Browse our range of reports and publications including performance and financial statement audit reports, assurance review reports, information reports and annual reports.
Multifunctional Aboriginal Children's Services (MACS) and Creches
The audit examined the effectiveness of DEEWR's administrative arrangements supporting the delivery of Indigenous childcare services through MACS and crèches, including the approaches DEEWR uses to monitor the achievement of the BBF sub-program objective.
In conducting the audit, the Australian National Audit Office (ANAO) reviewed three key areas:
- program administration—DEEWR's administrative systems and processes supporting the delivery of Indigenous childcare services through MACS and crèches and the broader BBF sub-program;
- management of service provider funding agreements—DEEWR's systems and processes for managing MACS and crèche service providers' funding agreements; and
- monitoring and reporting performance—the effectiveness of DEEWR's processes for monitoring the performance of service providers, and the achievement of the outputs and outcomes of the BBF sub-program.
The ANAO sought not to duplicate the work of DEEWR's Internal Audit function, and in doing so referred to the findings of the recent internal audit review of the CCSSP, where these were relevant and appropriate.
Summary
Introduction
1. Multifunctional Aboriginal Children's Services (MACS) and crèches are two types of Indigenous childcare services that are directly funded by the Australian Government through discretionary grants.1 MACS are community-based services that provide long day care and at least one other form of childcare or activity, such as outside school hours care, playgroups, nutrition programs and/or parenting programs. Crèches provide culturally appropriate childcare programs over flexible hours based on the needs of the Indigenous communities where they operate.
2. The Australian Government first funded MACS and crèches in 1987 and 1989 respectively. In the 1990s, the number of MACS and crèches was expanded and additional funding was provided to a range of organisations to deliver Indigenous childcare services.2 In 2003, the Australian Government consolidated the direct funding provided for Indigenous childcare services under the Budget Based Funding (BBF) sub-program.
3. The Department of Education, Employment and Workplace Relations (DEEWR) manages the broader Child Care Services Support Program (CCSSP), of which the BBF sub-program is a part.3 The Office of Early Childhood Education and Child Care (OECECC) within DEEWR is responsible for administering early childhood education and childcare programs.
4. The Australian Government provides the major component of operational funding for Indigenous childcare services through direct funding to service providers. During 2009–10, the Government funded the operation of 268 Indigenous childcare services at a cost of $44.2 million. This included $20.7 million in funding for 33 MACS and 36 crèches.
5. Service providers are funded on the basis that they operate in areas where access to mainstream or conventional childcare services is not available or commercially viable, and where there is a need for culturally competent services that meet the needs of the local Indigenous people. Table 1 outlines the location of MACS and crèches by state and territory and remoteness classification.
Audit objective and methodology
6. The audit examined the effectiveness of DEEWR's administrative arrangements supporting the delivery of Indigenous childcare services through MACS and crèches, including the approaches DEEWR uses to monitor the achievement of the BBF sub-program objective.
7. In conducting the audit, the Australian National Audit Office (ANAO) reviewed three key areas:
- program administration—DEEWR's administrative systems and processes supporting the delivery of Indigenous childcare services through MACS and crèches and the broader BBF sub-program;
- management of service provider funding agreements—DEEWR's systems and processes for managing MACS and crèche service providers' funding agreements; and
- monitoring and reporting performance—the effectiveness of DEEWR's processes for monitoring the performance of service providers, and the achievement of the outputs and outcomes of the BBF sub-program.
8. The ANAO sought not to duplicate the work of DEEWR's Internal Audit function, and in doing so referred to the findings of the recent internal audit review of the CCSSP, where these were relevant and appropriate.
Overall conclusion
9. The Australian Government funds a range of Indigenous childcare services including Multifunctional Aboriginal Children's Services (MACS) and crèches. MACS and crèches are community based childcare services provided in Indigenous communities across Australia, mainly in remote and very remote areas. During 2009–10, the Australian Government funded the operation of 268 Indigenous childcare services at a cost of $44.2 million. This included $20.7 million in funding for 33 MACS and 36 crèches.
10. Indigenous childcare services play an important role in communities and provide access to a range of services, including: childcare, early childhood education, primary health care and family support. Indigenous members of the community may also have the opportunity to gain employment in childcare and to engage in early childhood training.
11. Since taking responsibility for the administration of childcare services following a machinery of government change in December 2007, the Department of Education, Employment and Workplace Relations (DEEWR) has worked to improve the management of the Child Care Services Support Program (CCSSP). This has resulted in the development of a management framework supporting the provision of Indigenous childcare services. The framework includes operational guidelines for use by DEEWR staff, program guidelines for service providers and a revised performance management framework. In particular, the program guidelines have provided a basis for the more consistent management of the Budget Based Funding (BBF) sub-program and have assisted service providers to better understand their role and responsibilities as well as DEEWR's administrative and reporting requirements.
12. The objective of the BBF sub-program is to provide access to childcare in communities where mainstream or conventional childcare services are not available or viable, and where there is a need for culturally competent services. Most MACS and crèches are funded to operate in outer regional, remote and very remote areas of Australia where it is reasonable to expect that these conditions can be met. However, 12 per cent of services are located in major cities with a further 19 per cent in inner regional areas, where mainstream childcare services are accessible.
13. In order to measure the extent to which a program or sub-program is effectively delivering its objectives, it is important that key terms are appropriately defined for the benefit of all stakeholders. In relation to Indigenous childcare services, DEEWR would be better positioned to assess the contribution that the current services are making to the BBF sub-program objective if an agreed understanding of access, availability, viability and culturally competent was available. This common understanding would assist DEEWR to develop key performance indicators that support an assessment of the achievements of the BBF sub-program. This, in turn, would support clear and consistent decisions about the administration of the BBF sub-program and related services and provide guidance to DEEWR staff working in this area.
14. Budget Based Funding is provided to MACS and crèches through single-year funding agreements. The funding model and agreements allow DEEWR to influence the activities of funded organisations. Increasing the flexibility of the funding model to account for demographic changes and varying how the funding can be used, would assist service providers in better meeting the childcare needs of Indigenous communities. To aid service providers in their longer term planning for childcare service delivery and to reduce the administrative compliance burden, DEEWR could also consider transitioning service providers from single to multi-year funding agreements.
15. In supporting the delivery of Indigenous childcare services in remote and very remote Indigenous communities, DEEWR faces a number challenges, such as the availability of staff with relevant skills and experience. To overcome some of these challenges, a number of DEEWR funding agreement managers actively support the delivery of Indigenous childcare services in communities by assisting service providers to prepare budgets and reports, and develop childcare capacity in the local workforce. However, providing this level of support is outside of the stated role of funding agreement managers. To provide an appropriate level of support to service providers, there would be benefit in DEEWR determining the current extent of funding agreement managers' involvement in such supporting activities and, if appropriate, providing relevant training and support for them.
16. DEEWR has implemented a revised performance management framework for the CCSSP. The performance management framework assists DEEWR in measuring the activities and outputs of the BBF sub-program including, MACS and crèches. However, further developing the framework to incorporate effectiveness/outcome indicators would enhance DEEWR's understanding of the extent to which the Indigenous childcare services are delivering quality childcare outcomes. The Community Support Program and BBF sub-program objectives are output-focused and are achieved by providing physical access to childcare services, without consideration of the quality of the services provided.
17. ANAO has made four recommendations aimed at improving DEEWR's administration of Indigenous childcare service delivery through MACS and crèches.
Key findings by chapter
Program Administration (Chapter 2)
18. Effective program administrative arrangements support agencies in achieving their program objectives. In undertaking the audit, ANAO examined the effectiveness of DEEWR's administrative arrangements for MACS and crèches. Since December 2007, DEEWR has taken action to improve the administration of the BBF sub-program. The development of program and operational guidelines has provided a basis for the consistent management of the sub-program and assisted service providers to better understand their role and responsibilities, and DEEWR's administrative and reporting requirements. However, the ANAO identified several areas where further improvements to the management of the BBF sub-program, and in particular MACS and crèches, could be made.
Funding arrangements
19. Funding for MACS is determined on an historical allocation basis. The funding model is budget-based and does not take into account changes in demand for Indigenous childcare services, with the result that the level of funding to each childcare service provider has been relatively stable over time. The Australian Government first funded the operation of MACS and crèches in the late 1980s. Since that time there have been substantial demographic changes in the Indigenous population. For example, ABS census data indicates that between 1986 and 2006 the number of Indigenous children aged four and under increased from 31 852 to 55 566.4 In remote and very remote areas the number of Indigenous children aged four and under increased by 24 per cent between 1986 and 2006 to around 16 500 children. Over this same period the number and allocation of MACS and crèches has remained largely unchanged, with the exception of additional crèches funded as part of the Northern Territory Emergency Response (NTER).5
20. DEEWR uses single-year funding agreements to engage service providers to operate MACS and crèches. These agreements provide DEEWR with greater flexibility in administering the sub-program, but do create a significant administrative workload for both the department and service providers. Because the majority of MACS have been operated by the same service provider since their inception in the late 1980s, there would be merit in the department exploring the benefits of transitioning service providers from single-year to multiple-year funding agreements. This would reduce the administrative burden for both parties and provide greater certainty of funding for service providers to assist in their longer term planning for childcare service delivery.
Transitioning Indigenous childcare service providers to mainstream funding
21. In 2007, the Australian Government committed to transitioning 25 existing Indigenous childcare service providers to mainstream funding arrangements over four years.6 In June 2008, to better align Indigenous childcare service delivery with the government's broader Indigenous early childhood agenda, this funding was absorbed into the Indigenous Early Childhood Development National Partnership Agreement.
22. Several service providers indicated during discussions with the ANAO that they were capable of meeting the childcare standards for approved services7 and have the capacity to transition to mainstream funding. ANAO observed that five service providers were charging parents commercial or near-commercial rates for their childcare services. However, these parents/carers were not able to receive the Child Care Benefit or Child Care Rebate to reduce their childcare costs.
23. Transitioning MACS that are capable of meeting the childcare standards for approved services would potentially reduce the cost of childcare for parents and carers, and may allow for a reallocation of funding to other service providers. ANAO considers that there would be merit in DEEWR further exploring the option of transitioning selected MACS to mainstream funding as this would result in a saving for the BBF sub-program, which could be reinvested in either existing or new Indigenous childcare services. In examining this option DEEWR would need to give due regard to the benefits for parents/carers, potential changes in childcare service levels and the overall cost to the Australian Government.
Managing Service Provider Funding Agreements (Chapter 3)
24. The management of service provider funding agreements is the responsibility of the department's state and territory offices, with the primary point of contact being the designated funding agreement manager. The delivery of Indigenous childcare services is influenced by the effectiveness with which DEEWR funding agreement managers discharge their duties.
Management of funding agreements
25. DEEWR enters into funding agreements with organisations for the provision of Indigenous childcare services in one or more locations. The overall annual funding allocation to each childcare service is determined by the DEEWR national office, with service providers subsequently required to submit a service budget report for approval. The service budget details the annual estimated income and expenditure for the service. Once approved, service providers are expected to comply with the agreed budget.
26. The current form of the funding agreements enables DEEWR to influence the activities of Indigenous childcare service providers. Service providers are required to report expenditure variations to DEEWR in quarterly and half-yearly financial reports. DEEWR reviews and approves deviations from the service budget, and adjusts future payments to the service provider.8 Seasonal and short-term changes to the demand for, or operation of, individual services can create variances.
27. The existing administrative processes have limited flexibility and do not support all of the needs of service providers operating in remote and very remote areas. Affording service providers greater flexibility in how they use their funding would allow them to cater for local changes in demand and circumstances. An extension of this principle could include providing flexibility for service providers that have multi-schedule funding agreements to move a specified amount of funding between services. Affording service providers greater flexibility in how they use funding would need to be balanced by appropriate controls to make sure that quality childcare services are delivered in all locations.
Role of DEEWR funding agreement managers
28. The effective delivery of programs in remote and very remote communities may require government agencies to perform an expanded role beyond just the management of a funding agreement. The division between the roles of the government agency and the service provider can become blurred, with staff from government agencies providing additional support to service providers to assist them in meeting their contractual obligations.
29. The role of DEEWR funding agreement managers varies depending upon the specific needs of the service providers for which the manager is responsible. In urban and regional areas, funding agreement managers fulfil a role closely aligned to that of a contract manager. However, for service providers operating in remote and very remote communities, there is a need for funding agreement managers to have an understanding of local service delivery issues and to provide additional support to assist in the provision of childcare services in the communities. In such cases, the role of the funding agreement manager includes a range of capacity building tasks designed to support the service provider. This may include assistance with administrative tasks such as budget preparation and reporting through to developing child care capability in the local workforce.
30. DEEWR has not specifically addressed its role, or the role of funding agreement managers, in relation to building the capacity of service providers. State and territory offices, and individual funding agreement managers, determine the extent to which they are involved in capacity building of service providers, and the nature and extent of that involvement. This makes it difficult for funding agreement managers to deliver a consistent level of support to service providers. There would be benefit in DEEWR determining the extent of funding agreement managers' involvement in supporting activities, such as capacity building, of service providers. If DEEWR decided on a broader approach, then an appropriate level of training and support would need to be provided to funding agreement managers.
Contract management system
31. DEEWR uses the FaHCSIA Online Funding Management System (FOFMS) to manage funding agreements for the BBF sub-program. FOFMS processes approximately $2 billion per annum in Child Care Benefit and CCSSP payments. Payments to MACS and crèche service providers account for around two per cent of payments made through the system.
32. In managing MACS and crèche funding agreements, DEEWR requires a range of data, some at the individual service provider level. Analysis of this information assists with identifying anomalies and trends, and informs management decision making. In order to better meet its management information needs, DEEWR has advised that it is developing a data-warehouse to enable the improved sharing of BBF sub-program data.
Performance Monitoring and Reporting (Chapter 4)
33. The effectiveness with which DEEWR monitors service provider performance is a critical element in managing the BBF sub-program. DEEWR has implemented a revised performance management framework for the CCSSP and its components. The performance management framework assists DEEWR in measuring the activities and outputs of the BBF sub-program including MACS and crèches. However, the framework could be further enhanced by including effectiveness/outcome indicators.
34. The BBF sub-program objectives are currently output-focused and relate to the provision of childcare services, without particular specification of the quality of the services provided. In assessing the performance of MACS and crèches and their contribution to the CCSSP, DEEWR assesses whether a service is being provided, but not the extent to which that service is delivering quality childcare outcomes.
Service provider reporting
35. Service providers are required to provide a series of reports to DEEWR in relation to their operation. At the time of audit fieldwork, service providers were required to submit eight to ten reports annually depending on the level of funding. In 2008–09, 72 per cent of service provider reports for MACS and crèches were submitted late. As a result, 67 per cent of payments made by DEEWR to service providers were approved after the date specified in the funding agreement.
36. DEEWR requires that service providers supply specific data to assist in the administration of the BBF sub-program. However, a significant proportion of data collected from service providers is retained within DEEWR state and territory offices on hard copy files. The information is not collated centrally or analysed to provide management information across the sub-program. DEEWR advised that as part of the 2010–11 funding agreements, service provider reporting requirements have been reduced to five reports, and where multi-schedule funding agreements9 are in place, only one financial acquittal report will now be required. DEEWR expects that these initiatives will improve service provider compliance and enable funding agreement managers to analyse the reported information and respond to emerging issues.
Monitoring service providers
37. Operating childcare services in remote and very remote Indigenous communities presents service providers with a range of challenges, from compliance issues through to retaining skilled staff. Having in place an administratively efficient monitoring framework, that is proportional to the risk and scale of the funding and that provides timely information, is fundamental to the sound management of service providers.
38. At the time of the audit, DEEWR was in the process of developing a risk-based approach to its monitoring of service providers. This approach will include a risk assessment of each service provider and funded service with the results being used as a guide to the level of monitoring and ongoing support required from DEEWR. DEEWR has also recently commenced documenting administrative procedures, which should improve the guidance provided to staff involved in managing MACS and crèche funding agreements. Improvements to the central collection and analysis of Indigenous childcare services information may also help DEEWR detect instances where service levels vary from those expected.
39. The development of this enhanced approach is timely. In one instance noted by ANAO, a service provider continued to be funded for an extended period during which it did not operate an Indigenous childcare service. The decision to continue funding for the service provider was made by the funding agreement manager, rather than a delegated officer. The reasons for continuing funding were not documented. However, when asked to clarify this issue, DEEWR advised that the rationale to continue funding was:
- the need to cover ongoing administrative costs to maintain the childcare facility in readiness to be reopened;
- the need to support the recruitment of a new childcare coordinator; and
- that the service provider continued to meet their reporting obligations by submitting the required milestone reporting documents.
DEEWR subsequently advised that the service did not operate between July 2008 and August 2008, and again between January 2009 and February 2010 due to renovations.
Summary of agency response
40. The Department of Education, Employment and Workplace Relations (DEEWR) appreciates the opportunity to participate in the ANAO's performance audit of the Multifunctional Aboriginal Children's Services (MACS) and Crèches.
41. The ANAO's overall conclusion that since taking responsibility for the administration of MACS and Crèches, the Department has introduced more consistent management and encouraged a greater awareness of respective roles and responsibilities by service providers, noting areas for further improvement is welcomed by DEEWR.
42. DEEWR notes that the ANAO's findings and recommendations primarily relate to improving program administration, funding agreement management and performance management and recognises the relevance of the recommendations to its current focus on continuous improvement in the administration of the BBF Program. Within current resourcing, and subject to the views of the incoming government, DEEWR plans to undertake internal program management reviews and, in consultation with key stakeholders, develop a revised funding model.
43. DEEWR agrees to the report's four recommendations.
Footnotes
1. MACS, crèches and other Indigenous childcare services directly funded by the Australian Government are formally referred to as Indigenous non-mainstream services.
2. The types of organisations funded to provide Indigenous childcare services include Indigenous corporations, shire councils and not-for-profit organisations.
3. The CCSSP was transferred from the Department of Families, Housing and Community Services and Indigenous Affairs to DEEWR in December 2007, as part of a machinery of government change. Commonwealth of Australia, Administrative Arrangements Order, No S251, 3 December 2007.
4. Australian Bureau of Statistics, Census, 1986 and 2006.
5. In 2009–10 as part of the NTER an additional $15.2 million was allocated to upgrade 13 crèches and establish nine new crèches.
6. Australian Government, A Better Future for Indigenous Australians - improved access to childcare and early childhood services, Budget Measures 2007–08 Budget Paper No 2, p. 170.
7. The Australian Government has developed a National Quality Framework and National Quality Standards for early childhood education and care. These are replacing the previous standards and regulations regimes. However, Indigenous childcare services are exempt from complying with the National Quality Framework and National Quality Standards but must comply with state and territory government regulations and licensing requirements where applicable.
8. For example, unspent funds being shown in a quarterly or half-yearly financial report (or the annual acquittal report) may result in a reduced future payment being made by DEEWR rather than requiring a reimbursement from the service provider.
9. Multi-schedule funding agreements are where one organisation, for example a shire council, receives funding to operate more than Indigenous childcare service.