one of the measures of success contained in the Master Plan 2021–22⁴⁴: ‘Our response to compliance and debt management is targeted based on risk’.

Payment accuracy initiatives

3.6 The Payment Integrity Strategy was endorsed by the Executive Committee in April 2021. The strategy planned to move towards a risk-based human centred approach to payment integrity, establishing the following goals for:

• 2021, to consolidate customer research to understand drivers of integrity risk, debt and appeals;
• 2022, to build a model informed by front line service delivery, debt and appeals to understand risk and improvement opportunities;
• 2022, tiered proactive compliance and debt strategies for key payments based on customer risk segmentation and vulnerable customer definition; and
• 2025, customer segmentation based on risk, intent and defined vulnerability drives proportionate responses to compliance and debt management with defined escalation pathways. Better use of data, for example, Single Touch Payroll, allows Services Australia to effectively allocate resources.

3.7 The Payment Accuracy Roadmap was endorsed by the Customer Sub-Group (see paragraph 2.16) in November 2021. The Payment Accuracy Roadmap primarily includes education and prevention activities to improve payment accuracy over the next 24 months, such as educational content for customers on how to report their employment correctly, improved online payment and debt explanations for some payment types and communication ‘nudges’ that remind disengaged customers of requirements. The roadmap initiatives were to progress in unison with ‘Manage My Payment’ design work across the next two to five years and beyond.⁴⁵ The Roadmap does not include milestones for delivery of initiatives or performance measures to assess success.

3.8 In November 2021 Services Australia amalgamated the Payment Integrity Transformation Roadmap and Payment Accuracy Roadmap, listing 12 priority initiatives. Priorities and planned initiatives and activities have changed overtime, and initiatives do not have deliverables or performance measures to support an assessment of the successful implementation of these initiatives.

Debt restart plans

3.9 The national debt pause implemented in April 2020 ended on 2 November 2020 (see paragraph 1.14), and Services Australia implemented an operational plan (the Debt Restart Playbook) to progressively restart debt raising and recovery. The project closed on 30 June 2021 and outstanding work was to be transitioned to business as usual (BAU)⁴⁶, with the backlog at 1,240,058 undetermined debts.

3.10 In December 2021 and May 2022, Services Australia developed further operational plans (Lifting the debt pause for COVID-19 lockdown areas and Debt Restart 2.0) to manage the inflow of undetermined debts into the system for determination decisions following the end of various debt pauses. These plans focused on short term goals and processing based outcomes rather than a strategy for detection, deterrence or recovery. Reporting on progress against these plans is discussed at paragraphs 3.49 and 3.62.

Debt reform initiatives

3.11 On 25 May 2022, the Executive Committee agreed to the progression of the initiatives outlined in the Debt Modernisation RoadMap (RoadMap).⁴⁷ The relationship between the RoadMap and the various operational plans for restarting debt determinations following the end of the debt pauses is unclear.

3.12 The Debt Reform paper to the Executive Committee on the Debt Modernisation RoadMap identified that, as at May 2022, there was $4.6 billion in outstanding determined debt and $1.5 billion in undetermined debts (of which 70 per cent were between six months and three years of age). The paper also noted that the current debt processes took between 35 and 82 minutes due to the number of steps and systems involved, with a workforce of 300 to 400 full time equivalent staff. The initial focus of the Roadmap was to process the expected inflow into the system (following the end of debt pauses) of 10,000 to 15,000 undetermined debts per week. The implementation of the Roadmap was expected to lead to the following improvements:

• By July 2022 — the introduction of the Single User Interface Phase 1 Rapid Automation would decrease the rate of the growth in the number of undetermined debts, holding the number of undetermined debts at or below 1.2 million in 2022–23;
• By May 2023 — the Single User Interface Phase 2 and automated no debt completions would reduce the number of undetermined debts by 200,000 to 1 million; and
• By January 2024 — initiatives that would reduce the number of undetermined debts to around 366,000, which was less than the number of undetermined debts prior to the impacts of the COVID-19 pandemic.

3.13 The paper to the Executive Committee noted the Roadmap was developed in consultation with DSS⁴⁸ and consultation was required with other relevant policy entities in relation to the initiatives.⁴⁹ The paper did not address associated legal risks or the steps the decision-maker would need to undertake to implement the initiatives.

3.14 Services Australia developed internal discussion papers and informed the Minister for Government Services in September 2022 of the approach to managing the backlog of potential overpayments. The Minister for Government Services wrote to the ministers of relevant policy entities in October 2022 seeking their support. In January 2023, Services Australia provided DSS with a revised proposed strategy to address the backlog of undetermined debts for consideration. Services Australia has not yet consulted other policy entities or advised the Executive Committee that it is no longer pursuing the initiatives approved in May 2022.

3.15 A Debt Modernisation Charter (the Charter) was endorsed by the Strategic Advisor Transformation (Deputy CEO) in June 2022. The outcomes of the Charter include improved staff training and customer education, assessment of debts within 30 days of a notification of change of circumstances, efficient management of undetermined debts and ‘one consolidated modern debt management system for all agency payments and services’. The Charter’s performance measures of improvement in customer satisfaction, customer effort reduction and staff hours saved do not include a method for measuring performance, benchmarks or targets. These performance measures are unrelated to Services Australia’s internal or external debt related performance measures. Progress against the Charter’s outcomes were reported via the Debt Modernisation Progress Dashboard to the Chief Executive Officer Master Plan Implementation meetings in July and November 2022. Services Australia advised the ANAO in January 2023 that success measures are being finalised for the Charter.

Risk assessment processes for debt management

3.16 Services Australia advised the ANAO that debt risk is not separately assessed from payment accuracy risk.⁵⁰ Services Australia develops a Compliance Assurance Programme (CAP) each year for the investigation of payment accuracy risks. The payment accuracy risk management plans are not consolidated into a register to support risk assessment from a broader compliance rather than payment specific perspective. Payment integrity risk management plans were part of the CAP methodology but were not used in the development of the 2021–22 CAP to support payment accuracy risk identification. Risk tolerance levels have not been specified in the CAP in 2020–21 and 2021–22.⁵¹

3.17 The 2021–22 CAP Methodology observed that there was a lower volume of planned activity in 2020–21 due to natural disasters, the pandemic response and debt restart. This resulted in areas of payment accuracy risk not being addressed through compliance activities. The 2021–22 CAP noted the range of other factors relevant to establishing planned activity levels, limiting risk-based prioritisation.⁵² The CAP did not establish performance measures, and targets linked to the CAP related to planned activity levels rather than performance.

Does Services Australia have effective risk-based processes in place to detect debtors?

Debt detection methods

3.25 Services Australia uses six activities or processes to detect social security and welfare debt. Table 3.2 provides a description of each process, its primary purpose and relevant payments. While debt detection is not the primary purpose of some of these processes, it is a potential outcome.

Table 3.2: Processes that enable debt detection

Note a: From 1 July 2020 annual reconciliations requirements were discontinued for Farm Household Allowance (see commencement of Farm Household Support Amendment (Relief Measures) Act (No. 1) 2020). These reconciliations were generally completed 10 to 11 months after the end of the financial year. Services Australia continues to undertake reconciliations where information becomes available for 2014–15 through to 2019–20 financial years.

Note b: In 2021–22, Services Australia and Department of Agriculture, Water and Environment undertook a review of 50 randomly selected Farm Household Allowance payment recipients to check accuracy of payments.

Source: ANAO analysis of Services Australia’s records.

3.26 The processing of notification of changes to customer circumstances, reconciliations and data matching are automated processes. The other processes listed in Table 3.2 are generally created via a Services Australia officer completing a manual process.

3.27 The policies and procedures for customer notification of change of circumstances, reconciliations, random sample surveys, data matching processes and serious non-compliance investigations are generally contained in the Operational Blueprint. There are procedures for tip-off investigations located outside of the Operational Blueprint, these procedures include a two category risk rating system of low and high rather than the four tier system (low, medium, high or very high risk) that Services Australia advised the ANAO is used.

3.28 The key controls for the processes in Table 3.2 (with the exception of tip-offs and serious non-compliance investigations) were assessed by ANAO during the 2021–22 financial statements audit as having been implemented and operating effectively.

3.29 Of the debts detected during the Random Sample Survey, the ANAO selected a sample of 32 debts to assess whether required pre quality checks occurred prior to finalisation of the debt. The required quality check did not occur in 15 cases. Of the 17 cases where a pre quality check occurred, the quality checker required changes in seven cases.

3.30 Debt detection activities are not risk-based, instead they are a product of program design focused on payment accuracy and customer self-reporting. Services Australia does not have a cohesive or overarching plan that sets out, by debt detection activity, planned (or estimated⁵³) annual activity levels or the risk assessment completed to determine appropriate activity levels. Services Australia prepares various reports on the number and value of debts detected but does not report on the debts detected by separate debt activities.

• Change of circumstances and reconciliations are undertaken in response to information provided by the customer. Services Australia does not report on the number or value of debts raised following a determination process of customer notifications of changes of circumstance.
• Reconciliations are performed on the total population of recipients of specific payments. The payments are identified according to the risk of overpayment created by the difference between a customer’s estimated and actual annual income. Debt reports show the number and value of debts detected by payment type through reconciliation.
• Data matching activities are a data-driven approach to investigating the following payment accuracy risk factors: earned income⁵⁴; unearned income⁵⁵; qualifications⁵⁶; location⁵⁷; relationships⁵⁸; study load⁵⁹; and third party compliance.⁶⁰
• Services Australia advised in January 2023 that tip-offs containing insufficient information to identify a customer are closed; tip-offs rated as low, medium and high are actioned as part of the CAP (this is inconsistent with operating procedures, see paragraph 3.27); and very high risk tip-offs are referred to the division responsible for serious non-compliance and fraud investigations. The Fraud Investigations Branch will investigate cases that satisfy the Case Selection and Prioritisation Guidelines (CSPG), which are influenced by operational and case-based risks.
• The number of reviews undertaken for the Random Sample Survey is determined by DSS in consultation with Services Australia. Planned activity levels were to increase from 20,875 in 2021–22 to 22,917 in 2022–23. Sampling and reporting is undertaken on a trimester basis. Reports include the number of reviews completed, debts raised following a determination process, debt values and percentage of reviews where debt is detected.
• Planned compliance activities such as data matching and tip-offs are set out in the annual CAP. Regular progress reports are prepared and quarterly reviews are undertaken of compliance activities completed and debts raised following a determination process (although a quarterly review was not completed at the end of 2021–22 to determine effectiveness of compliance controls). An end of financial year review of controls effectiveness for 2021–22 was not completed.
• Services Australia’s Fraud and Corruption Control Plan 2020–24 does not establish the planned number of activities to be completed. An annual Fraud and Corruption Control Report 2021–22 sets out the number of external investigations completed⁶¹, the value of debts raised through external investigations and the number of external investigations that had a debt, not the number of debts raised.

Debts detected

3.31 Table 3.3 provides an overview of the ANAO’s analysis of planned and actual activity, and the number and value of determined debts that were raised for recovery by detection method. The breakdown of debts raised for recovery by each method is not routinely reported within Services Australia. The planned number of total CAP activities for 2021–22 was reduced from 256,800 to 229,350 in the 30 June 2022 progress report.⁶² This reduction meant that Services Australia exceeded total planned compliance activity (by completing 245,622 activities), exceeding data matching goals but did not meet goals for the tip-off activities. Services Australia did not meet planned activity levels for the Random Sample Survey.

Table 3.3: Planned and completed detection activities, and debts raised for recovery following a determination process

Note a: The number and value of debts raised from change of circumstance totals has been estimated by the ANAO as the difference between the total debts raised minus the total debts raised from other detection methods.

Note b: Due to redeployment of staff to support the COVID-19 response, Services Australia delayed planning for compliance activities in the CAP 2021–22 until the review of first quarter activities was completed. In November 2021, Services Australia planned to complete 256,800 compliance activities in 2021–22, covering data matching and tip-offs. By 30 June 2022, total planned compliance activities was reduced to 229,350.

Note c: Services Australia’s data matching activities were not separately identified in CAP reporting. In May 2023, Services Australia advised the ANAO that data matching comprises 84 per cent of the completed data matching and other compliance activities and 97 per cent of the number and 96 per cent of the value of data matching and other compliance activities debts raised. ANAO could not align Services Australia’s advice with CAP reporting. Services Australia did not respond to the ANAO’s request for the planned number of data matching activities.

Note d: Tip-offs are separated into two groups in CAP reporting.

• Tip-offs based on compliance risks (such as earned income, unearned income and location). There is not planned activity level but reporting includes the number and value of debts raised following a determination process.

• Tip-off operations (105,000 planned) and low impact tip-offs (30,000 planned, was reduced to   20,000 planned in quarter three) where activity levels are planned, but debts raised following a determination process are not reported.

Note e:  The total tip-offs investigated is comprised of: 83 tip-offs related to compliance risks; 100,015 tip-off operations; and 15,216 low impact tip-offs. Services Australia advised in April 2023, 6683 tip-offs were on hand at 30 June 2022 and had not been investigated.

Note f: The number and value of debts raised following a determination process reflect results from tip-offs based on compliance risks.

Source: ANAO analysis of Services Australia’s records.

3.32 Automated processes are responsible for detecting around 99 per cent of both the number and value of debts within the reported activity levels. Table 3.3 indicates that:

• reconciliations detect 42 per cent of the number and 73 per cent of the value of total debts raised following a determination process;
• processing of the notifications of change of circumstances detects 56 per cent of the number and 23 per cent of the value of total debts; and
• data matching detects one per cent of the number and three per cent of the value of total debts.⁶³

3.33 In 2021–22 Services Australia detected 2,198,033 undetermined debts valued at $2.6 billion.⁶⁴ Most (93 per cent, 1,636,710) of the 1,764,464 undetermined debts processed in 2021–22, either automatically or manually, determined there was a legally recoverable debt, with few (seven per cent, 127,754) determination decisions finding that there was no debt.

3.34 Where debts are not detected, the debt is likely to increase as changes are not made to customers payments in a timely manner. In 2021–22, the Random Sample Survey identified overpayment risk of six per cent, with an estimated value of overpayments at $7.2 billion for DSS payments. Services Australia made $124.9 billion in payments on behalf of DSS in the same financial year. The Random Sample Survey does not include debts detected from reconciliations as these are identified at a point in time when actual annual income data is available and compared against estimates provided throughout the financial year by customers. As a result, the Random Sample Survey underestimates the overpayment risk for all payments managed by DSS.

3.35 Services Australia does not estimate the risk of overpayments for other payment types it manages on behalf of other policy entities. For example, in 2021–22, Services Australia made payments totalling $10.1 billion for the Department of Education, Skills and Employment (DESE), detected $389.9 million potential overpayments arising from these payments and did not estimate the risk of overpayment relative to DESE payments. Services Australia does not report the value of debts detected relative to the risk of overpayments across all social security and welfare payment types.

3.36 Due to the varying approaches to planning and reporting on processes that enable debt detection, and in the absence of an overall target or benchmark for debt detection across the entity, Services Australia does not determine the effectiveness of any debt detection method.

Has Services Australia effectively implemented processes to support timely and appropriate debt determinations?

Types of debt determination decisions

3.37 Once an undetermined debt is detected, Services Australia must determine whether it is legally recoverable. A debt is only legally recoverable if it meets one of the relevant provisions from social security and welfare legislation⁶⁵, and satisfies notification rules and legislative requirements for the payment, including eligibility. If there is a legally recoverable debt, Services Australia should consider whether the debt should be waived. If the debt is not waived it must be raised for recovery. Appropriate records of the decision must be maintained in Debt Management Information System (DMIS) and related systems.

3.38 The debt determination process can be manual or automatic.

1. For manual cases, a Services Australia officer undertakes an investigation process and examines the evidence for a debt. When investigating a debt, the officer must determine if the debt is legally recoverable and it is cost effective to recover the debt.
2. For system calculated debts, the undetermined debt is automatically converted to a determined debt. For example, this can occur when a customer advises of a change in circumstance and a resulting debt is detected once the updated details are entered into the system.

3.39 There are three determination decisions that can be made. Table 3.4 provides a description of each of these determination decisions.

Table 3.4: Types of determination decisions

Source: Services Australia, Finalised ‘no debt’ (FND) or ‘zeroing’ debts that are not legally recoverable, 107–05110010, 4 March 2022, Services Australia, Debt waivers and write-offs, 107–20090157, 22 June 2021, Services Australia, Actioning an undetermined debt on the Debt Management and Information System (DMIS), 107–04010040, 14 July 2022, and Services Australia advice.

3.40 Table 3.5 provides a breakdown by decision type of the value, number and proportion of debts. The majority (82 per cent) of determination decisions were automatic, although 87 per cent of no debt decisions were manually determined.

Table 3.5: Determination decision types, by value and number, for 2021–22

Source: Services Australia, DMR1869 Determinations 2021–22 220630.

3.41 For each determination decision type, the ANAO selected a sample of 71 debts where a decision was made in 2021–22 to assess whether records of decisions, delegate approvals, administrative actions and communications with the customer were in accordance with legislative and procedural requirements. Key issues observed in sample results are summarised below.

• Policies and procedures do not provide sufficient information for where to locate the dates of decisions, calculations of debts, reasons for decisions and accounts payable letters sent to customer within the various DMIS and Process Direct screens that can be accessed by a Services Australia officer. The ANAO was provided with conflicting information during the course of the audit about where to locate information and what information was to be recorded for an automated process. For example:
  • The date of a debt related decision was found in the general debt information screen for 58 of 71 finalised no debt decisions and the date of the decision for the remaining 13 items could be located in an action log.
  • For raised for recovery debts, 55 of 71 sample items calculated the debt using a calculation tool in accordance with policies and procedures⁶⁶, 16 did not use a calculation tool. Services Australia advised 13 calculations were automated and did not require the use of a calculation tool.
  • Documents were not prepared for 12 of 58 sample items that were manually processed as finalised no debt. Where documents were prepared they did not always contain sufficient information to explain the debt, and at times recorded details about the debt that were in conflict with information recorded in DMIS.
• A valid reason specified in policy and procedures was recorded for 47 of 71 no debt decisions. In 14 cases a reason for a changed debt amount could be found elsewhere in the record, for 10 of these a category of reason was recorded that was not consistent with policies and procedures. In some cases, there was insufficient or inconsistent supporting information to support the reason recorded. Services Australia advised an incorrect reason was recorded for eight of 71 no debt decisions, including two no debt decisions where a debt should have been raised.
• 14 of 71 no debt decisions and 6 of 71 raised for recovery decisions were quality checked, and the checks did not identify any situations requiring feedback or changes to the decision. No waiver decisions were quality checked.

3.42 Quality check correctness rates for determination decisions were less than the desired correctness rate of 95 per cent or higher (see paragraph 2.41) for staff rated as ‘proficient’.

Decision-making authority

3.43 Services Australia does not have an adequate system of controls for debt decision-making. The decision to determine an undetermined debt as there being no debt (known as finalised no debt) may be made by any staff member with the relevant systems access. The decision-maker requires a delegated power to determine specific categories of payments that do not amount to an overpayment including prepayments and scholarship payments. Services Australia advised that the decision to finalise as no debt is an administrative action. Policy and procedures do not indicate where a decision taken when processing the undetermined debt is a delegated decision (requiring a delegation instrument) or administrative action (where no delegation instrument or other internal authority is required). Services Australia relies solely on quality checking processes (see paragraph 2.37 to 2.42) to ensure administrative actions to finalise no debt are appropriate and in line with policy and procedures.

3.44 Services Australia policy guidance states ‘Access granted to update DMIS does not remove the responsibility of staff to ensure their actions and decisions are within their delegation limits’. DMIS system access arrangements supporting delegate decision-making are not consistent with delegation instruments.

• Services Australia has internally delegated responsibility for small debt waivers to APS 1 to 4 officers, whereas DMIS system delegations have been established so that all officers, regardless of level, can make these decisions.
• DMIS system access arrangements for delegates are broadbanded. For example, responsibilities can be assigned to APS 1 and 2, APS 3 and 4, or APS 5 and 6 levels. Services Australia’s delegation instruments, delegating social security and welfare debt powers, do not always delegate powers to the lowest level in a DMIS broadband.

3.45 Services Australia provided a historical list of DMIS delegate and user staff names at a point in time. It could not provide a complete list of delegates or users in DMIS for the 2021–22 financial year to support testing of delegate approvals in the ANAO’s determination decision samples. On this basis ANAO testing could determine where an officer had or did not have access at a point in time, but not whether they were properly authorised as a delegate to make the type of decision on the day it was made. Services Australia does not undertake quality assurance reviews to assess whether a decision was made by a properly authorised delegate.

3.46 Sample testing identified four instances where the field identified as recording the decision-maker for finalised no debt and debts raised for recovery contained a customer reference number instead of a username for a Services Australia officer responsible for these determination decisions. Services Australia advised that the field signifying the decision-maker could be overwritten where there were subsequent decisions in relation to the debt. To establish the username of the decision-maker and the timing of the determination decision would require investigation of further screens and examination of audit logs including replaying decisions in Services Australia’s systems.

3.47 In October 2022, Services Australia advised the ANAO that in 2021–22 it received 80,870 requests for a formal internal review by an Authorised Review Officer. In 2021–22, 28,871 appeals that were decided included a decision relating to a debt or an aspect of debt management or recovery and 33 per cent of these appeals either varied or set aside the debt decision, recovery fee, interest charge or recovery arrangement.⁶⁷ Services Australia does not analyse debt related decisions varied or set aside to improve training, policies or procedures.

Timeliness of determination of debts

3.48 In 2021–22 Services Australia had 3,438,091 undetermined debts⁶⁸ with an estimated value of $4.0 billion available to make a determination decision (manual or automatic) (see Table 3.6). Of these, 177,988 detected debts were not accounted for as a determined or undetermined debt in Services Australia’s debt reports in 2021–22.

Table 3.6: Change in total undetermined debt between 30 June 2021 and 30 June 2022

Note a: Undetermined debts include parked and Family Tax Benefit qualification debts (see footnote 68).

Source: ANAO Analysis of Services Australia’s debt reports and advice.

3.49 Services Australia’s policy states it intends to determine debts as quickly as possible, to make the customer aware of the debt as soon as it occurs and to meet timeliness performance targets. Overall there was an increase in undetermined debts of 255,581 (with an estimated value of $0.5 billion) in 2021–22. The increase was due in part to debt pauses due to the COVID-19 pandemic and natural disasters, as Services Australia does not actively determine new debts for customers in affected areas during pauses (see paragraph 1.13). While Services Australia adopted a staged approach to debt raising in lockdown areas from January 2022 as debt pauses were lifted, it could not keep pace with the backlog of undetermined debts and the rate of new undetermined debts registered. Figure 3.1 shows the that between January and October 2022, overall the number of determined debts has increased, and the backlog of undetermined debts has fluctuated but has fallen since August 2022. The weekly report figures are inconsistent with end of financial year figures. At 30 June 2022 the backlog was around 1.5 million reported in end of financial year reports, not around 1.3 million reported in the weekly report as at 1 July 2022.

Figure 3.1: Number of determined and undetermined debts, weekly movement between 21 January and 28 October 2022

Note: Undetermined debts do not include parked or Family Tax Benefit qualification debts.

Source: Services Australia, weekly debt insights reports, 21 January to 28 October 2022.

3.50 Services Australia advised the ANAO in August 2022 that most debts (75 per cent) are determined automatically. Automatically processed debts are often determined on the same day they have been registered as an undetermined debt (for example, 68 of 71 items in the raised and waived sample were automatically raised and waived, with 67 of the 68 sample items being registered and determined on the same day). This indicates that there are significant delays associated with manual debt determinations.

Does Services Australia appropriately recover debts?

3.51 Once a debt has been raised for recovery, Services Australia commences the following process:

• determining the best recovery method⁶⁹, unless there is a reason to delay recovery such as temporarily writing-off the debt (see Appendix 5);
• informing the customer about self-service payment options;
• monitoring broken payment arrangements⁷⁰; and
• selective review of current payment arrangements.

3.52 Decisions about recovery or non-recovery of debts may need to be made a number of times during the life of the debt. The debt is due 28 days after the issue of the account payable letter. The account payable notice provides information to the customer on how they can pay the debt or contact Services Australia to enter into a payment arrangement.

3.53 As at 30 June 2022, determined debts had an outstanding balance of $4.6 billion for a total of 1,668,870 debts. Table 3.7 shows the status of outstanding balances for determined debt. At 30 June 2022, around 81 per cent of the value of outstanding debts were temporarily written-off and 12.5 per cent of debts were under a payment arrangement, where the debt was not otherwise categorised as held, quarantined, temporarily written-off or having been referred to an external collection agent (see Appendix 5 for further information on debt status).

Table 3.7: Outstanding determined debt status, by number and value, as at 30 June 2022

Note a: Excludes payments arrangements for any of the other debt status categories within the table.

Note b: Excludes no payment arrangements for any of the other debt status categories within the table.

Note c: The number and value of quarantined debts includes 91 payment arrangements with a value of less than $1 million. It is unclear if the payment arrangements continue while the debt is quarantined.

Note d: The number and value of temporary write-offs includes 373,463 payment arrangements with a value of $1,273.8 million. It is unclear if the payment arrangements continue while the debt is temporarily written-off.

Note e: The number and value of external collection agents includes 17,595 payment arrangements with a value of $52.7 million.

Note f: Totals rounded to one decimal place.

Source: Services Australia, Debt Profile Report as at 30 June 2022.

3.54 The ANAO examined compliance with procedural and legislative requirements for a selection of temporary write-offs and key controls for selected debt payment arrangements, which represent around 81 per cent of the value and number of outstanding determined debt. Management of debts that had other statuses were not examined.

Write-offs

3.55 As at 30 June 2022, 1,344,838 debts valued at $3.7 billion were temporarily written-off.

• The main reasons for temporary write-offs were debt pauses related to natural disasters and the COVID-19 pandemic (valued at $3.5 billion or 95 per cent)⁷¹ — write-offs from debt pauses were generally automated, whereas other write-offs were manually processed.
• Around 60 per cent of temporarily written-off debts were held by current customers, and 40 per cent were held by former customers.
• Twenty-seven per cent of the debts ($1 billion) that were temporarily written-off were older than six years.

3.56 Of the 1,344,838 debts that had a temporary write-off status as at 30 June 2022, the ANAO selected a random sample of 101 debts⁷² to assess whether records of write-off decisions, delegate approvals and communications with the customer were in accordance with requirements set out in policy and procedures.⁷³ Key points from testing results are summarised below.

• Services Australia recorded the reason for write-off (see Appendix 5) and the period of the write-off for all 101 sample items.
• Approvals were automatically processed for 85 of 101 sample items. Services Australia advised it made ‘an administrative decision to pause debts to ease financial strain during disaster events not a legislative decision’. These debts were reported with a status of temporarily written-off. The power to write-off a social security and welfare debt is found in the legislation governing the relevant payment type.⁷⁴ The ANAO saw evidence separate to customer debt records of emails where the debt pauses were being treated as an administrative decision or as a write-off under relevant legislation without reference to specific sections of the Acts.
• For the 16 manually processed sample items, Services Australia did not provide adequate data for ANAO to assess whether the decision-maker was a properly authorised delegate on the day they made the decision (see paragraph 3.45).
• For all sample items, the customer was advised of the debt by accounts payable letter, and of those, 35 were subsequently advised of the write-off.
• 10 of the 101 decisions were quality checked and a further 13 of 101 decisions were appealed. In one instance, there was a change to the write-off (as the period of the write-off was extended following an appeal).

Payment arrangements

3.57 When selecting payment arrangements, cost effectiveness considerations must be applied.⁷⁵ This includes considering the amount owed, the customer’s circumstances and the relative cost of available recovery action. Where there are no specific legislative requirements, Services Australia has developed policy and procedures that are intended to support cost effectiveness considerations. Table 3.8 provides an overview of payment arrangements and other recovery methods (including specialised recovery), the type of customer they are applied to, and cost effectiveness considerations in relation to debt values. Entering into a payment arrangement will not stop other recovery action in all circumstances.⁷⁶

Table 3.8: Types of payment arrangements and other recovery methods

Note a: Minimum withholding rates vary depending on the payment group, but they are all at a minimum $10 per fortnight if payments are less than $750, or $15 if payments are more than $750 per fortnight. For Family Tax Benefit recipients with debts more than $1,500, the minimum repayment amount is $60 per fortnight.

Source: ANAO analysis of Services Australia’s policies and procedures.

3.58 As at 30 June 2022, 175,244 debts valued at $572.3 million were in a payment arrangement that was managed by Services Australia.⁷⁷ Table 3.9 provides an overview of the payment arrangements in use that were managed by Services Australia as at 30 June 2022 for current and non-current customers. Withholdings accounted for around 78 per cent of recovery arrangements in place and was the main form of payment arrangement for current customers. Voluntary deductions and regular cash comprised a further 13 and eight per cent, respectively, of payment arrangements. Garnishee arrangements made up around one to two per cent of payment arrangements. Table 3.9 does not report on payment arrangements in place for debts that were quarantined, temporarily written-off or referred to external collection agents, as this information was not available to the ANAO.

3.59 In 2021–22, ANAO financial statements audit examined key controls in DMIS for automated withholdings and garnishee arrangements (see Table 3.8)⁷⁸, and found these controls were operating as intended. The ANAO found key internal controls around cash management and receipting for debt repayments were operating effectively, and appropriate key controls were in place as part of the Family Tax Benefit reconciliation process for Family Assistance Office debt recovery from the Australian Taxation Office.

Management of recovery outcomes

3.60 In 2021–22, Services Australia debt management activities:

• recovered $1.3 billion;
• waived debts with a value of $67 million (including $34.7 million in debts that were raised and waived at determination); and
• reduced debt balances by a further $500 million through permanent write-offs and debt reductions.

3.61 Services Australia’s current performance measurement arrangements do not support a meaningful assessment of debt recovery performance (see Table 4.3, Table 4.4, Table 4.5 and paragraphs 4.16 to 4.26).

3.62 Services Australia planned that recovery would restart for 15,000 debts a day from 30 June 2022 (involving SMS advice of withholding restarts) and 15,000 debts a day would become due from 1 July 2022. Services Australia monitored SMS messages sent to customers to notify them of restarts, the number of new payment arrangements established and the number of debts with disaster related pauses ending and whether they had a payment arrangement that had been paused.⁷⁹ Services Australia did not meet daily targets for restarting recovery and withholdings. From June 2022, Services Australia used weekly debt insights reports to track the number of SMS messages sent to customers to notify them that recovery or automatic withholdings would restart (see Figure 3.2).

Figure 3.2: Number of SMS messages sent to customers advising that recovery or withholdings would restart, weekly between 8 July and 28 October 2022

Source: Services Australia, weekly debt insights reports, 8 July to 28 October 2022.

4.1 The Public Governance, Performance and Accountability Act 2013 (PGPA Act) requires entities to fairly present their financial position, financial performance and cash flows, including complying with accounting standards and other requirements prescribed by the rules. The Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) section 16EA requires performance criteria included in performance statements to be measurable and reliable. Services Australia needs to manage its responsibilities to policy entities under the bilateral arrangements which includes being able to effectively measure performance, accurately report on debt to policy entities and support those entities to discharge their responsibilities under the PGPA Act.

Does Services Australia accurately report outstanding determined debt and debt recovery balances?

Services Australia’s reporting on debt

Services Australia’s annual reports

4.2 Services Australia reports on its outstanding balances for determined debt and debts recovered in its annual reports. Since 2016–17, Services Australia has included a narrative on debt management and two tables: debts raised (following a determination process) from customers who received social security and welfare payments; and social security and welfare debt recovered. The results are set out in Table 4.1.

Table 4.1: Annual reporting of debt management

Source: ANAO summary of Department of Human Services and Services Australia Annual Reports 2016–17 to 2021–22.

4.3 As discussed in paragraph 1.14, the reasons for the decline in debt detection and recovery from 2019–20 are attributed by Services Australia to debt pauses being applied following the 2019–20 bushfires, flood events across regions of Australia, and in relation to the COVID-19 pandemic.

4.4 The information in the annual reports does not include the number of debts detected but not yet determined (undetermined debt) or the number of debts temporarily written-off.

Services Australia internal debt reports

4.5 Since January 2022, the Debt Programme and Compensation Recovery Branch produces the only report used for debt monitoring across the organisation. The weekly debt insights report contains the following:

• number of debt determinations completed, split into categories by type of decision;
• number of new undetermined debts registered, split into categories of payment type;
• age of undetermined debts by current or non-current customers;
• number of SMS debt recovery contacts made;
• number of debts recovered, split into categories by recovery type; and
• summary of withholding arrangements in place to recover debt.

4.6 This report provides numbers and statistics on debts in the system and debt balances, and does not contain any performance targets.

Reporting on debt to policy entities

Financial reporting

4.7 Policy entities retain responsibility for reporting on debt balances in their financial statements under the PGPA Act but rely on the financial information provided to them by Services Australia as the service delivery agency.

4.8 Services Australia’s Chief Financial Officer (CFO) issues annual assurance letters to policy entities for whom it manages social welfare payment debt in 2021–22.

4.9 Through these letters, the CFO confirms that internal controls have no known deficiencies in order to maintain materially accurate accounts and records relevant to the policy entity. The assurance letters to DSS and the Department of Agriculture, Water and Environment (DAWE) also include an assurance statement relating to debt.

4.10 Services Australia provides four policy entities (DSS, Department of Education, Skills and Employment [DESE], Department of Home Affairs [DHA] and DAWE) with detailed monthly financial reports on debts, see Table 4.2.⁸⁰

Table 4.2: Monthly financial debt reports to entities

Source: ANAO summary of Services Australia records.

4.11 ANAO analysed values in reports to entities against values contained in the Services Australia debt profile report and concluded that there was reasonable assurance over the completeness of social security and welfare debt reported by Services Australia to policy entities.

Reporting under bilateral arrangements

4.12 Services Australia is required to provide specific reports on debt under the bilateral arrangements with four policy entities: DSS; DHA, DESE and DAWE. The requirements for these reports are unique to each entity and are set out in the bilateral arrangements, in most instances requiring that Services Australia keeps the relevant policy entity informed of debt matters.

4.13 Services Australia advised the ANAO that DSS has been provided with full access to data in Services Australia’s systems relating to DSS welfare payments including debt. DSS extracts the data itself for the reports required under the bilateral arrangements (see paragraphs 4.28 and 4.31).

Has Services Australia established adequate arrangements to assess and monitor the effectiveness of its debt management and recovery?

External performance measurement

4.14 In accordance with section 16EA of the PGPA Rule and Resource Management Guide (RMG) 131 Developing good performance information, meaningful performance information is reliant upon a clear understanding of the entity’s purpose and expressing that understanding in a way that is related and measurable.

4.15 Section 16EA of the PGPA Rule requires an entity’s performance measures, in the context of the entity’s purposes or key activities, to:

1. relate directly to one or more of those purposes or key activities;
2. use sources of information and methodologies that are reliable and verifiable;
3. provide an unbiased basis for the measurement and assessment of the entity’s performance;
4. where reasonably practicable, comprise a mix of qualitative and quantitative measures;
5. include measures of the entity’s outputs, efficiency and effectiveness if those things are appropriate measures of the entity’s performance; and
6. provide a basis for an assessment of the entity’s performance over time.

Debt performance measure

4.16 Prior to 2021–22, Services Australia reported on ‘debt under recovery’ as a key performance measure. Services Australia advised the ANAO that this measure had been in place since 2012. The target for the performance measure had remained unchanged at 60 per cent or more, between 2012 and 2021–22. Services Australia was unable to provide evidence of the rationale for the target or any review of the appropriateness of the target, particularly in light of the debt pauses.

4.17 In 2021–22, Services Australia transitioned from 27 performance measures to seven high-level measures (see Appendix 6).⁸¹ The ‘debt under recovery measure’ was classified by Services Australia as ‘not aligned’ with any of the seven as part of an internal mapping exercise. The only remaining payment related performance measure from 2021–22 is ‘payment quality’, which consists of ‘Centrelink: delivery of correct customer payments’ and ‘Medicare: delivery of accurate medical benefits and services’.

4.18 The ‘debt under recovery’ measure appeared in the appendix to Services Australia’s Corporate Plan 2021–22 with the same target of 60 per cent or more for 2021–22. Services Australia’s Annual Performance Statements 2021–22 only report on the seven high-level measures. The ‘debt under recovery’ measure was reported in an appendix to the Annual Report 2021–22. Table 4.3 sets out the details of the performance measure.

Table 4.3: Services Australia’s debt under recovery performance measure 2021–22

Source: Services Australia Corporate Plan 2021–22.

4.19 The ANAO assessed this measure against the requirements of section 16EA of the PGPA Rule and the results are set out in Table 4.4.

Table 4.4: Results of performance measure assessment

Legend: ◆ Fully and/or mostly meets requirements ▲ Partially meets requirements ■ Does not meet requirements.

Note a: Related refers to the requirement of subsection 16EA(a) of the PGPA Rule 2014, as amended. In applying the ‘related’ criterion, the ANAO assessed whether the entity’s performance measures:

• related directly to one or more of the entity’s purposes or key activities;

• provided a clear link between purposes, key activities and performance measures; and

• were expressed in a consistent way.

Note b: In applying the ‘measurable’ criterion, the ANAO assessed whether the entity’s performance measures were:

• reliable and verifiable — supported by clearly identified data sources and methodologies;

• free from bias — provides an unbiased basis for the measurement and assessment of the entity’s performance; and

• assessable over time — able to provide a basis for an assessment of performance over time.

Source: ANAO analysis based on the PGPA Act and PGPA Rule.

4.20 The ANAO assessed the ‘debt under recovery’ performance measure as not related, and was largely measurable except that it did not support assessment over time.

• The measure is not related to a key activity.
• The measure is reliable and verifiable because the data sources for the measure are Services Australia’s two key systems — Income Security Information System (ISIS) and Debt Management Information System (DMIS) — which have appropriate key system controls to mitigate risk and ensure the data is accurate and complete. Services Australia also conducts a quality assurance check on the final report, by running a separate manual calculation and comparing that against the system-generated report totals.
• It is free from operational bias because the process for extracting the data to measure performance is data mining from the Enterprise Data Warehouse, which in turn utilises data from ISIS and DMIS, and there is no manual manipulation of the data for the compilation of the original report.
• Up until 2019–20, the same methodology was used to calculate the performance results so they were comparable up to that period. The original methodology only included Services Australia’s collection of debts. In 2019–20 Services Australia amended the methodology to include the debts collected by external collection agents⁸² and provided an explanation for the results of the measure in the 2019–20 Annual Performance Statements. When changing the methodology, Services Australia did not report the results of the measure using the original and revised methodology to support a comparison.

4.21 The results of ‘debt under recovery’ performance measure are recorded quarterly in the relevant internal performance measure record⁸³, and approved each quarter by the Debt Programme, Appeals and Reviews Division General Manager.

4.22 In October 2018, following a high-level review of performance measures, Services Australia advised the Secretary of DSS that ‘debt under recovery’ was identified as not an effective measure of performance, as achieving the target does not contribute to reducing the outstanding balances for determined debt. At the time, Services Australia was engaging with DSS on a new suite of performance measures under the bilateral arrangement. Despite concerns about effectiveness of the measure, ‘debt under recovery’ remained the only measure in the corporate plan in 2019–20 and 2020–21.

Performance measure reporting

4.23 The ANAO examined Services Australia’s reporting of the ‘debt under recovery’ performance measure in its annual reports from 2016–17 to 2021–22. The results are set out in Table 4.5.⁸⁴

Table 4.5: Performance results for the debt under recovery measure

Note: The increase in results from 2018–19 was in part due to the measure being updated in October 2018 to include debts recovered by external collection agents. This means the results prior to 2018–19 are not comparable with future years (see paragraph 4.20).

Source: Services Australia annual reports 2016–17 to 2021–22.

4.24 The formula for the measure is the value of debt under arrangement divided by the value of total outstanding determined debt at the end of the financial year. The formula excludes undetermined debt, and debt temporarily written-off or held. Services Australia advised that the reason for the improved results from 2019–20 was the calculation of debt under recovery does not include debts that have been temporarily written-off. From 2019–20 onwards there has been a smaller number of debts that have been determined and therefore eligible to be progressed by Services Australia (or an external collection agent) through to a recovery arrangement. The performance results from 2019–20 onwards do not reflect the percentage of debts under recovery compared to the population of all outstanding determined debts. The debt pauses led to significant numbers of outstanding determined debts remaining temporarily written-off which are excluded from the methodology for this performance measure. In the absence of an accompanying explanation of the circumstances, the performance results from 2019–20 do not provide a meaningful comparison to prior year results.

Internal performance measures

4.25 Services Australia has three internal debt performance measures, set out in the Debt Programme and Compensation Recovery Branch Business Plan 2021–22 under the overarching statement ‘Deliver high quality debt raising and recovery services that collectively improve debt recovery performance’:

• percentage of all debt is under a recovery arrangement with the Agency (Services Australia) — 60 per cent target;
• percentage of outstanding potential overpayments (undetermined debt) are under 90 days old — 80 per cent target; and
• percentage of outstanding potential overpayments (undetermined debt) are under 180 days old — 90 per cent target.

4.26 Services Australia advised the ANAO that although ‘debt under recovery’ is no longer an external performance measure, it will still be providing internal reports to the responsible executives within relevant branches. Since January 2022, this measure has been included in weekly debt insights reports (providing weekly results over a period of two months) which are reported to the Deputy Chief Executive Officer Payments and Integrity (see paragraph 4.5). The adequacy of this measure is discussed at paragraphs 4.22 to 4.24.

4.27 Services Australia reports on the other two measures as part of the quarterly reports prepared under the bilateral arrangements with DSS. Since January 2022, Services Australia reports on the ageing of outstanding potential overpayments (undetermined debts) in the weekly debt insights report. Ageing is reported for across 10 intervals but is not aligned⁸⁵ to these measures. For example, weekly debt insights reports provide a result for undetermined debts that are 90 days old or less⁸⁶, but do not report against the measure of less than 90 days. Services Australia does not report internally on the effectiveness of various methods to detect an undetermined debt or the volume of debt detected compared to the assessed rate of payment inaccuracy (see paragraphs 3.34 and 3.35).

Bilateral performance measures

4.28 The ANAO examined bilateral arrangements for seven of the nine entities on behalf of which Services Australia manages debt, only the DSS bilateral arrangements contain performance measures relating to debt (in the agreement for Payment Assurance).⁸⁷ The debt measures and the performance results for five of the six measures in 2021–22 in the Quarterly Performance Assurance Reports (provided to DSS) are set out in Table 4.6.

4.29 The data for the quarterly reports is extracted by DSS, which has access to Services Australia’s Enterprise Data Warehouse. DSS then sends the results to Services Australia for inclusion of a narrative describing the reasons for the results. Services Australia does not generate any reports on these performance measures.

4.30 Targets have been established for each of the five performance measures reported in Table 4.6. In 2021–22, the targets were not met as a result of the debt pauses and the impact this had on the backlog of undetermined debts awaiting processing.

4.31 In April 2021, the Strategic Business Discussion Committee (established under the bilateral arrangements with DSS) agreed that the current debt management key performance measures were not fit-for-purpose, and they needed to be replaced with a set of key performance measures that take account of the whole debt management cycle. The Bilateral Management Committee (established under the bilateral arrangement with DSS) agreed to a 12 month pilot for five new key performance measures, to be implemented from 1 July 2021, see Table 4.7.

Table 4.7: Pilot key performance measures and results for the first three quarters of 2021–22

Note a: Services Australia cannot calculate the results for the measures and does not undertake any validation of the results. Services Australia advised the ANAO ‘that DSS produces the results for the KPM and the agency provides commentary on the KPM results as part of the quarterly Performance Assurance Reporting’.

Note b: The pilot measure for overpayment detection consists of the number of overpayments detected in the financial year-to-date (based on the number of undetermined debts registered in Debt Management Information System) as a proportion of the previous year’s leakage to outlays (pro-rated to financial year-to-date) (based on the results of the Random Sample Survey).

Source: Bilateral Management Committee papers December 2021 and June 2022.

4.32 The debt detection pilot measure does not appropriately measure debt detection performance because the measure assumes that debts detected via annual reconciliation processes would be identified by the Random Sample Survey (see paragraphs 3.34 and 3.35).

4.33 DSS sought to put in place targets for the pilot measure. However, Services Australia and DSS agreed not to apply targets or benchmarks until the results were monitored over a period of 12 months and realistic targets could then be set in recognition of the impact of the debt pauses on operational performance.

4.34 The five existing performance measures under the bilateral arrangement with DSS focus only on the timeliness of debt determination activities and debt recovery. Whereas the five pilot performance measures are broader and cover overpayment detection, debt determination and debt recovery with the inclusion of tracking recovery trajectories and volume. Combined, these 10 performance measures provide DSS with a clearer view of Services Australia’s effectiveness in managing debt, when compared to the measures currently used by Services Australia (see paragraph 4.25).

4.35 In December 2021, the committee noted that the overpayment detection Key Performance Measure was affected by the COVID-19 pandemic, and undetermined debt processing had fallen behind the long-term processing trend pre pandemic, due to debt pauses. Both the Bilateral Management Committee and the Strategic Business Discussion Committee were to receive ongoing reports, as it was expected that extended debt pauses would have a continuing impact on results. In June 2022, the committee agreed to extend the pilot to 31 December 2022 (noting the ongoing impact of the COVID-19 pandemic has performance well below business as usual levels), and conduct a review in January/February 2023 when debt management activity is expected to return to business as usual levels. As at April 2023, Services Australia and DSS were still finalising a paper for the Bilateral Management Committee on the outcomes of the pilot phase and Services Australia did not provide ANAO with a copy of the draft paper.

Appendix 1 Entity responses

Appendix 2 Improvements observed by the ANAO

1. The existence of independent external audit, and the accompanying potential for scrutiny improves performance. Improvements in administrative and management practices usually occur: in anticipation of ANAO audit activity; during an audit engagement; as interim findings are made; and/or after the audit has been completed and formal findings are communicated.

2. The Joint Committee of Public Accounts and Audit (JCPAA) has encouraged the ANAO to consider ways in which the ANAO could capture and describe some of these impacts. The ANAO’s 2022–23 Corporate Plan states that the ANAO’ s annual performance statements will provide a narrative that will consider, amongst other matters, analysis of key improvements made by entities during a performance audit process based on information included in tabled performance audit reports.

3. Performance audits involve close engagement between the ANAO and the audited entity as well as other stakeholders involved in the program or activity being audited. Throughout the audit engagement, the ANAO outlines to the entity the preliminary audit findings, conclusions and potential audit recommendations. This ensures that final recommendations are appropriately targeted and encourages entities to take early remedial action on any identified matters during the course of an audit. Remedial actions entities may take during the audit include:

• strengthening governance arrangements;
• introducing or revising policies, strategies, guidelines or administrative processes; and
• initiating reviews or investigations.

4. In this context, the below actions were observed by the ANAO during the course of the audit. It is not clear whether these actions and/or the timing of these actions were planned in response to proposed or actual audit activity. The ANAO has not sought to obtain assurance over the source of these actions or whether they have been appropriately implemented.

• From July 2022, Services Australia planned to deliver changes within Money You Owe, as well as non-digital channels, to give customers enhanced visibility of their welfare debts and provide greater choice when managing debt repayment following a disaster. Services Australia has implemented arrangements for customers to opt through self-service channels to pause debt recovery activities for three months when impacted by emergency events under phase one of the Situational Hardship Project. Phase two of this project is expected to incorporate other hardship events and explore the feasibility of enhanced digital channels such as two-way SMS.
• Services Australia advised in January 2023 that system functionality was released in August 2022 that enabled customers to receive a SMS notification to confirm a write-off has been applied to their debt. Further functionality was introduced in October 2022 to notify customers of their eligibility for a write-off based on their geographical location. These contacts are recorded on the customer’s record.
• Services Australia developed a Debt Restart 2.0 plan in May 2022 to manage restarting debt raising and recovery workload and pressures on the system when various debt pauses were lifted. It also developed a ‘winning the week’ initiative to target the inflow of debts at the earliest point of contact.
• In June 2022, Services Australia endorsed a Debt Charter which set out a vision, outcomes, expected benefits and measures of success for Debt Modernisation. The Charter outlined the transformation ambition of ‘social welfare debts are managed through contemporary, customer centric systems and processes. Debt is prevented wherever possible and customers are empowered to avoid future overpayments’. Expected benefits include improved customer experience, a reduction in future debts and appeals, increased customer satisfaction, clearer communication with customers, and reduced manual staff effort and increased productivity for debt management and appeals activity.
• A review of Services Australia bilateral arrangements with the Department of Education and the Department of Social Services was in progress to improve the arrangements particularly, documentation of aspects of the arrangements.

Appendix 3 Circumstances to finalise a debt as no debt

Table A.5: Circumstances where a debt is finalised as no debt

Note a: Incentive Allowance is a saved payment made to Disability Support Pension customers to encourage them to participate in sheltered workshop employment.

Note b: An Assurance of Support is a legal agreement an Assurer makes with Services Australia to help someone get a visa to live in Australia (the Assuree, Services Australia’s customer). It is the Assurer’s promise to pay Services Australia back for any income support given to the Assuree. An Assuree may claim an income support payment when the Assurer is no longer able to support them. In these cases, Services Australia will raise for recovery an Assurance of Support debt for the Assurer.

Source: Services Australia, Finalised “no debt” (FND) or “zeroing” debts that are not legally recoverable, 107–05110010, 4 March 2022, and Raising Pension Bonus Scheme (PBS) debts, 107–04020180, 19 December 2021.

Appendix 4 Debt waiver reasons and delegations

1. Debt waiver reasons are summarised in Table A.2.

Table A.2: Debt waiver reasons

Source: Services Australia, Waiving Centrelink debts, 107–05120000, Resources, pages 8 to 11.

2. The level of delegated official varied considerably by circumstance and financial limits for waiver decisions. For example, under the Social Security Act 1991 eight sections were delegated (and for some sections more than one subsection was delegated), and for each section or subsection one of 10 combinations of delegated official level and financial limit was applied to the delegation. Generally, the legislation supports the Secretary (and their delegated officials) waiving a debt in specific circumstances.⁸⁸ Circumstances leading to waivers consistently listed in legislation included:

1. the debt is arising from error;
2. the debt relating to an offence;
3. a small debt;
4. amounts in excess of debts agreed following a settlement in a civil action;
5. in special circumstances (such as, the debtor unintentionally providing incomplete information); or
6. particular classes of debt, for example, where the Minister has listed the class of debt in a legislative instrument.

Appendix 5 Circumstances where a debt is not recovered

1. In some circumstances a determined debt is not recovered or there is not a current payment arrangement. These circumstances are where a payment arrangement has not been agreed, or a debt has been parked, held, quarantined, written-off or referred to an external collection agent (see Table A.3 for descriptions of these circumstances).

Table A.2: Circumstances where a debt is not recovered or in a payment arrangement

Note a: Undetermined debts are automatically held by the system when a policy decision has been made to pause the debt, such as in response to a natural disaster. Exceptions to this are Family Tax Benefit auto-determined debts and compliance review debts, which will not automatically be held.

Note b: For example, when family assistance payments are reconciled, information about arrears or debts for the relevant financial year and outstanding Family Tax Benefit and Child Care Subsidy debt amounts for prior financial years are reported to the ATO. The reconciliation result will remain parked until an ATO response transaction is received.

Note c: Family assistance offsetting may still apply to some written-off debts.

Source: ANAO analysis of Services Australia’s debt policy and procedures.

Appendix 6 Aligning Services Australia’s 27 performance measures from 2020–21 with the seven high-level measures for 2021–22