Introduction

1.1 Australia’s vocational education and training (VET) system is designed to ensure skills are developed in a wide range of occupations, through practical school-based and work-based learning. Apprenticeships and traineeships (referred to as apprenticeships in this report) are key components of the VET system and are an employment arrangement that combines paid work with a structured program of on-the-job and off-the-job training.

1.2 Apprenticeships are undertaken in a range of occupations, as shown in Figure 1.1.

Figure 1.1: Australian apprentices by major occupation type March 2023

Note: Seventy-five occupations were listed as ‘unknown’.

Source: National Centre for Vocational Education Research data 31 March 2023.

1.3 The Australian Apprenticeships Incentive System (the Incentives System) commenced on 1 July 2022 and its objective is to ‘contribute to the development of a highly skilled and relevant Australian workforce that supports economic sustainability and competitiveness’. The Incentives System supports Australian apprenticeships in priority occupations listed on the Australian Apprenticeships Priority List¹, and provides financial support to Australian apprentices and their employers.

1.4 The Incentives System is the responsibility of the Department of Employment and Workplace Relations (DEWR) and supports Outcome 2 of DEWR’s strategic purpose – Promote growth in economic productivity and social wellbeing through access to quality skills and training. It is managed through DEWR’s Skills and Training Group by Apprenticeships Policy Branch and Apprenticeships Operations Branch.

1.5 The Incentives System is delivered through the Australian Apprenticeships Support Network (AASN) which consists of seven service providers, located in all states and territories as well as the Torres Strait, that are contracted by DEWR to support employers and prospective apprentices to enter into an Australian apprenticeship arrangement. Under the contractual arrangements in 2023–24² the AASNs were:

• Apprenticeship Support Australia;
• Sarina Russo Job Access Pty Ltd;
• VERTO Ltd;
• MEGT (Australia) Ltd
• Top End Group Training Pty Ltd;
• The BUSY Group Ltd; and
• MAS National Ltd.

1.6 The services offered by AASNs are free of charge to apprentices and employers.³ Services to assist apprentices include help to find an employer, find the right training course, support to make Incentives System payment claims, and providing general support and advice. Services available to employers include matching them with a suitable apprentice, facilitating the execution of the contract with the apprentice, and providing advice and support.

The Incentives System

1.7 The Incentives System replaced the Australian Apprenticeships Incentives Program (AAIP) which was introduced in 1998 and closed to new recipients on 30 June 2022. The key difference between the two programs is that financial supports are available to apprentices as well as employers under the Incentives System, whereas the AAIP primarily provided financial supports to employers. Differences in the supports offered under the AAIP and the Incentives System are set out in Table 1.1.

Table 1.1: Supports available through the Australian Apprenticeships Incentives Program and the Incentives System

Note a: For an employer to receive wage subsidies, their apprentices must be undertaking an apprenticeship in priority occupations as listed on the Australian Apprentices Priority List. All other apprenticeship occupations are eligible for the hiring incentive.

Note b: The Additional Identified Skills Shortage payments were two payments of $1000 available to apprentices who commenced and completed occupations experiencing national skills shortages. The payment differs from the support payments available under the Incentives System which are incremental payments available during specific periods throughout the apprenticeship.

Source: Australian Apprenticeship Incentives System Reform Regulation Impact Statement.

Roles and responsibilities

1.8 While DEWR is responsible for the overall administration of the Incentives System, there are various stakeholders involved in the Incentives System.

• Apprentices — individuals undergoing either apprenticeships or traineeships involving structured on-the-job and off-the-job training leading to formal qualifications.
• Employers — employ apprentices and provide them on-the-job training and support to complete their apprenticeship.
• AASN providers — work with employers and apprentices on behalf of DEWR to administer the Incentives System, including recruitment, providing eligibility assessment, support to claim payments, training and other assistance.
• Group Training Organisations (GTOs) — employ apprentices who then work for host employers to receive on-the-job training.
• Registered Training Organisations (RTOs) — approved education providers, such as TAFE, where the apprentice receives training.
• State and Territory Training Authorities (STAs) — responsible for their respective state or territory VET. They monitor GTOs and RTOs and certify training agreements and employment arrangements for apprentices.

Program administration

1.9 Administration of the Incentives System is through DEWR’s Apprenticeship Data Management System (ADMS). ADMS enables stakeholders to complete required tasks including making claims for payments under the Incentives System. A high-level overview of the process is set out in Figure 1.2.

Figure 1.2: Incentives System processes

Note: The training contract can be signed either in ADMS or offline and then uploaded into ADMS.

Source: Australian National Audit Office (ANAO) analysis of the Incentives System process.

Budget and expenditure

1.10 As at the 2023–24 Mid-Year Economic and Fiscal Outlook, the Incentives System was allocated $2.994 billion from 2022–23 to 2026–27. Funding for the AAIP continues under grandfathering arrangements, where an employer or apprentice continues to receive their eligible payment until the training and qualification is completed or the apprenticeship ceases. A breakdown of the budget for both programs is shown in Table 1.2.

Table 1.2: Incentives System budget 2022–23 to 2026–27

Source: Portfolio Budget Statement 2022–23 Budget Related Paper No. 1.6 Employment and Workplace Relations and 2023–24 Mid-Year Economic and Fiscal Outlook estimate.

1.11 The expenditure on Incentives System payments from 1 July 2022 to 31 December 2023 is provided in Figure 1.3.

Figure 1.3: Incentives System expenditure

Note: Payments were minimal in the first quarter because claims can only be made after the three-month claiming period under the program guidelines. Group training organisations received $3,822,298 between January 2023 and December 2023.

Source: ANAO analysis of Incentives System performance reports.

1.12 Since 1 July 2022 to 31 December 2023, the Incentives System has provided assistance to 40,043 employers and 120,494 apprentices.

Incentives System as a grant program

1.13 The Commonwealth Grants Rules and Guidelines 2017 (CGRGs)⁴ are a legislative instrument under subsection 105C(1) of the Public Governance, Performance and Accountability Act 2013 and establish the Australian Government’s overarching grants policy framework. Sections 2.3 and 2.4 of the CGRGs state:

2.3 For the purposes of the CGRGs, a ‘grant’ is an arrangement for the provision of financial assistance by the Commonwealth or on behalf of the Commonwealth:

a. under which relevant money or other CRF money is to be paid to a grantee other than the Commonwealth; and

b. which is intended to help address one or more of the Australian Government’s policy outcomes while assisting the grantee achieve its objectives.

2.4 The CGRGs apply to all forms and types of grants. Grants may take a variety of forms, including payments made:

a. as a result of competitive or non-competitive selection processes;

b. where particular criteria are satisfied; or

c. on a one-off or ad hoc basis.

Program guidelines

1.14 In line with the CGRGs, the Australian Apprenticeships Incentive System Program Guidelines state that ‘In accordance with paragraph 2.3 of the CGRGs, payments under the Incentives System are defined as a ‘grant’ and are subject to the provisions of the CGRGs’. The program guidelines set out the requirements for the administration and delivery of the Incentives System and the payments available.

Legislative authority to make payments

1.15 The legislative authority which enables DEWR to make payments under the Incentives System is provided by section 1062A of the Social Security Act 1991 — ‘Arrangements and grants relating to assisting persons to obtain and maintain paid work’ — which came into effect on 2 April 2022.⁵

1.16 Legislative authority can also be exercised under item 554 in Part 4 of schedule 1AB of the Financial Framework (Supplementary Powers) Act 1997:

To provide funding, including for apprentices and employers of apprentices, to encourage and support the commencement and completion of apprenticeships.

1.17 The Secretary of DEWR has delegated authority to approve claims for payments under the Incentives Systems to the Assistant Secretary of Apprenticeship Operations Branch (Senior Executive Service Band 1).

Rationale for undertaking the audit

1.18 The Incentives System began on 1 July 2022 and provides financial support to apprentices, employers and RTOs. Funding of $2.994 billion over five years from 2022–23 has been allocated to the Incentives System. An audit of the Incentives System at the mid-point in its implementation is timely in order to provide assurance to the Parliament on the implementation of the new system and its program management.

Audit approach

Audit objective, criteria and scope

1.19 The audit objective was to assess whether the design and implementation of the Incentives System by DEWR is effective.

1.20 To form a conclusion against the objective, the ANAO applied the following high-level criteria:

• Has the Incentives System been effectively designed and implemented to support the intended program objectives?
• Have appropriate compliance and program monitoring arrangements been established for the Incentives System?

1.21 The scope of the audit included the implementation of the Incentives System and ongoing monitoring and evaluation of the program noting the end date for phase one is 30 June 2024. The establishment of procedural guidelines, processes, systems and assurance mechanisms used to deliver the Incentives System were examined. The interactions with the states and territories (in terms of the regulatory and training elements) and the involvement of the Australian Apprenticeships Support Network for initial eligibility assessments, were also reviewed.

1.22 Areas out of scope for this audit were the broader operations of the AASNs, Trade Support Loans and Australian Apprentice Support Loans.

Audit methodology

1.23 The audit methodology involved:

• examination of Incentives System documentation including policies, program guidelines, process maps, systems specifications, budget information;
• determining how program guidelines and process are implemented in practice, through walkthroughs of the key processes undertaken by DEWR;
• reviewing the systems used to process Incentives System payments and manage the program from DEWR’s perspective and determining if the IT general controls are suitable to provide assurance on data and payment accuracy, including through system walkthroughs;
• assessing performance measures, metrics, and reporting arrangements;
• analysis of Incentives System data sets;
• assessing compliance activities and results since 1 July 2022; and
• meetings with DEWR staff.

1.24 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $352,000.

1.25 The team members for this audit were Renina Boyd, Dr Vivian Turner, Jiyoung Kim, Qing Xue, Claire Holden, James Wright and Michelle Page.

2.1 Delivering Great Policy, available through the APS Academy⁶, sets out four principles:

• clear on intent — clear policy intent so the advice is relevant and outcomes-focused;
• well informed — forward looking, utilising lessons learned, and seeking input from stakeholders;
• practical to implement — work with those involved in implementation, try multiple options for a practical solution, and plan for an evaluation; and
• influential — the right stakeholders have been engaged throughout the process and advice is tailored to each audience.

Was the design of the Incentives System informed by a clear evidence base as well as lessons learned from the Australian Apprenticeships Incentives Program?

External reviews

2.2 In November 2018, the Honourable Steven Joyce (the former New Zealand Minister for Tertiary Education, Skills and Employment) was appointed by the Prime Minister to lead a review into Australia’s vocational education and training sector. The 2019 report, Strengthening Skills: Expert Review of Australia’s Vocational Education and Training System⁷, recommended simplifying apprenticeship incentives to increase take-up by employers and apprentices. It also recommended that the National Skills Commission develop a new National Skills Priority List for apprentices with an annual consultation process to ensure it targets required skills.⁸

2.3 The Productivity Commission’s 2020 National Agreement for Skills and Workforce Development Review⁹ highlighted that reforms to the apprenticeship system should ‘focus on reducing barriers to the supply of apprentices, lifting completion rates, and simplifying the hiring process for employers’. It also noted that completion rates could be improved by matching apprenticeships to employers, courses and support needs, mentoring apprentices, and making apprenticeships more flexible. Employer incentives could also be improved by better targeting incentives, either through changing the payments available to 12 and 24 month progress payments and improving their ease of access, or through reorientating the funding to screen and support apprentices.

Reviews and evaluations of the Australian Apprenticeship Incentives Program

Australian Apprenticeship Incentives Review 2020

2.4 The National Skills Commission (now Jobs and Skills Australia (JSA)) engaged Deloitte in July 2020 to undertake a review of the Australian Apprenticeships Incentives Program (AAIP) to determine the effectiveness of the apprenticeship incentives provided by the AAIP. The review sought to determine drivers of changes to apprentice and employer behaviours in response to historical changes to AAIP eligibility, amount, timing, recipient and payment mechanisms. The review was informed by economic modelling of data from the Training Youth Information Management System (TYIMS)¹⁰, the Longitudinal Survey of Australian Youth¹¹ and a literature review and behavioural analysis. The AAIP review was completed in October 2020.

2.5 The review concluded that apprenticeship commencements had decreased over time as the AAIP most effectively incentivised shorter, non-trade traineeships. It also determined that employer incentives should reflect the relative cost of training in order to be effective, with larger incentives needed to increase employment levels in areas of skills shortage. Lastly, it detailed that evidence-based refinements of the AAIP require further research and experimentation, with a suggestion to test alternative wage supplement schemes with a variety of amounts and types of payments.

Surveys

2.6 In 2021, Wallis Social Research was contracted by the Department of Education, Skills and Employment to perform qualitative and quantitative surveys of employers and apprentices. The department sought to determine what non-financial support and incentives would encourage apprentices to complete their training and employers to hire apprentices and maintain apprentice employment. The results found that:

• greater support and mentorship was needed from Registered Training Organisations (RTOs) and Australian Apprenticeship Support Network (AASN) providers for both employers and their apprentices throughout the apprenticeship;
• there was inadequate time given to both employers and apprentices during the sign-up process, with contact from the AASNs before the sign-up being helpful;
• apprentices required more time to understand the training contract they were being asked to sign and only eight per cent considered AASNs as a point of support;
• some apprentices had no contact from their AASN provider after signing the contract;
• employers experienced an administrative burden in completing paperwork which could be improved with help from the AASNs; and
• feedback indicated that RTOs did not always provide high quality courses in the fields required nor pastoral support to apprentices.

Other reviews

2.7 Five review activities targeted to specific payments available under the AAIP were undertaken by the department during 2021–22, summarised in Table 2.1.

Table 2.1: AAIP evaluations for specific payments

Note a: BAC payments were introduced in October 2020 to encourage employers to hire apprentices. The payment provided 50 per cent of the apprentice’s wage for the first 12 month period from the date of commencement.

Note b: SAT payments were introduced in April 2020 to support small businesses to retain apprentices or to re-engage displaced apprentices during the COVID-19 pandemic. This was expanded to include medium businesses from 1 July 2020. A subsidy of 50 per cent of the apprentice’s wages was available for eligible employers for wages paid between 1 January 2020 (for small businesses) or 1 July 2020 (for medium businesses) and 31 March 2021.

Source: Australian National Audit Office (ANAO) analysis of evaluation reports provided by Department of Employment and Workplace Relations (DEWR).

2.8 Overall, the reviews, surveys and evaluations of the AAIP and the skills and workforce environment in Australia raised issues with the AAIP and the broader apprenticeships system. The findings and recommendations provided led to the approach to review and replace the AAIP with a simpler system and more targeted financial and non-financial supports.

Review and replacement of the National Skills Needs List

2.9 The AAIP had three separate priority lists which informed eligibility for certain payments.¹²

• The first list was the National Skills Needs List (NSNL) which was introduced in 2007 and sought to increase apprenticeships in areas of persistent skills shortage. In the 15 years it was in place, it was updated once in 2011. Of the 65 occupations on the list, 85 per cent were trade-based.
• The second was the AAIP Priority List, introduced in 2012, which consisted of aged care, child care and enrolled nursing, with disability care added in 2013.
• The third list related to the AISS Apprentice Commencement payment, introduced in 2019. The AISS aimed to support apprenticeships in occupations experiencing national skills shortages and targeted 12 occupations which faced a shortage of qualified workers and were determined to be in an area of national skills shortage. The AISS occupations were already on the NSNL.

2.10 A review of the NSNL began in August 2019 by the Department of Employment, Skills, Small and Family Business due to identified shortcomings in the list and its methodology. These shortcomings primarily related to the frequency of updates to the NSNL and the criteria used to define the scope of the list. Public consultations with industry and other stakeholders were performed in August 2019 and December 2019. Feedback confirmed that a new priority occupations list was required which was ‘forward looking’ and ‘responsive to changes in skills shortages’. Fifty-five per cent of respondents agreed with an annual update of the list. Concerns were raised around annual updates disrupting workforce planning and increasing the administrative burden. Feedback on the proposed methodology received ‘broad high-level support’ from respondents with consultation during the assessment process being emphasised in submissions.

Introduction of the Australian Apprenticeships Priority List

2.11 On 1 July 2022 the Australian Apprenticeships Priority List replaced the NSNL, AAIP priority list and AISS payment list with the proposed methodology reviewed by stakeholders. The new priority list is based on the JSA Skills Priority List incorporating skills that are currently in shortage or are forecast to be, and are skilled occupations with an apprenticeship pathway.¹³ These two data points are used to compile the Priority List; however, no direct stakeholder consultation is performed when the list is updated annually which is not consistent with the proposed methodology. Skills shortage is determined by JSA and relates to the ability to fill vacancies, with occupations with fill rates below 67 per cent highly likely to be in shortage.

2.12 The list is updated by DEWR in line with changes to the JSA Skills Priority List, which is published annually. The first update of the priority list was on 1 January 2023, increasing from 77 to 111 occupations.¹⁴ In advice for the 2023–24 Budget, DEWR noted that ‘The addition of 39 new occupations on the 1 January 2023 Priority List is budgeted to have an additional cost impact of $196.6 million on the Australian Apprenticeships Incentive System over five years from 2022–23.’

Development of the Incentives System

2.13 Incentives for Australian Apprenticeships, announced as part of the 2019–20 Budget, was to be implemented on 1 July 2020. Its intention was to simplify the AAIP by reducing incentive categories and extending some eligibility criteria, thereby responding to the Strengthening Skills review. The Incentives for Australian Apprenticeships program was to have 15 payment types (the AAIP had 30) with streamlined eligibility requirements.

2.14 Implementation of the Incentives for Australian Apprenticeships was delayed due to the COVID-19 pandemic, which also resulted in additional payments for apprenticeships.¹⁵ The Incentives for Australian Apprenticeships program was redeveloped into the Australian Apprenticeships Incentive System in response to the further reviews of the apprenticeships system and AAIP (discussed from paragraphs 2.2 to 2.6 and Table 2.1), along with lessons learned from the COVID-19 pandemic (refer to the analysis of the BAC and SAT payments in Table 2.1).

2.15 A Regulation Impact Statement (RIS) was produced to guide the changes.¹⁶ The RIS detailed the need for a more fiscally sustainable model of apprenticeship incentives that are better targeted to support commencements and completions in priority occupations and address skills shortages.

2.16 The RIS was informed by the Strengthening Skills review, the National Agreement for Skills and Workforce Development Review, the Wallis Surveys, data from the National Centre for Vocational Education Research¹⁷, and workshops with stakeholders. Feedback which led to the options presented in the RIS included providing apprentices more financial and non-financial support, reducing barriers to sign-up, targeting priority skills via apprenticeships, continuing to encourage increased commencements and ensure completions are considered.

2.17 The RIS set out five challenges to consider when reforming apprenticeship payments, set out in Table 2.2.

Table 2.2: Challenges outlined in the RIS

Source: Australian Apprenticeship Incentives System Reforms Regulation Impact Statement.

2.18 The ANAO analysed the issues identified from the key reviews and evaluations (see paragraphs 2.2 to 2.8) and the corresponding challenges from the RIS. The results are set out in Table 2.3.

Table 2.3: Issues identified in key apprenticeship reviews

Note a: The National Australian Apprenticeship Association produced a technical paper ‘A blueprint for strengthening apprenticeships’ in February 2022 which recommended 14 initiatives to improve the apprenticeship system.

Source: Australian Apprenticeship Incentives System Reform Regulation Impact Statement and ANAO analysis.

2.19 The RIS compared the initial option for the Incentives for Australian Apprenticeships program with two other options. The first option was only targeted to apprenticeships in priority occupations and the second option was a two phased step-down¹⁸ approach which was to become the current Incentives System. This option included payments to apprentices in priority occupations, unlike the AAIP which focused on payments for employers. No analysis was undertaken by the department on potential impacts if apprenticeship payments were ended or if a completely different system of payments was introduced.

2.20 The Office of Impact Analysis¹⁹ assessed the RIS as adequate, and indicated it would have benefited from greater public consultation with stakeholders and further analysis on its social and economic impacts.

2.21 The RIS provided an analysis of how the three options would address the five challenges, set out in Table 2.4.

Table 2.4: Options for apprenticeship programs

Source: Australian Apprenticeship Incentives System Reform Regulation Impact Statement and ANAO analysis.

Establishment of the new Incentives System

2.22 Submissions were provided by DEWR to the government in February and March 2022 detailing the new Priority List methodology and the options for the new Incentives System. The government agreed to the two-phased approach to the Incentives System in March 2022. This option met the apprenticeship challenges listed in the RIS by targeting incentives towards areas of skills shortages, providing financial support to both employers and apprentices, simplifying the incentives available and thereby reducing the administrative burden, and maintaining in-training support for apprentices. It also provides a step down from the additional payments provided during COVID-19, returning to pre-COVID investment levels during the second phase.

2.23 The Minister for Skills and Training was briefed in May 2022 and approved the grant guidelines in June 2022 (discussed at Table 2.6). Information provided to the minister on the implementation pathway for the Incentives System comprised plans for public communication and stakeholder engagement, contract variations with the AASNs, information on the legislative authority for payments, required system and business process changes, operational arrangements provided for in the grant guidelines, exemption from grants hub and policy issues and impacts.

2.24 The first phase of the Incentives System, from 1 July 2022 to 30 June 2024, provides a subsidy for both priority and non-priority occupations. Table 2.5 provides a summary of the payments available during the first phase of the Incentives System and how the payments incorporate feedback from reviews.

Table 2.5: Supports available during phase one of the Incentives System

Note a: The New Energy payment was introduced on 1 January 2023 and informed by consultations with Industry Associations, Unions and Peak Bodies.

Note b: Tutoring, mentoring and interpreter assistance is only available to Registered Training Organisations.

Source: Australian Apprenticeships Incentive System Guidelines and ANAO analysis.

Have suitable guidelines and processes been developed to support effective and consistent service delivery of payments?

Development of the program guidelines

2.25 Commonwealth grant programs are required to comply with the Commonwealth Grants Rules and Guidelines 2017 (CGRGs).²⁰ As the current Incentives System falls within the definition of a grant program (discussed previously in paragraphs 1.13 to 1.14), grant opportunity guidelines are required for the program.²¹ Grant guidelines which are clear, comprehensive, and consistent with policy objectives assist in ensuring accurate administration of the program through supporting quality decision-making. Regular reviews of the guidelines allow for updates to address program implementation issues or changes to policy, which ensures the guidelines remain accurate and up-to-date.

2.26 The Australian Apprentice Incentives System Program Guidelines (the guidelines) are the primary documentation for the program and provide key information on the program.

• An overview of the Incentives System, the purpose of the guidelines and the Australian Apprenticeship Support Network, and policies and funding of the Incentives System.
• Primary eligibility requirements, standard requirements for claiming payments and additional eligibility considerations.
• For each payment type detail on the payment type, eligibility requirements, payment schedule and rates, information on claiming payments and administrative information.
• Information on general administrative matters — how payments are made, withholding or refusing payment and suspect claims, debt recovery, waivers and review of decisions, taxation, conflicts of interest, privacy and freedom of information.

2.27 The guidelines were developed by DEWR staff and supported by internal legal advice where required. In developing the guidelines DEWR considered implementation issues and took account of multiple scenarios, for example, how different payment options may incentivise uptake of apprenticeships.

2.28 As part of the CGRGs, entities are required to undertake a risk assessment for the grant opportunity and determine an overall risk rating to inform the management and release of the program guidelines. DEWR assessed the program guidelines for the Incentives System as ‘medium’ risk, based on advice from the Australian Government Solicitor. In May 2022 the Department of Finance agreed to the medium risk rating and the Minister for Finance approved the release of the guidelines on 25 June 2022.²²

2.29 The initial program guidelines were published on GrantConnect²³ on 29 June 2022. The guidelines have been reviewed and updated three times since the program commenced on 1 July 2022.

• The guidelines published on 15 December 2022 were updated to include the New Energy Apprenticeships, which came into effect on 1 January 2023.
• The guidelines published on 11 August 2023 had minor administrative updates, with the priority list also updated to include annual changes.
• Updated guidelines were published on 21 December 2023, and included minor administrative updates, predominantly clarifying the eligibility of apprentices for payments. A revised Priority List to commence on 1 January 2024 was also published.

2.30 From May 2022 to December 2023, the responsible ministers were provided briefings on the Incentives System seeking approval of (or providing advice on) the program guidelines or changes to policy, as set out in Table 2.6.

Table 2.6: Ministerial briefings for the Incentives System

Source: ANAO analysis of ministerial submissions provided by DEWR.

Alignment of the program guidelines with the CGRGs

2.31 The ANAO assessed the program guidelines published in August 2023 against the CGRGs and the results are set out in Table 2.7.

Table 2.7: Assessment of the program guidelines with the CGRG mandatory requirements and key principles

Note a: The Secretary of DEWR has authorised delegation related to arrangements and grants for the purposes of section 1062A of the Social Security Act 1991 to the Senior Executive Service (SES) Bands 2 and 3 (up to the limit of the appropriation available for the relevant program) and the SES Band 1 (up to the value of a particular grant not exceeding $10 million). In practice, a SES Band 1 approves claims for payment under the Incentives System (refer to paragraph 1.17).

Source: ANAO analysis of the Incentives System Program Guidelines against the CGRGs

2.32 Overall, the program guidelines align with each of the CGRG mandatory requirements and key principles.

Supporting documentation

2.33 AASN providers are contracted to support the administration of the Incentives System on behalf of the Australian Government. They facilitate the training contract process and assist apprentices and employers to claim payments and complete other administrative matters. AASNs also run screening services to assist potential apprentices identify suitable apprenticeship pathways and provide in-training support during apprenticeships, such as mentoring.

2.34 DEWR has developed a range of factsheets (frequently asked questions/FAQS) to assist AASN providers, employers and apprentices to understand and/or administer the Incentives System. These factsheets cover topics such as: an overall summary of the Incentives System; the Priority List; New Energy Support Payments; school-based apprenticeships; hiring incentive payments; disability support payments; and taxation information.

2.35 The fact sheets contain clarifying information on each topic. For example, documents relating to payments provide an overview of the payment type, eligibility requirements, how payments are to be calculated, and the role of AASNs and State and Territory Training Authorities (STAs) in the claim process. Appendix 3 sets out examples of how the factsheets for the Priority Wage Subsidy, Hiring Incentive and Apprentice Training Support Payment align with the program guidelines.

Consultation with apprentices

2.36 DEWR has consulted with apprentices on their Incentives System experience. Workshops were held with apprentices to understand motivations and challenges experienced during their apprenticeships. A survey of apprentices was performed to understand their low claiming rates.

• A temporary blanket waiver of the three-month claim period for the Australian Apprentice Training Support Payment was enacted from 1 April 2023 because some cohorts of apprentices were experiencing difficulty in meeting the identity verification and Tax File Number requirements. The waiver allows apprentices to submit a manual claim via their AASN if the period to submit their first claim has expired.
• Due to the low claiming rates by apprentices, DEWR surveyed apprentices in September 2023 to identify barriers to claiming payments. Preliminary results from the survey indicated that the complexity of claiming, including the need to provide a Tax File Number, training plans and accurate information was a key factor.

Are appropriate systems in place to ensure accurate processing of payments?

Apprenticeships Data Management System (ADMS)

2.37 ADMS is the primary mechanism for the administration of the Incentives System. As shown in Figure 2.1, AASNs connect apprentices with employers and facilitate the signing of training contracts and STAs approve the training contract. The apprenticeship then progresses, with the apprentice undertaking on-the-job and classroom training. Once the effect date²⁴ is reached, the employer or apprentice is notified of their eligibility to claim a payment through ADMS and AASNs. AASNs can assist employers and apprentices to submit their claim and assess claim eligibility.²⁵ If the claim is determined to be eligible, the DEWR delegate approves the claim and a payment is made.

Figure 2.1: ADMS functionality for administration of the Incentives System

Source: ANAO analysis.

2.38 In November 2023 ADMS had 223,820 active users. ADMS is used by employers and apprentices, AASNs, STAs, Services Australia and DEWR. Each type of user is provided different levels of access based on user requirements as set out in Table 2.8.

Table 2.8: User functionality in ADMS

Note a: Different levels of access are provided to AASN staff members based on their level of responsibility and delegation.

Note b: STAs use their own systems which communicate with ADMS to perform this function.

Note c: Services Australia verifies Priority Wage Subsidy claims that are not verified through the automated process in ADMS. Services Australia is not involved in service delivery for any other Incentives System payments. Services Australia cannot amend the information provided by an employer in a claim, it can only verify that the evidence supports the amount claimed OR return it to the employer with instructions on what amendments need to be made.

Source: ANAO analysis.

Development of the system

2.39 ADMS was developed to replace TYIMS due to its increasing obsolescence. ADMS was developed as an in-house solution as this was determined to offer the greatest control over its development, provide the lowest risk to delivery, and provide greater potential for reuse across related systems. ADMS was designed to offer an improved user experience, increase efficiency and productivity, provide enhanced reporting capabilities, and have a greater adaptability to policy and program changes.

2.40 The second pass business case for the development of ADMS was approved by the government in August 2020, and the original approved budget for ADMS was $92.9 million. DEWR advised the ANAO that as at 31 December 2023, the revised overall budget²⁶ for ADMS was $124.96 million and $99.74 million had been spent on the development of ADMS.

2.41 ADMS development was split into four phases.

• Phase 1 from late 2020 to July 2021, sought to stabilise the previous system, TYIMS, and introduce new Application Programming Interfaces to assist with integration with AASN and STA systems.
• Phase 2 from July 2021 to June 2022, saw the development of early infrastructure and the building of user profiles.
• Phase 3 from July 2022 to June 2023, began the replacement of TYIMS with externally available releases of ADMS.
• Phase 4 from July 2023 to June 2024, will result in final enhancements to the user experience.

2.42 A summary of ADMS releases is provided at Appendix 4. Initial functionality in ADMS related to single touch payroll data exchange and user interfaces for each user profile. Progressive releases were timed for when functionality was required. For example, claim applications for the hiring incentive and apprentice support payments were released in December 2022, with the first claim periods for these payments due in January 2023.

2.43 In November 2023 the second last piece of core functionality in TYIMS was decommissioned with AASNs now performing almost all their business in ADMS. From March 2024 payments are processed and managed in ADMS and all claim types have been moved into ADMS.

Testing system functionality

2.44 System walkthroughs of ADMS and its interactions with the other systems — TYIMS and SAP — showed that the system controls could be relied upon to ensure that ADMS accurately administers the Incentives System. Controls ensured that claims were processed accurately, and the required evidence was recorded in ADMS, for example claimant details, eligibility assessment and claims approved..

2.45 Third party data interactions with ADMS were also reviewed: STA reference data for training courses; Single Touch Payroll²⁷ data from the Australian Taxation Office; and the Unique Student Identifier with the Department of Education. The latter two processes are real time and automated within ADMS and the system controls are appropriate to ensure that the correct evidence is uploaded into ADMS. The STA reference data is uploaded ADMS in a timely manner and errors resolved where identified.

System guidance

2.46 A series of factsheets and reference guides were produced to assist with the administration of the Incentives System and using ADMS, particularly while the system was being rolled out. These documents are produced and updated to incorporate changes to the Incentives System and ADMS as required, and contain information on a range of topics including:

• registering for ADMS;
• logging into ADMS using myGovID²⁸;
• providing payslips as wage evidence;
• an overview of the claim application process;
• how to create employer profiles;
• checking the status of a claim application; and
• how to assess applications.

2.47 Appendix 4 (Table A.4) lists the ADMS guidance documents and how they align with the program guidelines. DEWR advised that a detailed ADMS user guide is being developed in preparation for final project closure in early 2024.

Communication and training

2.48 AASNs receive regular email communications and training presentations on changes to the Incentives System and ADMS. Feedback received from AASNs informs communication and training requirements. DEWR advised that training material is developed for AASN providers, employers and apprentices for all functionality upon its release.

Gateway reviews

2.49 Gateway reviews are overseen by the Department of Finance and aim to support effective delivery of major IT projects within entities.²⁹ Five gateway reviews have been completed during the development of ADMS with a final end-stage review due in September 2024. A summary of the reviews, the ratings and the number of recommendations is shown in Table 2.9.

Table 2.9: Summary of ADMS gateway reviews and outcomes

Note a: Red was defined as: ‘Successful delivery of the program/project appears to be unachievable. There are major issues on program/project definition, schedule, budget, quality or benefits delivery. The program/project may need to be re-baselined and/or overall viability re-assessed.’

Amber was defined as: ‘Successful delivery of the program to time, cost, quality standards and benefits realisation appears feasible but significant issues already exist requiring management attention. These need to be addressed promptly.’

Green/Amber was defined as: ‘Successful delivery of the program to time, cost, quality standards and benefits realisation appears probable however constant attention will be needed to ensure risks do not become major issues threatening delivery.’

Green was defined as: ‘Successful delivery of the program/project to time, cost, quality standards and benefits realisation appears highly likely and there are no major outstanding issues that at this stage appear to threaten delivery significantly.’

Source: ANAO analysis of gateway reviews.

2.50 Recommendations were made against categories including business case and benefits, governance and planning, risk management, and readiness for service or the next stage. Of the 32 recommendations made to DEWR up until the March 2023 review, 29 had been noted by Finance as addressed or fully addressed in subsequent gateway reviews. DEWR has since fully addressed two of the remaining recommendations and the one recommendation from the March 2023 gateway review relating to a transition plan for decommissioning TYIMS was marked as partially addressed and in progress in the December 2023 review.

2.51 The March 2023 gateway review highlighted the success of the ADMS project and recommended DEWR:

• consider harnessing the ADMS approach to project implementation within the department; and
• consider sharing the successes achieved through the ADMS approach to project implementation with other areas of government.³⁰

2.52 The December 2023 gateway review subsequently found that:

…the ADMS project has further matured since the last review. Lessons have been learned from releases and are being actively sought through stakeholder engagement. This, along with continued workforce stability, business SMEs [subject matter experts] working alongside DSD in Agile delivery teams, and an effective dedicated SRO [senior responsible officer] model, has resulted in increasingly successful releases, most recently on 24 November 2023.

External stakeholders acknowledged recent project successes and reiterated the benefits the new system is now creating. This positive position has been facilitated by a comprehensive and well implemented change management and engagement strategy.

3.1 Establishing appropriate external and internal performance measures, and ensuring regular reporting against those measures, provides a view of program effectiveness and impact. A program of compliance activities that is linked to risk provides assurance that the program is being administered appropriately and facilitate continuous improvement.

Have appropriate compliance and program monitoring arrangements been established for the Incentives System?

Identification of risk

3.2 DEWR’s Enterprise Risk Management Policy and Framework require risk assessments to be developed at the enterprise level as well as the strategic and operational levels (the latter which cover policies, programs and projects, procurements, contracts and events).

3.3 DEWR has identified risks related to the Incentives System and mitigations to assist in managing each risk (see Appendix 5). The key risk relating to the Incentives System is ‘compliance breaches of the Incentives System’ and two of the treatments include:

• clear and consistent advice on the program guidelines and supporting material for Australian Apprenticeships Support Network (AASN) providers; and
• compliance monitoring of AASNs.

Compliance

Compliance workplan

3.4 The DEWR Skills and Training Compliance Governance Committee oversees compliance of skills and training programs. Its 2023–24 Compliance Workplan sets out the compliance activities to be undertaken for the administration of the Incentives System.

Table 3.1: Incentives System compliance activities 2023–24

Note: The compliance activities relate to both the Australian Apprenticeships Incentives Program (AAIP) and the Incentives System.

Source: Skills and Training Compliance Governance Committee Compliance Workplan 2023–24.

Assessment of compliance by AASN providers

3.5 AASN providers play a central role in the administration of the Incentives System and are required to meet the key performance indicators (KPIs) established under the AASN contract.

3.6 KPI assessment is performed over six-month periods (e.g. 1 February to 31 July or 1 August to 31 January) by staff in the DEWR State Office Network. Assessments are performed at the contract level as providers may hold individual contracts across different regions.

3.7 KPI4 – AASN services and AAIP/Incentives System administrative monitoring guide, requires AASN providers to accurately and appropriately administer the Incentives System including such areas as: ensuring correct eligibility advice is provided to employers and apprentices; claim forms are completed correctly and within timeframes; and data is accurately entered into the system.

3.8 KPI4 is assessed through compliance checks involving desktop reviews of AASN files and reports run from the Training and Youth Internet Management System (TYIMS) and/or ADMS. The sampling methodology was developed by Deloitte Access Economics in 2019 for the 2019–2024 AASN contract period. It was derived from previous methodologies developed by the Australian Bureau of Statistics used to monitor providers’ performance under the AAIP. The KPI4 assessment elements and sampling size are set out in Table 3.2.

Table 3.2: KPI4 assessment elements, sample size and weighting

Note a: Strong-performing providers had reduced sampling from round four onwards to reduce delays experienced in the assessment process.

Source: DEWR KPI4 monitoring guide.

3.9 Changes to the methodology were made from round five of the compliance monitoring period as the USI and address elements were no longer measured due to verification of these elements being integrated into ADMS. In addition, AASN providers who were found to have positive performance results in previous rounds had reduced sampling to 33 files to reduce delays experienced by DEWR staff in undertaking the KPI assessment process.

3.10 The Incentives System has been assessed alongside the AAIP as part of KPI4 from round five onwards, with previous rounds one to four assessing compliance with the AAIP only. The KPI4 results for rounds five to seven are set out in Table 3.3. The minimum benchmark for meeting KPI4 is 90 per cent compliance.

Table 3.3: Compliance monitoring of KPI4 February 2022 to July 2023

Note a: Compliance is achieved if the average score of all four elements in the monitoring period is 90 per cent or higher. The elements are assessed at the contract level. Each Australian Apprenticeship Support Network (AASN) provider (of which there are seven in total) can hold individual contracts across different regions and there are 24 contracts in total under the current AASN service arrangements.

Source: AASN provider performance summary.

3.11 The ANAO analysed rounds six and seven noting that the Incentives System came into effect from 1 July 2022 and the results of round five applied primarily to the former AAIP.

3.12 Figure 3.1 shows the round six compliance results for the four elements measured under KPI4.

Figure 3.1: Round six compliance results for KPI4

Source: ANAO analysis of the AASN provider performance summary for round six.

3.13 The three elements relating to accurate eligibility assessment, claim requirements met (fee for service) and claim accuracy were largely compliant with overall averages of 95.53, 95.95 and 97.19 per cent respectively. However, the timeliness element had significantly lower compliance with only eight of the 24 contracts meeting the 10-day processing time and an overall average of 75.77 per cent. Five of the eight contracts that did not meet the total compliance rate of 90 per cent met the target for all elements except processing time.

3.14 Processing times began to experience delays in round three (1 February 2021 to 31 July 2021). In 2020, stimulus payments for apprenticeships were introduced which had significant uptake levels and resulted in a higher workload for AASNs. Claiming of these payments began on 1 January 2021.

3.15 Figure 3.2 shows the round seven results of contracts for the KPI4 measure.

Figure 3.2: Round seven compliance results for KPI4

Source: ANAO analysis of the AASN provider performance summary for round seven.

3.16 In round seven, the number of contracts that met the three elements relating to eligibility assessment, claim requirements (fee-for-service) and claim accuracy were comparable to round six. The number of contracts that met the 10-day processing time increased with an overall average compliance rate across the 24 contracts of 88.15 per cent. Two of the five contracts that did not meet the total compliance rate of 90 per cent met the requirement for all elements except processing time.

3.17 New Energy Apprentice Support Payment spot checks (KPI2) was introduced in round seven as the New Energy Support payment began on 1 January 2023. DEWR advised the ANAO in December 2023 that it intends to commence reviewing KPI2 from January 2024 as the AASNs would have had their six and 12 month progress contacts with Incentives System participants.

3.18 When reporting the results of round seven to its executive, DEWR advised that it had strengthened performance management and monitoring with the expectation of improved compliance performance. To date DEWR has implemented measures such as:

• reviewing and streamlining the AASN performance management framework; and
• implementing more regular performance meetings and check ins with providers.

3.19 Results of compliance monitoring are used to provide feedback to AASN providers at the end of each round. DEWR issues letters to providers advising the actions necessary to correct identified issues, with those providers whose results fall below benchmarks assisted by DEWR State Contract Managers to improve future performance. If poor performance continues, the AASN providers are required to provide training interventions for their staff within 30 business days. If AASNs continue to fail KPIs over two monitoring periods, future fee-for-service payments may be withheld.

3.20 Where a provider has ongoing KPI compliance issues, a performance improvement plan may be instigated to provide greater oversight of the AASN provider’s compliance. One provider was placed on a performance improvement plan in June 2023. The performance improvement plan outlined strategies to improve the provider’s performance, including increasing the number of field staff, mentoring and training programs for staff, increased internal compliance monitoring, and improving internal documentation processes. DEWR advised that it ‘observed improved performance during this period, including an improvement in KPI scores and qualitative feedback from State Contract Managers regarding significant improvements in responsiveness and engagement with the Department.’

3.21 Debt recovery is performed when overpayments are identified through the compliance monitoring. If a debt is raised against an AASN provider, it is reclaimed against their fee-for-service payments under the AASN contract.

Eligibility overrides monitoring

3.22 An additional compliance check conducted by DEWR on the Incentives System is the monitoring of manual overriding of eligibility by AASNs in ADMS. AASNs can manually override system-generated eligibility for a payment if they determine that the employer or apprentice is eligible for the payment. When a manual override occurs the AASN provider is required to provide a comment in a free-text box detailing the reason for the override. DEWR conducts a review of the comments to determine if a legitimate reason was provided and the decision was correct.

3.23 In March 2023, DEWR noted that insufficient details were being provided in the free-text box by AASN service providers when overriding the system generated eligibility. Reports generated from eligibility override checks are discussed with AASNs at monthly meetings with feedback provided by DEWR when more information is required in the free-text box. As a result, further detail is now being provided by AASNs on the reasons for overrides being made. DEWR advised that as at September 2023, there have been no instances of incorrect eligibility overrides identified through the reviews.

3.24 DEWR finalised a standard operating procedure for the eligibility override checks in January 2024.

Is program expenditure, trends (uptake) and performance regularly monitored and reported?

Data collection

3.25 ADMS has the capability to collect a range of data relating to the Incentives System, which was not previously available through TYIMS. Examples of the types of information that can be reported as at December 2023 include:

• employer, apprentice and apprenticeship details;
• apprenticeship activity, e.g. commencements and completions;
• eligibility for payments;
• claiming activity; and
• payments.

3.26 Data from ADMS is stored in the ADMS data warehouse, organised into database tables and presented through the data analytics tool, PowerBI. Figure 3.3 shows the data movement process.

Figure 3.3: Data flow from ADMS to reports

Note: Audit database — data from the ADMS production system is loaded into the audit database each night within the ADMS data warehouse for database auditing purposes, and data is in the same structure as the production system.

Landing database — data from the ADMS production system is loaded into the landing database, and data is shuffled into different types of tables based on defined rules.

Reporting database — this is the integration and reporting layer for ADMS reporting; data is reshaped for reporting for different business domain areas.

Source: ANAO analysis.

3.27 A review of the end-to-end reporting process for the Incentives System found that DEWR has a well-designed process in place to manage the movement of data from ADMS to the data warehouse. This includes the data flows from ADMS to the audit database in the data warehouse, through to being loaded into the landing and reporting databases, and to the final presentation of results as reports in PowerBI. In addition, relevant business rules are applied at different levels of the data movement. DEWR was unable to provide evidence that the agreed business rules and specific reporting requirements were documented and applied when transforming and integrating data for the reports.

Internal performance reporting

3.29 DEWR prepares monthly status reports on the Incentives System which are presented as part of the papers for the Skills and Training Executive Committee.³¹ The Committee meets monthly to consider: implementation of initiatives across the skills group; management of risks and issues; making strategic and operational decisions; and supporting effective management of resources.

3.30 The status reports provide an update of the Incentives System including:

• overview of the program’s objectives;
• overall status assessment via green/amber/red rating, with a comparison against the previous month’s status and accompanying commentary including financial performance and uptake of claims;
• budget/resourcing summary by quarters;
• list of achievements for the current reporting period and planned achievements for the next reporting period;
• milestones with traffic light status and brief summary of issues; and
• key risks and mitigation strategies, with traffic light rating.

3.31 The report notes that because the Incentives System is demand driven, there are no identified key performance indicators for the program.

3.32 Another report that DEWR produces for internal use is the Australian Apprenticeships Incentive System program performance report. It provides information displayed in a dashboard style and covers: the level of expenditure from program commencement (1 July 2022) to date including breakdown by payment type; numbers of employers and apprentices assisted; numbers of claims; and quarterly expenditure for grants reporting (see paragraph 3.46). Similar to the status reports discussed in 3.30 above, there are no performance targets included in the program performance reports. The reports are available to select staff in Apprenticeship Operations Branch, Apprenticeships Policy Branch, and DEWR’s finance area (for monitoring potential variances between ADMS and SAP).

3.33 DEWR provides fortnightly reports to the minister through their office on the New Energy Apprenticeships Program.³² These reports provide information on:

• the number of New Energy Apprentices, including net increases, commencement numbers, and retention rates;
• an overview of employer profiles, apprenticeship locations, occupation categories, demographics; and
• compliance monitoring outcomes.

3.34 No feedback is provided by or sought from the minister or their office once the reports are submitted via email. These reports do not contain performance measures or targets but rather transactional data on take-up numbers, budget and expenditure.

3.35 With no internal performance measures or targets in place³³ for the three internal reports discussed above, it will be challenging for DEWR to determine whether the Incentives System is meeting its program objective (discussed further at paragraph 3.41).

External performance reporting

Corporate reporting

3.36 The department has had a corporate performance measure relating to the AAIP since 2020–21 and this measure continued (without change) under the Incentives System (see Table 3.4).

Table 3.4: AAIP and Incentives System performance measure

Note: Prior to 2020 the performance measure was ‘Growth in the number of apprenticeship commencements’.

Source: DEWR Corporate Plans 2021–22 to 2023–24.

3.37 As part of the performance statements audit of the Department of Education, Skills and Employment, the ANAO assessed the performance measure against section 16EA of the Public Governance and Performance and Accountability Rule. Section 16EA of the Rule and the Department of Finance Resource Management Guide (RMG) 131 Developing good performance information requires entities to have meaningful performance information which relies upon a clear understanding of the entity’s purpose and expressing it in a way that is related and measurable.³⁴

3.38 As the performance measure and methodology used to determine performance results for the Incentives System (and the former AAIP) has remained unchanged since the 2021–22 performance statement audit, the ANAO’s findings are applicable for the 2022–23 reporting period.

3.39 The ANAO found the measure to be compliant with the requirements of section 16EA and RMG 131.

• Related — the measure is related to the key activity ‘Respond to national future skills needs through access to VET graduates with the required skills’.
• Reliable and verifiable — calculation of results for the measure uses an approved methodology documented in its corporate plan, and a clearly identified data source through the use of National Centre for Vocational Education and Training (NCVER).
• Assessable over time — the measure and methodology has remained unchanged over the past three years and therefore the results can be assessed and compared over that period.
• Free from bias — NCVER is an independent, not-for-profit subject-matter expert, and the data used to calculate the results of the performance measure is publicly available on the NCVER website.

3.40 In 2022–23 the target was reported as achieved, with a 1.6 per cent increase in the number of apprenticeship commencements in the first six months of the financial year compared to the first six months of 2019–20 (pre-COVID). When DEWR reports an increase in numbers compared to 2019–20, then technically it is not meeting the intention of the target because it has exceeded the target rather than maintained numbers.

3.41 The performance measure and target no longer provide a clear view of program impact under the new Incentives System. As the program objective is to contribute to the development of a highly skilled and relevant Australian workforce that supports economic sustainability and competitiveness, a target of increasing numbers of commencements rather than maintaining them will more effectively measure the achievement of the program objective. In addition, if the level of apprenticeships completions is included in the performance measure, that could provide a clearer view of program impact.

3.42 The Regulation Impact Statement (RIS) developed for the Incentives System identified potential impacts for apprenticeship commencements and completions:

• an expected increase in commencements by around 11,500 per year for each of the first two years then 5,500 per year ongoing, compared to pre-COVID levels; and
• an expected increase in the proportion of apprentices who complete their priority apprenticeship by 7.4 per cent.

3.43 The identification of these potential impacts/benefits, and the increased availability of data through ADMS, indicates that DEWR has the capability to more effectively measure program impact.

GrantConnect

3.46 Payments made through the Incentives System are reported by DEWR on GrantConnect, as the program meets the definition of a grant under the Commonwealth Grant Rules and Guidelines 2017 (CGRGs). As at November 2023, 174,679 grants totalling $180,103,049 had been reported for 2022–23 and July to September 2023–24. The reported numbers on GrantConnect align with DEWR’s internal expenditure reporting.

3.47 To meet the requirements of the CGRGs, DEWR is required to report on GrantConnect no later than 21 days after the grant takes effect (or in the case of the Incentives System, when a payment is made to an employer or apprentice). DEWR reports quarterly and on the total payments made across all payment types available under the Incentives System. DEWR commenced reporting in August 2023 and reported again in November 2023. No further reports have been published on GrantConnect as at February 2024.

Is a suitable evaluation being developed to assess program impact?

3.48 The evaluation of grant opportunities is set out in the CGRGs which state that:

Officials should undertake an evaluation of a grant opportunity before initiating further grant opportunities or extending existing grant agreements, in order to determine whether existing grants administration processes, practices and requirements remain applicable.

3.49 From the establishment of the Incentives System, DEWR committed to undertake a checkpoint review around late 2023 before phase two of the Incentives System commences from 1 July 2024, as set out in Table 3.5.

Table 3.5: References to undertaking a checkpoint review of the Incentives System

Source: ANAO analysis of DEWR documentation.

3.50 In October 2023, government agreed that DEWR complete a two-month checkpoint review of the Incentives System and a broader eight-month strategic review of the Australian apprenticeships.

3.51 DEWR advised the ANAO in November 2023 that the check point review was underway, and due to be completed around January 2024. This check point review will involve analysis of data from ADMS and a survey of apprentices to understand the impact of the payments provided under the Incentives System. The checkpoint review will also inform the design of phase two of the Incentives System. DEWR further advised the ANAO on 8 March 2024 that the findings from the checkpoint review are currently being considered by the government.

3.52 DEWR also advised that the strategic review will be a continuum of the check point review and will assess the Incentives System along with the broader apprenticeships environment. As set out in the Mid-Year Economic and Fiscal Outlook (MYEFO) 2023–24, the review will:

• include an early focus on financial supports for apprentices
• consider opportunities to update program settings to better support apprentices
• be informed by targeted research and broad consultation designed to deepen the Government’s understanding of the apprenticeships system.

3.53 The strategic review is to be led by an ‘experienced and eminent expert’ and completed around July/August 2024. The eminent expert will be selected by the Prime Minister. In MYEFO 2023–24, the government provided $5.4 million over two years for DEWR to undertake the strategic review.

3.54 Draft terms of reference for the strategic review were prepared by DEWR in November 2023. This document briefly set out the scope of the review and mentioned the appointment of the eminent reviewer/expert. DEWR advised the ANAO on 24 January 2024 that the Department of Prime Minster and Cabinet had not made any decisions regarding the review. On 19 February 2024, the Minister for Skills and Training announced that the Honourable Justice Iain Ross AO and Ms Lisa Paul AO had been selected to lead the strategic review. DEWR advised on 8 March 2024 that it has commenced planning for consultations.

Appendix 1 Entity response

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 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.

• Department of Employment and Workplace Relations (DEWR) developed and finalised the standard operating procedure for the Incentives Systems eligibility checks compliance activity (see paragraph 3.24).
• Two rounds of reporting on GrantConnect reporting were performed to partially comply with the Commonwealth Grants Rules and Guidelines 2017 (see paragraphs 3.46 to 3.47).

Appendix 3 Incentives Systems fact sheets and guidance

1. The tables below provide examples of how the factsheets for the Priority Wage Subsidy, the Hiring Incentive, the Apprentice Training Support Payment, and Apprenticeship Data Management System (ADMS) guidance and how they align with the Incentives System program guidelines.

Table A.1: Priority wage subsidy fact sheet

Source: ANAO analysis of documentation developed by DEWR against the guidelines.

Table A.2: Hiring incentive fact sheet

Source: ANAO analysis of documentation developed by DEWR against the guidelines.

Table A.3: Australian apprentice training support payment fact sheet

Source: ANAO analysis of documentation developed by DEWR against the guidelines.

Table A.4: Apprenticeship Data Management System (ADMS) guidance

Source: ANAO analysis.

Appendix 4 Apprenticeship Data Management System releases

Table A.5: History of Apprenticeship Data Management System (ADMS) releases

Source: ANAO analysis of DEWR ADMS documentation.

Appendix 5 Incentives System risks

1. The Department of Employment and Workplace Relations (DEWR) developed a risk management plan for the Australian Apprenticeships Incentive System (the Incentives System) which was updated in August 2023 (version three). The document sets out the risks, causes treatments and their effectiveness ratings, and risk owners. A summary of the risks and treatments is set out in Table A.5 below.

Table A.6: Incentives System Risk Management Plan August 2023

Source: DEWR Incentives System risk management plan.