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Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) (Consequential Amendments) Bill 2006

CHAIR —Thank you for your submission. Do you wish to make any amendments or alterations to it?

Mr Sandison —No.

CHAIR —I now invite you to make an opening statement after which committee members will ask questions.

Mr Sandison —I will make a very brief opening statement to let you have some time for questions. I will note the key points. This follows on from the recent Welfare to Work reforms, which saw some significant changes in the area of income support and employment services. The particular focus of these minor amendments are to support the reforms in Welfare to Work and basically to ensure the integrity of the system overall. In some of the major areas in the vocational rehabilitation area the reforms are aimed at the staged introduction of partial contestability and the creation of a level playing field for the provision of vocational rehabilitation services. Those services are an integral part of the reform measures that were put into place last year, with the provision of services to people with a partial work capacity.

I would like to make a key point in the area of the pensioner education supplement: after a first review is conducted into their DSP eligibility, people are not considered to be part of the transition group after that review. The intent we had was to support people in that transition group. I note the comments in other submissions about the second review and why it would be unfair if after the second review they got moved to Newstart and they were not allowed to take PES with them. From our viewpoint the issue was to protect people in the transition group. Once a review has been undertaken we would not consider them part of the transition group; they are just a DSP recipient, and the same rules should apply to them as to the other 710,000 people that were grandfathered.

On the issue of financial case management, the point I would like to highlight is the fact that the changes that have been put forward in relation to financial case management are about the ‘how’ in the recovery of debt, not the original decision on debt or the amount of the debt and the appeal rights about the debt. It is putting forward a proposal around how it should be recovered and suggesting a simple process by which it can be recovered. The debt itself can be raised now under the Financial Management Act. So we are not trying to change the nature of the raising of the debt; this is about how to make it an easier and simpler mechanism to recover. We are in your hands.

CHAIR —Apart from the two items that you have mentioned there were some other comments earlier this morning questioning the ability of monitoring and quality assurance procedures that would be in place to make sure that private rehabilitation service providers continue and give their clients a high level of service while also containing program costs and expenditure. Can you give us an idea of the procedures that will be in place?

Mr Waslin —Essentially, we operate this contract under the same provisions as the contracts we have with other employment service providers. Certainly, we have the terms of the contract and the expectation of delivery under that. We have an arrangement with our state offices where we have contract managers who are constantly monitoring the quality of the services that are being provided. They are expected to be physically in touch with those providers. We have certain standards which need to be addressed—we have an intention to publish, as we do with our other employment service providers—that agree on the quality that those organisations are to meet in the delivery of that contract. We call them star ratings and no doubt you are aware of those sorts of things. So those things are out there. They are to inform the market but also to inform the individual about the degree of quality and the expertise that an organisation has. We are constantly reviewing the coverage of our contracts to ensure that we are getting both the volume and the quality we expect, and on a milestone basis we are reviewing the ongoing contract arrangements.

CHAIR —So you would consider that introducing the notion of contestability will give the government and indeed the consumers a benefit that they would not have otherwise had?

Mr Waslin —That is the intention. Certainly, in many locations it means that individuals have a choice of more than one provider and that allows them to go down a specialist stream if that is what they need or to choose amongst generalist providers, if that choice is available to them.

CHAIR —We had a query from a disability group that we saw this morning about the provision of access and the way in which that will be monitored. For instance, if a provider sets up in a town or, indeed, in a city, will there be procedures put in place to see that, given that this is the client group that will be affected, disability access will be provided?

Mr Waslin —That is right; in fact, it is a condition of our contract.

Senator MARSHALL —If a person has their rehabilitation program decided by a private provider, is the content of their program reviewable?

Mr Waslin —It is. Initially, we would make an assessment of the best channel for that individual to be aided. If they are sent to a VRS it would then be up to the individual and the provider to come to an agreed position about their best course of action. That is then documented, but it can be appealed if they are not happy with the outcome.

Senator MARSHALL —What is the mechanism for the appeal?

Mr Waslin —There are a number of processes that are available to them. Obviously, there is a complaints line. We encourage individuals to first deal with the content of the coverage with the organisation that they are dealing with. If it cannot be resolved between the individual and the organisation, we then have processes whereby the department would come in and review the establishment of the program with the organisation we contracted out.

Senator MARSHALL —That is not really an appeal process; it is a complaint process.

Mr Waslin —That is the complaint process. It can then be taken to an appeal process if that is required.

Senator MARSHALL —Who makes that decision?

Mr Waslin —The individual.

Senator MARSHALL —So the individual can get a review?

Mr Waslin —That is correct, but we encourage them to try to address the issue initially with the organisations. Then, of course, there is an escalation process if the issue cannot be resolved.

Senator MARSHALL —Does the tender for rehabilitation services ensure that all providers will have full disability access?

Mr Waslin —I believe it does. Certainly, when we ask organisations to sign a contract with us, it is a condition of that contract arrangement that access is provided. Of course, we have our contract managers who will check that before they open.

Senator MARSHALL —Will the tender documents be available for scrutiny?

Mr Waslin —We are in a purchasing phase at the moment. We have approached the market already for a proportion of the new business. Tenders have closed and we have completed the assessment. We will go into the business and allocation phase before we make the results of the tender known. The tender itself is certainly publicly available.

Senator MARSHALL —What guidelines will be in place to ensure that providers have full disability access? How will the department audit that after the tenders are let?

Mr Waslin —It is a condition of the contract that those organisations would sign with us. We require our contract management—our state based staff—to physically visit those premises to ensure that that condition has been complied with.

Senator MARSHALL —In terms of the secretary’s power to enter into arrangements with providers who do not meet the Commonwealth disability service standards, will these arrangements require eventual compliance with these standards?

Mr Waslin —I understand that is the case.

Senator MARSHALL —What time frame will providers have to meet these standards?

Mr Waslin —In the contract, there is a series of standards which need to be met. We are allowing accreditation to occur within the first 12 months, but the physical standards need to be met with immediately.

Senator MARSHALL —What penalties will apply if they fail to meet the standards?

Mr Waslin —It would be the normal approach that we take under our ongoing contract arrangements with all providers. We constantly review the quality of the service and their capacity to meet the contract requirements. Clearly, if organisations are not going to meet those contract requirements, we will need to take action against them.

Senator MARSHALL —So is there a time frame?

Mr Waslin —We would set a time frame on an individual basis. It is about organisations demonstrating their capacity to adjust and to meet our contract arrangements. We would certainly give them some time in which to do it. It will be dealt with on an individual basis. Essentially, when we go to tender, we ask organisations to declare exactly how they are going to operate. We make an assessment of that capacity when we are going through the review of the tender. When we start to allocate business, we obviously allocate business to those organisations that are most highly rated and have the capacity to deliver under the terms of the contract.

Senator MARSHALL —Thanks. The Mental Health Coordinating Council and the Mental Health Council of Australia have raised specific concerns about the adequacy of rehabilitation services for people with mental health issues. What is the department’s response to their concerns?

Mr Waslin —I think there is a specific element under the contract. I just need to refer to my notes to be sure.

Mr Sandison —One of the overriding issues, Senator, is the fact that if you win a contract as a provider you are required to meet the requirements under the tender to support people whatever their needs are in relation to rehabilitation. So to be able to meet those requirements you have to show and demonstrate through the tender process that you have got the professional capacity, the capacity as an organisation, to meet the needs of the individuals—and that is across mental and physical disabilities, the need for rehabilitation.

One of the overarching things that probably needs to be remembered is that, with all DEWR contracts with our providers, the performance of the providers is monitored all the way through. Where people cannot meet the requirements of individuals they are not going to deliver the outcomes in terms of rehabilitation, assisting people into employment, and that will show. Just as with our other services of Personal Support Program, Job Network and so on we monitor all the time the outcomes being achieved, and where we can measure through star ratings and so on the high performers and low performers there are business reallocations. There are mechanisms to ensure that those that can deliver the services at the high standard are the ones that are supporting the people that need the assistance.

Senator MARSHALL —Is that the only form of auditing you do? Once a tender is let—assuming people meet the criteria, the tender is let—is your auditing really just looking at the results or do you do an ongoing audit to ensure that people continue to meet standards required?

Mr Sandison —No, as Mr Waslin said, there are still physical checks—our state office staff go out and visit sites and maintain an engagement with our providers across all the different services. So we look at the outcomes side but they also look at the capacity of the organisation. There is an issue for state office staff to remain aware of the substance of the organisation in terms of its financial standing, if there are issues raised in the community. State staff and contract managers overall have to maintain an awareness of the status and the capability of organisations. As well as through data, we look at the outcomes being achieved by those organisations. So I think really it is the input and outcomes sides that get monitored by the department.

Mr Waslin —In fact, the star ratings take into account the key performance indicators which are contained in the contract. They are based on achieving outcomes for individuals, but one of the KPIs is about the quality of service those organisations deliver.

Senator MARSHALL —Thanks.

Mr Waslin —If I can go back to your previous question: within the tender arrangements, part of the incentive payment structure allows for an intermittent support fee, which is specifically for individuals with mental health issues. That is an additional fee of $605.

Senator MARSHALL —Okay. Moving on to the pensioner education supplement, what benefit does the department see in making these restrictions?

Mr Sandison —The primary issue was to make sure in the first place that we had supported the transition group—the group that had moved onto DSP between the budget in 2005 and 30 June 2006. It is actually looking at their capacity to maintain the supplement, if they were studying beforehand, if they were moved over to Newstart. With that group, when they are reviewed it is the first review that might move them over onto Newstart, and if they were studying we wanted to protect that capacity to study. Currently, somebody who is on the disability pension, if they are studying and they are on PES and they get reviewed through an ad hoc review—a change in circumstance, earnings being displayed—and they happen to be moved onto Newstart they lose that entitlement. That is the 710,000 ‘grandfathered’ people. So what we wanted to do was provide a surety, a protection, for the transition group, because they are in the in-between area, that if there is a review that says, ‘Under the new rules you move to Newstart,’ you can continue to study if you are already studying.

If there were a second review later on—and that is the issue we are trying to address with this change—in four or five years time, then they should be treated as a DSP person. They have had one review that said, ‘No, you are still on DSP’—they are not a transition person anymore; they are just a DSP recipient—and it was not the intention of government to leave that hanging for five, 10 or 15 years where that person could subsequently end up with another review, through whatever change of circumstance, and still be given the support of PES and move across. They should be treated the same as the other people that are on DSP.

CHAIR —So that transition group is defined by a time element rather than by category.

Mr Sandison —That is correct.

CHAIR —It is the group between the introduction of the legislation and June 2006. Is that correct?

Mr Sandison —Between budget night 2005, when the decision was made—once there is an announcement, that is when you start grandfathering and so on—and 30 June 2006. There is a group of people in there of which only one part might end up with a partial capacity and might need to be moved over to Newstart. The government brought in a safety net for PES but we did not block off the issue that that could go on for five, 10 or 15 years.

CHAIR —Yes. Thank you.

Senator MARSHALL —How is this consistent with the spirit of the government’s previous commitments, as outlined in the explanatory memorandum?

Mr Sandison —The commitment given was to ensure that, under the new rules, after two years of people moving onto DSP but being in the transition group, they would be reviewed. That was the intent of the government’s decisions in this area. A small number might be reviewed beforehand because of a change of circumstance but the majority would be reviewed two years after they moved onto DSP. Under the new rules, and if their partial work capacity were established, they would be moved from DSP onto Newstart. The intent was to protect that group of people when that review happened so that if they had made a decision to study they would not receive a penalty, in the form of loss of the pensioner education supplement, when they moved over. It was not the intent that a group of people would go onto DSP and potentially stay there for five or 10 years and then maybe move over with PES, if they established a work pattern or had a change of circumstance.

Senator MARSHALL —Are you saying that people will continue to receive the same study assistance, being the pensioner education supplement, until they complete their course?

Mr Sandison —If it is after that first review. The issue is that the first review is saying: ‘You’re in a transition group. We now need to make a decision, as established under the transition arrangements, on whether you have a partial work capacity.’ If you are moved over onto Newstart under that first review then you take PES with you and you continue that course of study until it is completed. The intent was not to allow somebody who happened to be in that transition group at the start but who has since been a DSP person for three or four years and who has started studying to then be moved over to Newstart if there were a change of circumstance and to carry PES with them. The government clearly defined that their support was for the transition group in that review process. When the decision was made in the first review to move that group over to Newstart, the idea was that they should still be supported. That is in line with what is happening with parents. When parents are moved over with the requirement to look for work, if they are studying and getting access to PES they will continue on that course as well. But a new person moving straight onto Newstart as a principal carer does not carry a PES capacity; they are a Newstart person. The aim is to keep things in alignment and not to have them spread out into different areas.

Senator MARSHALL —What evidence is there that these restrictions will improve the long-term employment prospects of people affected?

Mr Sandison —The decisions are made more in keeping with the fact that people who are on DSP do not have a requirement to look for work; they get supported while they are on DSP to study if they would like to. There is not a requirement that that study has to be in relation to looking for work. It is an open accessibility to PES, so it is not about linking them to look for work when they are on DSP. If their circumstances change then it is an issue for them to move over to Newstart and look for work. It was defined to keep it in line with the 710,000 people already on DSP and the rules that affect them.

Senator MARSHALL —How much money does the department expect to save as a result of these restrictions?

Mr Sandison —I do not think there was an assessment done. I would have to take that on notice and check, but very small numbers would be involved. There are 710,000 people on DSP. The transition group is of the order of 100,000. We would identify the partial capacity group from those who would get a review in the first place—and they still would get PES. They would move over and still get PES.

Senator MARSHALL —What number would that be, for example?

Mr Sandison —I think we gave evidence in Senate estimates that there might be 20,000 to 25,000 in that transition group. It lasted for a bit over one year. So their assessments are done. The remaining group that you are talking about are part of a subsequent review of people from the transition group who then might have had a change that has given them a partial work capacity. We are talking scores, so the quantum involved is not a savings issue. It is about clarity, the integrity of the system and how existing DSP people are treated.

Senator MARSHALL —So you estimate fewer than 100? You said ‘scores’. I am trying to—

Mr Sandison —It may be in the order of fewer than 100, yes.

Senator MARSHALL —I am just trying to get a ballpark figure. I will not hold you to it. We will do that in three weeks time. I will move on to the recovery of financial case management payments. How does a person access financial case management?

Mr Sandison —Basically, they would first of all have to be in receipt of an eight-week penalty. They would then have to establish vulnerability. The two major criteria for vulnerability are that they have dependants in the household—primarily that would be children, but it may be parents that they are looking after in the household—or they are vulnerable in themselves. That was put in to ensure that we could take account of people with mental health problems in particular and potentially people with medication issues, so that they had the money to pay for medication. Basically, from there, a decision is made about whether people fit those categories. They are then offered financial case management. Just because you are eligible it does not mean that you actually get it. There is a significant number of people who actually decline the offer of financial case management. Then, with the offer of financial case management, if the person accepts, a decision is made about what kinds of bills might be paid. The requirement under financial case management would be for Centrelink to talk to the person and refer them to an agency that delivers financial case management, and then for that agency to talk to the person about the kinds of payments that they might need to make while they are in the eight-week penalty period.

Senator MARSHALL —Are you saying that there is no actual entitlement—it is a discretionary payment decided by Centrelink officers?

Mr Sandison —It is not a payment. Financial case management is a status. Then payments are made to pay for your bills. The first thing is to establish the status of the person in terms of eligibility to receive financial case management. There are guidelines—

Senator MARSHALL —You say ‘eligibility’. How do you meet the eligibility test?

Mr Sandison —If you have children, you meet it. It is as simple as that. I am sure there would be some areas where there would be a discussion about a person’s individual vulnerability if it is their mental health, but our guidelines in that area state that if it is identified that the person has a mental illness and they are paying for some medication, that would be a reason to identify them as being eligible as well. But, primarily, 95 per cent are people who have children in the household.

Senator MARSHALL —What appeal rights does a person have in respect of a decision regarding their access to financial case management?

Mr Sandison —Primarily what would happen is that people would appeal the eight-week penalty in the first place. That is where the formal appeal process would be. They could then challenge the Centrelink decision about financial case management. It is a program—it is not a social security payment or entitlement. So you have one issue, which is the eight-week penalty, and that is under social security legislation—that is the normal appealable process up to the original decision maker and then to a review officer in Centrelink, the Social Security Appeals Tribunal and AAT and so on. That is the normal process for the eight-week penalty. If a person did not get offered financial case management, they would just have to challenge that with the person making the decision about eligibility in Centrelink.

Senator MARSHALL —That is not an appeal process.

Mr Sandison —No, it is a challenge of the decision, as for other programs we have. It is identified as a program.

Senator MARSHALL —I just want to be clear, because it has been stated by previous witnesses that there is no appeal process. I just want to make sure that that is in fact the case. I think you support that. There is no appeal process?

Mr Sandison —No, not in that form.

Senator MARSHALL —Who administers financial case management?

Mr Sandison —Centrelink.

Senator MARSHALL —If a person is granted access to financial case management, under what circumstances would the money provided under financial case management be recovered?

Mr Sandison —Firstly, there are no cases of recovery at this stage. We are six months into the first year and the numbers in financial case management are relatively low. The numbers actually accepting it are lower again. An example would be where a person received an eight-week penalty, they were offered financial case management and accepted it and they had $500 worth of bills paid. It is not a payment entitlement. A $500 electricity bill in midwinter would be an example.

They finished the eight-week penalty and subsequently appealed because they still did not believe that they should have had the eight-week penalty. By the time that has gone through the eight weeks is over but they won. What would happen is that they would be back paid their social security entitlement, because they should have been paid it, but in the meantime they have had a $500 bill paid, which they normally would have paid from their social security entitlement. So that would be a debt owing. Under the current situation, that debt can be raised anyway under the Financial Management and Accountability Act. That is why I raised at the start that this is an issue of the how, not whether, a debt gets raised. So the debt would be there.

For a lot of people one of the simplest ways to repay your debt if you are on social security is to have a proportion of it paid out of your social security payments each fortnight. Normally you would go to Centrelink and arrange for that debt to be repaid. I think that under the current guidelines the amount is in the order of 14 per cent or 16 per cent. That might be the sort of figure. If you can stress particular circumstances, it might be lower. But that would then allow for a regular payment to come out of your income support.

The reason we have to bring this in is that under financial case management the debt is related to the program, so we have to pay the income support to the person. Otherwise, the first step would just be to say, ‘Here is your back dated eight weeks of income support less the $500.’ As has been noted by the various witnesses, they are two separate things, so we back pay the eight weeks and then say, ‘Right, you owe us $500 and this is the simpler way.’ The debt is still raised. This does not change the fact that a debt is raised. It just has to be recovered through a separate mechanism and not through income support means. That is not necessarily the simplest way or that with the least impact on the individual. The best way is to tie it in with a discussion around their income support.

Senator MARSHALL —The example that you gave us was that if the eight-week penalty was appealed and the person won that. Are there any other ways a debt could be raised through financial case management?

Mr Sandison —We try and think through every way that certain things might happen in social security and, as we all know, after a while some other things happen and you learn different ways that things can happen. Another one could be that even during an appeal you might not win the appeal, but if you are partway through an eight-week penalty and your appeal is happening, you are put on payment pending. So your income support is reinstated until a decision is made about whether the penalty should apply.

So if a payment has already been made—because you would have been put on financial case management if you were eligible and accepted—and you then make an appeal, forgetting what happens at the end of the appeal process, you are put on payment pending. So there could be an overlap in terms of a payment made for you and you starting back again on a payment three weeks into an eight-week penalty period. There might be a debt involved there where the two figures do not work out. All we want to do is link it so that the entirety of income support and whatever has been paid through financial case management can be managed together.

—With the example, and I may have misinterpreted what was said to us this morning, is it possible that someone is granted financial case management payments and then a decision is simply made later that they were not eligible and a debt raised in those circumstances? The proposition put to us this morning—and I want to make sure I understand what is happening—was that there is no real test applied; it is very discretionary. There are some threshold criteria which have to be met for people to be eligible for these payments, but it is really an unappealable decision made by a Centrelink officer. And if the decision is made that it is granted, subsequent to that decision, a decision may be made that it should not have been granted and a debt raised under those circumstances. Is that possible? The position put was that, if you were eligible at one point in time and the same person decided you were ineligible later, that should not have then made you ineligible for the period of time that you got it, and a debt should not be raised under those circumstances.

Mr Sandison —In those circumstances the decision maker in relation to what gets paid—and this is managed by Centrelink—is, I think, the provider, at the end. If a local community organisation is the provider for financial case management, you would go and talk to them. You would bring in your electricity bill and say: ‘I’m on an eight-week penalty. I want to pay this bill so I do not get cut off.’ The decision is made by that community organisation. If there were a change made by them, Centrelink would have an opportunity to look at it. If it got raised, we would also look at it in terms of the entitlement and the impact on the individual. While it is not an appellable issue, it is a program management issue about the way people are treated and services delivered. The possibility might be there, but I would extremely doubt that a local welfare organisation is going to pay a $100 bill for something and then put their hand up four weeks later and say: ‘I don’t think I should have made it for them. I think there should be a debt.’ The experience is that it is at the other end that that goes ahead. I do not know Centrelink’s review processes or decisions or the individual payments that are made by the individual providers. I would have to find that out. Perhaps I can take it on notice to find out how Centrelink might look at the individual decisions.

Senator MARSHALL —Yes, if you could. As you say, it may never happen, but I am interested in the possibility because, under those circumstances, it would appear to me that it is appealable by the provider but not appealable by the recipient, which seems to be an inequitable position.

Mr Sandison —The recipient would go back to Centrelink, not necessarily as an appeal. They would go back to the individual who told them they would get financial case management in the first place and say: ‘Organisation X, a community organisation, has changed their mind about me getting payment on something. I do not think that is right or fair. What can I do about it?’ At the very least, it would be a customer complaint which Centrelink would take very seriously.

I acknowledge that welfare groups raise these issues and the discretion that is available. Equally, we tend to get hammered by the welfare groups where no discretion is available because we cannot respond to individual needs and circumstance. So there is always a double-sided debate around discretion and how useful it is, or is not, in the circumstances. If there were a cast-iron set of rules that said, ‘Only in these circumstance pay these sorts of bills,’ within a month we would have someone saying, ‘Yes, but what about if somebody’s solar panel is not working and that is their only form of electricity?’ Our rules say ‘electricity bills’, so is that one and the same thing? We have very much erred on the side of discretion, because we are trying to respond to individual needs of people at risk, or the kids who are at risk in the houses.

Senator MARSHALL —I appreciate that, but we are concerned about vulnerable people falling through the cracks. It may be a very small proportion, but we want to see whether things are possible or not possible. We are just being thorough, and that is what these inquiries are for. Are there any appeal rights on a decision to recover payments?

Mr Sandison —My understanding of the mechanisms for appeal is that they can go back and question Centrelink, obviously not as a formal appeal. The only other mechanisms are far more formal appeals, not through the social security side. They are through the ADJR, the judicial review, route. That is different from the social security one. Social security has a very clear line of appeal and claim, right through a process. Because this sits outside, there is another formal approach to appeal. I think it is through the judicial review council.

Senator MARSHALL —In these circumstance would Centrelink rely on the advice of the agency who is administering the payment or would they make decisions unilaterally? If they could do that, what would happen if the administering agency did not agree?

Mr Sandison —I think that is a question for Centrelink. On the first part of the question, I think there would be a discussion with the agency involved. In everything else we deal with in these sorts of areas, the starting point is a discussion to work out the whys and wherefores and to understand why a decision was made. On the second part of your question, about whether they would go ahead unilaterally, that is a question for Centrelink.

Senator MARSHALL —Centrelink is not coming.

Mr Sandison —I think they were looking more at the nature of the legislation—how the cost recovery would take place—and not going back a bit into the whys and wherefores of debts and so on.

ACTING CHAIR (Senator Marshall) —Let me think about your answer while Senator Fifield asks some questions.

Senator FIFIELD —Mr Sandison, Senator Marshall elicited most of the information I was after. I will not hold you to the name of this review body—whether it is the judicial review council or something else—but is it a body which people who are the subject of debts which are raised under the Financial Management and Accountability Act, regardless of program or portfolio, can appeal to?

Mr Sandison —That is my understanding. I could get information about that group and who appeals to it, and provide that information to you.

Senator FIFIELD —I would appreciate that because, as you said, this is a program and debts are raised under the Financial Management and Accountability Act. I would be very interested to know whether, whatever the process is, that is the standard process for recovering money from people who are given money under programs when they are not entitled to it—a debt is raised according to that act, and that is their avenue of appeal. I would appreciate that information.

Mr Sandison —I will get that information.

Senator GEORGE CAMPBELL —There is an argument whether payment by the financial case manager to the recipient is a debt or a gratuity—or charity, as someone described it this morning. Does the recipient sign anything to acknowledge that they have received the payment and that, in certain circumstances, it may be repayable?

Mr Sandison —Yes.

Senator GEORGE CAMPBELL —They do?

Mr Sandison —When they are identified as being eligible for financial case management, on the form they have a sign-off point that acknowledges that if the payments are made incorrectly then they will have to pay back the money to Centrelink. So it is on the form, and I understand that that is when they are told, ‘Yes, you are entitled to financial case management.’ And then when a payment is actually being made—‘We will pay the electricity company for you’—they also sign there acknowledging that if that is an inappropriate payment—

ACTING CHAIR —You used the word ‘incorrectly’ before, and then ‘inappropriately’.

Mr Sandison —In these circumstances it might be that it was incorrect or inappropriate—

ACTING CHAIR —They are very different meanings.

Mr Sandison —If there is fraudulent activity—and that is often the case—we have to have a bottom line. If somebody has been acting fraudulently there is a requirement to be able to recover money from them. And the other situation is where they appeal and have had back payments. So if one is inappropriate or incorrect then the requirement is for the individual to say that they acknowledge that the money would have to be repaid. I can get the exact wording. It would probably be easiest if I could get the financial case management form with the statement on it for you.

Senator GEORGE CAMPBELL —Could you do that, because there seems to be some questioning of just exactly what does apply here and what the rights and obligations are. The government is seeking to legislate a right to recover these payments yet they are not seeking to put in legislation the right to make the payments. Why?

Mr Sandison —They already have the right to recover the money under the Financial Management and Accountability Act. All they are trying to do is have it linked to the Social Security Act so it can be done in a simpler form. My understanding of the recovery process would be that the individual could be required to go around to Centrelink with a cheque for $20 once a fortnight, because the debt can already be raised, if it were to occur, under the financial management act. All we are saying is that it could be done automatically in a way that is more convenient to the individual, or through a simpler ‘mechanism’—I use that word advisedly—to have the process operate that way. Most people on income support are used to that kind of mechanism.

Senator GEORGE CAMPBELL —Why would you not spell out in legislation both the provision to make the payments and the provision to recover it?

Mr Sandison —The need we had was to actually put this into place. There was no need to do legislative amendments to set the debt in place in the first place. The program is outside the Social Security Act anyway; therefore, all that can be done. It was just a matter of the recovery.

Senator GEORGE CAMPBELL —Are you aware, Mr Sandison, of any other provisions where moneys are paid under the Social Security Act that a similar set of circumstances applies in respect of recovery?

Mr Sandison —I am not aware.

Senator GEORGE CAMPBELL —So, to your knowledge, it does not apply anywhere.

Mr Sandison —No but, again, this is the realm of our legal people; I can check for you.

Senator GEORGE CAMPBELL —Would you take that on board and check for us.

Mr Sandison —Certainly.

Senator GEORGE CAMPBELL —Mr Waslin, with regard to the standards you were talking about in terms of the providers’ application of rehabilitation services, does a contract set out the standards or the quality control measures that will be implemented by these particular providers?

Mr Waslin —I do not have it in front of me but I believe it does. We certainly have a code of practice that we are seen to adhere to, and there is certainly a layout of the sorts of services we expect people to deliver and the conditions under which they do so. I can get you a draft copy of the contract, if you would like to see that.

Senator GEORGE CAMPBELL —Can you do that. To your knowledge, does the contract provide for a penalty upon these providers if they do not meet those standards?

Mr Waslin —I am not aware of that; I would need to check that.

Senator GEORGE CAMPBELL —Could you check that out as well. In your initial comments you said that this would give a choice of more than one provider. How do you guarantee that in every marketplace? That does not occur now, does it?

Mr Waslin —No, that does not occur now. There is one provider in the marketplace—that is, CRS. What we are endeavouring to do under the partial contestability is to sign up organisations to deliver roughly about 30 per cent of the VRS business.

Senator GEORGE CAMPBELL —There are other areas of provision of services by government where there is contestability, but not every marketplace has a choice of more than one provider.

Mr Waslin —That is correct.

Senator GEORGE CAMPBELL —You said that there would be a choice of more than one provider.

Mr Waslin —I stand corrected. I thought I said that it may allow a choice of more than one provider in some locations. Obviously when we are offering a split of about 30-70, the bulk of the business is still with CRS and, in many locations, they will continue to be the sole provider. But in other markets more than one provider will be available.

ACTING CHAIR —So the extra providers, or the private providers, will always be in a situation where they are providing the extra support or the choice, or will they become the exclusive provider in some areas?

Mr Waslin —We are not quite sure of the answer to that yet. Obviously we have gone to public tender. We have assessed the organisations that meet the standards and the quality of delivery we expect. We are now in a position to start, in February, to look at where those organisations are likely to be located and the sort of business they are bidding for, and then we will look at the volume of business in that area and how viable it would be to put them in there. We are not quite sure exactly where those organisations will be put yet.

Senator GEORGE CAMPBELL —Will you require them to apply the rules that are applied in some other areas. They just cannot pick up the high-volume areas but they have to pick up some of the low-volume areas, so the Commonwealth is not left with the marginal areas to service while the private providers pick the cream off the top.

Mr Waslin —Again, because we are in a 70-30 split, it may not be practical to force some of these organisations into markets where there is not the volume of business to have two organisations. I think our fallback will be CRS, under the current arrangements, but, again, we are not quite sure where exactly these organisations will be located because we have yet to go through assessment of the locations where they have bid and the viability of putting them in there. We need to balance up the potential number of individuals who need servicing in that location against the parcel of business that CRS have the capacity to deliver and the capacity of those new organisations to come into that location as well.

While I say that, there is additional business coming through the Welfare to Work arrangements and so there is capacity to pick up additional people because of those individuals who might be on Newstart allowance and who choose to seek the assistance of a VRS organisation to aid them in getting back into employment. So we are looking at additional business beyond what CRS is currently delivering in locations.

ACTING CHAIR —It occurs to me that, while you may be introducing contestability, you are not actually ensuring you are introducing competition.

Mr Waslin —It is not universal competition. It will certainly be competition in the larger markets where you can sustain more than one organisation, but it is not in our interest to tender organisations in locations where they are not going to be financially viable and able to deliver the required quality service to the individual.

Mr Sandison —I think it worth noting as well that, as a staged process, the government had made step 1 contestability and, given that CRS has been the sole provider for a long time, you have to bring new people into the marketplace. Because of the quality issues, you do not want to go in and say, ‘Look, it is universal competition around the country.’ You have providers who are government or otherwise in every part of the country. You want to take it slowly and actually test the capacity of the market to provide a quality service and, in future years—we do our procurement processes for our other services on a three-year basis—you go in and look at the market again. The market changes and the demands change. But equally, with regard to your comment about provision of service in more remote areas or rural areas and government being left to provide the service, there is a requirement to have wherever possible that backstop of a government provider, and financial case management is an example where there are areas in which Centrelink is the provider because other services have not been picked up through a commercial engagement process.

Senator GEORGE CAMPBELL —If you go ahead and introduce the contestability model—

Mr Sandison —Yes.

Senator GEORGE CAMPBELL —then one of the things you have to guard against is socialising the losses and privatising the gains, which is a potential here—people picking the cream and leaving the rest for the community to pay for.

Mr Sandison —That is a risk that was identified in our procurement process but, because it is the very first time it has been done, we have to wait and see what the response from the marketplace is under the current procurement process.

Mr Waslin —With our other employment services we do not necessarily get 100 per cent coverage the first time we approach the market. Some organisations declare that in some areas it is not financially viable to be delivering services and, because of a lack of providers, we need to make a second approach to the market. We might do that under the revised conditions for very specialist areas of Australia.

Senator BARNETT —With regard to that last point, is there a fixed view that the 30 to 70 ratio should apply, and how did that come about?

Mr Waslin —It is averaged at around 30 per cent. We have approached the market with a parcel of business that is about 20 per cent of the volume of business that CRS is currently delivering and 50 per cent of the new business which is coming out of the additional moneys coming from Welfare to Work. On average, that is about 30 per cent of business.

Senator BARNETT —But obviously that will be a different ratio in different locations and different states and that is not embedded in legislation or any sort of government requirement; is that correct?

Mr Waslin —On average across Australia it will be about 30 per cent but it will vary by location; that is correct.

Senator BARNETT —But it may go up and down over time?

Mr Waslin —No. The first approach will be a contract for the period taking us up to June 2009, and so it will be a fixed parcel of business until that time expires, in which case we would—

Senator BARNETT —That is what I wanted to know, thank you. In financial case management, do you have an estimate of how many customers or clients are being case managed since the start of the program on 1 July last year?

Mr Sandison —It is in the several hundred. I can get you the exact numbers.

Senator BARNETT —I am just getting a feel for the numbers. It is not—

Mr Sandison —It is not a huge number; it is well below the forecasts, particularly with the higher than expected decline rate.

Senator BARNETT —You have agreed to take on notice questions regarding the appeal system from Senator Marshall and, I think, Senator Fifield. Can you take into account, when responding, the National Welfare Rights Network submission. They have expressed concerns this morning about the appeal process. The Australian Federation of Disability Organisations have also expressed similar views, so we would be interested in your feedback on their concerns about that.

Mr Waslin —Yes.

Senator BARNETT —Access to vocational rehabilitation services other than CRS was raised this morning by the Federation of Disability Organisations. They referred to, and have tabled, a document: ‘Checklist, information and contacts—access to JCA premises, goods, services and facilities’, and they referred to an Australian government job capacity assessment site document, which has been tabled. Mr Waslin, you said that this issue of access would be a condition of the contract. So can we take it that the guidelines tabled today are guidelines that are included in the contract? And, if not, how is it a condition of the contract? Can you provide further and better particulars?

Mr Waslin —I can get back to you on that. I did not bring the contract with me but I can refer back to that.

Senator BARNETT —The issue of access to these sites is an important issue for people with disabilities and I am seeking some sort of assurance that this is part of the process and it is a requirement in some respect that they can access these sites in an appropriate manner.

The other questions I have are with regard to the benefits of the contestable arrangements that you would see. Can you provide any further and better particulars or further evidence of the benefits of contestability under this new arrangement? Can you flesh out, in terms of the introduction of contestability within the industry, the benefits that are likely to flow?

Mr Sandison —I think the best place to go would be some of the descriptions given when the government decision was announced and in going to the tender. I think that would be best. Some of the information that is covered in the tender documents that we will provide to you would cover that.

Senator BARNETT —In terms of rural and regional and remote Australia and access to these services, are there any particular measures that have been taken to make sure that those areas are properly serviced and cared for?

Mr Sandison —There have been, in the discussions about the establishment of the tender and the 30 per cent target figure and how we manage those processes. Again, that is probably best responded to, on the rural-remote and the servicing, when we provide that other information.

Mr Waslin —Although, prior to going to the market, we did agree with the Department of Human Services and CRS that we would not go to a tender situation for every rural and remote location in Australia, on the basis that it would not be sustainable to put the organisation out in some of those locations and it would be best to leave that parcel of business with CRS who are an existing and established provider there.

Senator BARNETT —If CRS is an existing and established provider then those services will continue?

Mr Waslin —That is correct.

Senator BARNETT —So there are no areas where services will be diminished—is that correct?

Mr Waslin —Yes.

Senator BARNETT —Good. Thank you.

ACTING CHAIR —Just following up on that: I think that is an interesting point because the private providers will not always be in addition to CRS; they will replace CRS in some areas. What happens if a private provider simply ups and walks away? The profit is not there; they are not going to continue in a business that is not making money. What provisions do you have in place?

Mr Waslin —At this stage it is partial contestability; we are only offering a parcel of business equivalent on average to about 30 per cent of the total. And we are not looking to replace CRS in locations; we are looking to supplement CRS. So in the larger locations, where the volume of business is there, we are looking to offer individuals a choice of provider beyond CRS.

ACTING CHAIR —That is what I thought I asked earlier: whether the private providers would always be in addition and so provide that choice, as opposed to simply replacing one service.

Mr Waslin —I am sorry; that will not be in all locations across Australia, though.

Mr Sandison —There will not be a choice in some locations; CRS will be the one there. In other locations the choice will be between CRS and a new provider. That is the intent and until we know through the procurement process what comes out of it we will not know exactly how that falls out. That is a question mark as the first foray into—

ACTING CHAIR —The question I asked was whether the new providers in every instance will be there to provide choice as opposed to replacement. I am not sure what you are saying to me now.

Mr Waslin —I am sorry if I misled you. It is certainly the intention to add additional choice to individuals. We have asked for organisations to respond if they intend to provide specialist service to individuals as well. It is just that we have not got to the point yet where we know where those organisations will be and therefore what choice exists for individuals until we get to the allocation phase and then notify the market of the results of the tender.

ACTING CHAIR —Thank you both very much for your presentation today and the department’s submission. You have taken a lot on notice. We appreciate that and the secretary will be in contact with you about a suitable time to get that information to us before we have to finalise our inquiry report.

Committee adjourned at 1.01 pm