Introduction

1. Indigenous Australians experience higher levels of unemployment than non‑Indigenous Australians and improving the participation of Indigenous Australians in the economy has been a long‑term policy focus of governments.¹ In 2008, the Council of Australian Governments (COAG) committed to closing the gap on Indigenous disadvantage. One of the six Closing the Gap targets relates to employment outcomes—to halve the gap in employment outcomes between Indigenous and non‑Indigenous Australians by 2018. To meet this target, the level of employment for Indigenous Australians would need to increase by approximately 100 000 persons, which represents an increase of almost 60 per cent on the number of Indigenous people employed in 2008–09.²

2. There are a number of general factors that can influence employment outcomes, including the extent to which opportunities for employment exist and individuals’ circumstances in relation to job‑readiness, skills, education and health or disability. There has been a range of different employment programs administered by the Australian Government to address Indigenous employment; currently two of the major programs are the Indigenous Employment Program and the Job Services Australia network. Both of these programs operate to train and place Indigenous people into employment.

3. The National Indigenous Reform Agreement (NIRA), which provides the framework for the Closing the Gap policy, also identifies the importance of involving the private sector in initiatives to help address Indigenous disadvantage, alongside the efforts of government. As part of this, the Australian Government committed to encouraging the private sector to engage with Indigenous Australians and to contribute to Indigenous Australians’ economic development, including through mechanisms such as the Australian Employment Covenant. The NIRA also notes that engagement with the private sector and a focus on industry sectors with strong potential for jobs growth is fundamental to improving economic development opportunities for Indigenous Australians.³

Australian Employment Covenant

4. The Australian Employment Covenant⁴ (the Covenant) was launched on 30 October 2008 by the then Prime Minister Kevin Rudd and the Covenant founder, Mr Andrew Forrest with the aspiration of securing 50 000 sustainable jobs to be filled by Indigenous Australians (although a timeframe was not specified). The Covenant is a national, industry-led initiative designed to facilitate connections between Indigenous job seekers, employers and Commonwealth‑funded employment and training service providers. The Covenant model involves employers publicly committing to providing jobs for Indigenous people and, the Australian Government brokering training solutions for job seekers, placing job seekers into Covenant identified jobs and providing ongoing placement support for these job seekers. The Australian Government supported the Covenant as it had the potential to make a significant contribution to its Closing the Gap target and to complement other employment initiatives.

5. The Covenant was announced and implemented at a time when the Australian Government was already delivering various employment programs aimed at helping Indigenous Australians break the cycle of unemployment. These programs included the Indigenous Employment Program (IEP), Community Development Employment Projects (CDEP), and Job Network (Job Services Australia (JSA) from 1 July 2009). The Covenant’s point of difference to existing Indigenous employment programs is that it is industry‑led, and aims to drive active engagement and partnership with the private sector to develop explicit commitments to tackle Indigenous disadvantage.

6. To coordinate the engagement with the private sector, the Covenant founder, Andrew Forrest, established a not‑for‑profit organisation known as the Australian Employment Covenant (AEC). The AEC’s role was to work with the private sector and act as the bridge between the sector and the Government.

7. Under the Covenant the Australian Government committed to:

• support and promote the Covenant’s objective, on a non‑discriminatory basis and in accordance with the law;
• engage Employment Service Providers in efforts to attract and support at least 50 000 Indigenous people to participate in Covenant training, placement and support; and
• provide for pre‑employment job training for Indigenous job seekers tailored to the specifications of Covenant Employers (who were to guarantee employment upon completion of specified training by the Indigenous job‑seeker).

8. To give effect to these commitments, the Australian Government, agreed to undertake specific activities in support of the Covenant, which were to be implemented by the Department of Education, Employment and Workplace Relations (DEEWR). The four specific roles were:

• facilitating and coordinating training for eligible Indigenous Australians to the appropriate job standards of the employing industry;
• facilitating referral, placement and support processes involving the take up of AEC jobs by eligible Indigenous job seekers;
• facilitating post‑placement and mentor support for eligible Indigenous Australians through universal employment services, the Indigenous Employment Program and the Community Development Employment Projects Program; and
• recording and tracking of Covenant jobs and the placement and retention of Indigenous job seekers into Covenant jobs and training (where the information is recorded within the Australian Government’s IT systems) following the implementation date in February 2009.⁵

9. The Australian Government’s commitments had a short and long‑term focus. In the short‑term, the Government agreed to contribute financially to the establishment of the AEC and provide direct funding to the AEC of up to $20.9 million for the first three years of the Covenant. Over the longer‑term, the Australian Government had an ongoing role to support the Covenant to achieve its target of 50 000 sustainable jobs. The Government planned to fulfil its commitments to pre‑employment training and employment placement support through existing programs such as the IEP, JSA and the CDEP Program. The Australian Government expected to contribute up to $200 million worth of funding to the Covenant through the IEP and JSA alone in the form of funding for pre‑employment training and employment placement support, some of which was provided directly to Covenant employers.

10. The Minister for Indigenous Employment and Economic Development reaffirmed the Australian Government’s ongoing support for the Covenant in March 2013. The Minister also announced that the Australian Government would continue to meet its commitments by providing direct assistance to many of the employers who have signed up to the Covenant and by providing Indigenous job seekers with pre-vocational training and other support to help them to take up the jobs available through the Covenant.⁶

11. In March 2013, the AEC reported that more than 330 employers had made public commitments of over 60 000 jobs for Indigenous Australians and that this had led to 14 000 job placements.⁷ The ‘covenant jobs’ come from a cross‑section of the economy, including industries such as the mining, retail, hospitality, transport and construction sectors. Also in March 2013, the Australian Government reported that it had allocated $150 million worth of support to Covenant employers through the IEP.⁸ Activities able to be supported with this allocation included training for specific operations, such as warehousing, meat processing or forklift driving, or general industry training in areas such as hospitality, construction, resources sector, and business administration. Some funded projects also included workplace mentors to provide ongoing support to job seekers once they had commenced in employment.

Audit objective, scope and criteria

12. The objective of the audit was to assess the effectiveness of DEEWR’s management of the Australian Government’s contribution to the Covenant. The scope of the audit is the Australian Government’s role in the initial establishment of the Covenant and its ongoing contribution through other employment programs.

13. To reach a conclusion against this objective the ANAO examined whether DEEWR established:

• effective governance arrangements to support the Australian Government’s contribution to the Covenant and its objectives;
• implementation arrangements to facilitate the Australian Government’s responsibilities under the Covenant; and
• performance systems that enabled the department to undertake the Australian Government’s performance reporting role under the Covenant agreement and to monitor the Australian Government’s broader contribution to the Covenant.

Overall conclusion

14. The Australian Government agreed to the Australian Employment Covenant (the Covenant) in October 2008 as a means of contributing to Closing the Gap in Indigenous employment. The Covenant represents an innovative approach to collaboration between the public and private sectors to encourage community involvement and support in the delivery of policy outcomes. However, while the partnership has achieved some of its aims in relation to employment outcomes and generating job commitments from business and industry, it did not facilitate the expected level of ongoing collaboration. The Department of Education, Employment and Workplace Relations’ (DEEWR’s) management of the Australian Government’s contribution was effective in part, but there is limited performance information available to accurately measure the Australian Government’s contribution to the Covenant. In supporting the Covenant, DEEWR considered that the existing employment service delivery system was sufficient to meet the Australian Government’s commitments without major changes to the department’s approach. While there were some efforts to facilitate involvement of the employment service network in the early stages of the Covenant, this was not sustained, and as a consequence the department’s approach to the Covenant was not significantly different from the existing service delivery approach. Future joint initiatives would also benefit from consideration as to where existing service delivery models can be adapted to better support partnership approaches.

15. Establishing effective arrangements to support collaboration between the Australian Employment Covenant (AEC) and DEEWR was an important element of the Covenant. DEEWR developed a number of mechanisms to guide and support delivery of the Australian Government’s commitments and to collaborate with the AEC. These arrangements were largely focused on the initial implementation of the Covenant, and included the establishment of the Australian Government Coordinator for the initiative, an internal implementation team, a departmental taskforce, internal working groups and an inter‑departmental committee. These initial arrangements were not supplemented by the development of ongoing management arrangements tailored to the Australian Government’s role in the Covenant. As a consequence, the department’s long‑term approach to supporting the Covenant was not well‑defined.

16. To support the Australian Government’s contribution to the Covenant, DEEWR committed to recording and tracking Covenant jobs as well as the placement and retention of Indigenous job seekers into Covenant jobs and training. DEEWR identified gaps in its data collection system after the initial implementation of the Covenant but did not progress further work to address these gaps. Consequently, DEEWR largely relied on data from the AEC to report outcomes in relation to the Covenant. While DEEWR was not responsible for measuring the overall success of the Covenant, the department should, at a minimum, have been able to track and readily identify the extent to which it was meeting the commitments made by the Australian Government to training, referral, placement and ongoing support for Indigenous job seekers.

17. In order to fulfil its commitments for training and employment support, DEEWR relied on the AEC to provide information from employers about detailed job requirements, including skills and qualifications, against which the department could tailor training solutions. DEEWR’s information requirements did not fully align with the information the AEC provided about job requirements and this resulted in fewer packages of support being developed than expected. There was also limited awareness within the DEEWR service provider network of opportunities associated with the Covenant. At the end of four years, the department had engaged on training needs with approximately 70 Covenant employers, or less than a quarter of employers who had committed jobs under the Covenant. Adopting additional measures to facilitate the improved connections between the employers and job seekers sought through the Covenant, would have better supported the Australian Government’s commitments.

18. The Covenant initiative is consistent with broader Australian Government objectives of engaging with the private sector in Closing the Gap on Indigenous Disadvantage. As an industry‑led partnership, it represented an innovative approach to delivering employment outcomes that relied on collaboration between parties. The Covenant’s implementation has highlighted a number of issues for further consideration in future partnership arrangements entered into by the Australian Government. These include: establishing a clear understanding of the timeframe of the partnership and when key outcomes are to be achieved, and developing reliable approaches to measuring contributions to partnerships.

19. Against this background, the ANAO has made one recommendation directed at DEEWR developing options, in consultation with the AEC, to clarify the Australian Government’s approach and ongoing contribution of the Covenant and more effectively measuring the Australian Government’s contribution to the initiative.

20. Partnerships between governments and industry, such as the Covenant, are likely to be ways governments can leverage from, and build greater resilience in, communities going forward. From a policy perspective, it is important that governments learn from and develop such arrangements. In the case of the Australian Employment Covenant, the initiative was innovative, and the experience highlights that benefits can be achieved through this kind of partnership. The experience also underlines the importance of active engagement with existing service delivery mechanisms, adjusting arrangements where necessary and, having the means of assessing both the contributions to the partnership and overall value of the initiative.

Key findings by chapter

Arrangements to Support Collaboration (Chapter 2)

21. Successful partnerships are supported by strong management arrangements that facilitate effective collaboration between the different parties. It is also important that the partners have visibility over the results being achieved by the implementation of agreed strategies and the individual contributions directed to the achievement of common goals. In the case of the Covenant, the preconditions for successful collaboration were present with, in the first instance, the establishment of a shared goal, the authoritative support of the respective organisations’ leaderships and formal supporting arrangements.

22. The two main formal arrangements between the AEC and DEEWR were the Covenant document and the funding agreement. These were supported by the establishment of the role of the Australian Government Coordinator and further by the secondment of DEEWR officers to the AEC. However, the Covenant was a high level document and did not provide a detailed description of the roles and responsibilities to support implementation by each party. The funding agreement set out the AEC’s responsibilities specifically in relation to the initial funding, although not broader responsibilities in relation to the Covenant’s outcomes. Further tailored arrangements were not developed to direct and provide visibility over DEEWR’s ongoing contribution to the Covenant or the specific outcomes to be achieved.

Implementation Arrangements (Chapter 3)

23. To implement the Australian Government’s commitments, DEEWR relied heavily on the AEC to provide information from employers regarding training requirements. In general, DEEWR considered that information provided by the AEC on job commitments did not include sufficient specification of job details to enable service providers to take appropriate action. When this information approach demonstrated limited success, DEEWR developed several alternative strategies to collect information about training needs but these were not fully effective and the result was that DEEWR did not develop an industry or regional approach to addressing employer needs in line with the Australian Government’s agreed role.

24. While there was some early engagement with existing programs and service providers, a survey by DEEWR of employment service providers in April 2009, just after DEEWR’s promotional activities, found that only 35 per cent of providers understood their role in the delivery of the Covenant. An outcome of an internal preliminary evaluation report completed by DEEWR in February 2010 found that significant gains were likely to be made by increasing employment service providers’ awareness and understanding of the Covenant but DEEWR did not pursue this strategy. Consideration was also not given to the existing contractual incentives of employment service providers and whether there was scope to modify these to accommodate the AEC model.

25. In implementing the Australian Government’s commitments under the Covenant, DEEWR considered that its approach was to ensure that the needs of Covenant employers were met by the existing employment and training systems. Further, the department considered that the nature of the existing service delivery model could address the needs of individual employers and that significant change to service delivery was not necessary to support the Covenant. While it was intended that the Covenant would be supported through existing programs, the Covenant also presented opportunities for DEEWR to engage with new employers and implement new approaches to training and employment. A more sustained approach to engaging with employment service providers, such as by industry and/or employer, may have supported additional engagement with employers in regions. Future joint initiatives would benefit from consideration as to where service delivery models can be adapted to better support partnership approaches.

Performance Measurement (Chapter 4)

26. DEEWR is not responsible for measuring the overall results of the Covenant, but it is a partner to the agreement and should, at a minimum, have been able to measure the Australian Government’s contribution. DEEWR’s public reporting on this contribution has a number of limitations. For example, in May 2012, the Australian Government announced that since the commencement of the Covenant, the Australian Government had assisted 73 employers with up to $132 million in funding. Some caution needs to be applied when considering the department’s performance data as the figures include funding committed to employers (not actual expenditure on training and support)⁹, the figures include a number of errors, projects entered into before the Covenant was announced and funding to some service providers (who were also Covenant employers). Data from the department’s system also indicates that approximately 6000 26‑week outcomes have been achieved with Covenant employers. Similarly, a more accurate figure cannot be determined due to the limitations in the department’s systems.

27. DEEWR did not establish a formal or regular monitoring mechanism in relation to each of its four roles under the Covenant and did not set business targets to be achieved in each area. Without detailed operational targets against the Australian Government’s commitments, it was difficult for the department to specifically measure its progress and achievements. In the absence of a well developed performance framework, DEEWR was unable to regularly assess its own overall performance, or readily identify the extent to which it was meeting commitments made by the Australian Government.

28. DEEWR initially made a number of changes to its employment services systems to enable the department to track information and expenditure in relation to Covenant placements and employers. In 2009, DEEWR identified concerns with quality of data collected through its own systems. However, the department decided against further investment in its systems. Similarly, after undertaking initial evaluation work, the department decided not to complete a final evaluation. The lack of performance information and evaluation represents a missed opportunity for the department to assess the value of the Covenant model, and importantly, to inform future partnerships of this nature.

Summary of agency response

29. DEEWR provided a formal response to the proposed report which is contained in full in Appendix 1. A summary of DEEWR’s response was also provided:

The ANAO has acknowledged in its report that DEEWR engaged positively with the initiative and saw the Covenant as an opportunity to strengthen linkages between employment service providers and, employers and Indigenous job seekers. The ANAO recognises both the deployment of the Australian Government Coordinator and the secondment of a number of department staff to the AEC as new and useful initiatives.

The audit has pointed to several broad areas in which the department could have been more responsive, over time, to the opportunities presented by the initiative and to the need for clarity in roles, responsibilities and appropriate monitoring of activities.

DEEWR believes that as this is an audit of a partnership rather than a program, it represents a relatively untested approach for audits. As the ANAO has audited only one side of the partnership the conclusions that can be drawn are necessarily limited. Without a similarly in depth audit of the AEC side of the partnership the audit missed the opportunity to examine the interdependencies between partner roles and responsibilities - for example the capacity of government-funded employment services to prepare and train Indigenous job seekers for Covenant jobs was dependent on the ability of the AEC to work with employers to identify the availability of specific jobs and skill requirements so providers could tailor training and other services to meet these specific needs, but the audit has not examined the AEC's performance of this function.¹⁰

DEEWR is strongly committed to increasing employment outcomes for Indigenous Australians. DEEWR works actively with Indigenous Australians, employers, industry groups and providers to maximise employment outcomes for Indigenous Australians. The success of this partnership approach is evidenced by the outcomes achieved through Government-funded employment services over the period of the Australian Employment Covenant. To illustrate this, the department notes that, from 1 July 2009 to 31 March 2013, over 152,000 job placements were achieved with Indigenous Australians by Job Services Australia (JSA).

The partnership with the Australian Employment Covenant provided an opportunity to support a new approach to collaboration between the public and private sectors through an industry-led initiative supported by Government funding. The initiative has been successful in generating aspirational commitments from employers, with the AEC reporting over 60,000 commitments to date. However, job commitments from employers do not necessarily lead directly or immediately to identified jobs that can be filled by Indigenous Australians. The commitments made by employers reflect the forward commitments of companies across Australia which will need to be filled progressively over a number of years. The JSA job outcome data reported above shows that when employers have identified vacancies with clear skill requirements, jobs are filled.

Summary of the Australian Employment Covenant’s response

30. The AEC organisation was not audited by the ANAO, however due to its role in the Covenant initiative the AEC was provided with relevant extracts of the proposed report. The AEC provided a formal response to the proposed report which is contained in full in Appendix 2. A summary of AEC’s response was also provided:

On 30 October 2008 business leaders gathered together at Kirribilli House to participate in the launch of the Australian Employment Covenant. The launch was set at a significant point in our nation’s history. The apology to the Stolen Generation had been made in Parliament earlier that year and Australia’s conscience was focused on delivering meaningful reconciliation.

The message from business leaders to both the Australian Government and Indigenous Australians was that the issue of Indigenous disparity was not just a Government or Indigenous Australia problem but was in fact an opportunity for all Australians to solve together and business leaders, who carry the responsibility for the future hiring decisions, could play a significant role in ending the disparity through employment.

338 employers have committed over 62,000 jobs under the Covenant. To date nearly 15,000 jobs have been filled by Indigenous Australians. We acknowledge the efforts of Indigenous people, employers and the Australian Government, in particular DEEWR in driving these results.

The Proposed Audit Report acknowledges the challenges faced in the implementation and fulfilment of the Covenant’s commitments. In spite of these challenges we remain committed to working with the Australian Government plus State and Territory Governments to ensure the balance of jobs are filled.

Recommendation

Footnotes

[1] In 2006, according to Census data, the unemployment rate for Indigenous people was 16 per cent. In 2011, the unemployment rate for Indigenous people was 17 per cent. At both points in time, the unemployment rate for Indigenous people was more than three times the unemployment rate of non‑Indigenous Australians.

[2] Council of Australian Governments, National Indigenous Reform Agreement (Closing the Gap) [Internet], COAG, Canberra, 2008, p. 8, available from <http://www.federalfinancialrelations.gov.au/content/npa/health_indigenous/indigenous-reform/national-agreement_sept_12.pdf> [accessed 21 January 2013].

[3] Council of Australian Governments, National Indigenous Reform Agreement (Closing the Gap) [Internet], COAG, Canberra, 2008, p-A40, available from <http://www.federalfinancialrelations.gov.au/content/npa/health_indigenous/indigenous-reform/national-agreement_sept_12.pdf> [accessed 21 January 2013].

[4] The Australian Employment Covenant refers to: the agreement signed by the relevant parties (the Covenant), and the entity that coordinates the commitment of ‘covenant jobs’ by employers (the AEC).

[5] Australian Government, Fact Sheet – The Australian Employment Covenant [Internet], Department of Education, Employment and Workplace Relations, Canberra, 2008, available from <http://www.deewr.gov.au/Employment/Pages/AustralianEmploymentCovenant.aspx> [accessed 30 May 2012].

[6] J Collins (Minister for Community Services, Indigenous Employment and Economic Development), ‘GenerationOne breakfast’ [Internet], Speech to the GenerationOne Senior Executive Breakfast, Australian Parliament House, Canberra, 20 March 2013, available from <http://www.ministers.deewr.gov.au/juliecollins/generationone-breakfast> [accessed 21 March 2013].

[7] A Forrest, ‘Expectations Lead – Results Follow’ [Internet], Speech to the GenerationOne Senior Executive Breakfast, Australian Parliament House, Canberra, 20 March 2013, available from <http://generationone.org.au/blog/2013/03/speech-generationone-senior-executive-breakfast-canberra> [accessed 21 March 2013]. In June 2013, the AEC informed the ANAO that 338 employers had made commitments to 62 000 jobs and that 15 000 job placements had been made.

[8] J Collins (Minister for Community Services, Indigenous Employment and Economic Development), ‘GenerationOne breakfast’ [Internet], Speech to the GenerationOne Senior Executive Breakfast, Australian Parliament House, Canberra, 20 March 2013, available from <http://www.ministers.deewr.gov.au/juliecollins/generationone-breakfast> [accessed 21 March 2013].

The department informed the ANAO that DEEWR’s practice is to report commitments rather than actual expenditure to reflect the amount of support that the Australian Government has agreed to provide as expenditure figures are affected by organisational performance and do not reflect the government’s commitment. In the Minister’s speech of 20 March 2013, a figure of $73 million was indicated as having been provided to a group of employers. The department has clarified that this figure is a subset of the overall amount allocated rather than an actual expenditure.

[9] As noted in footnote 8, DEEWR advises that it’s practice is to report funding committed rather than actual expenditure.

[10] ANAO comment: The Covenant was an industry-led initiative with support from the Australian Government. Accordingly, as noted in paragraph 12, the focus of this audit was on the Australian Government’s contribution for the Covenant initiative including over the longer-term.