Employment and Workplace Relations portfolio

The Employment and Workplace Relations portfolio is responsible for: skills, vocational and employment pathways; workplace relations; work health and safety; and rehabilitation and compensation.

The Department of Employment and Workplace Relations is the lead entity in the portfolio and is responsible for ensuring Australians can experience the social well-being and economic benefits that training and employment provide. The department is also responsible for workplace relations and work health and safety, rehabilitation and compensation. Further information is available from the department’s website.

In addition to the Department of Employment and Workplace Relations, there are eight entities within the portfolio that are responsible for delivering programs and initiatives in relation to workplace relations and work health and safety. The portfolio’s material entities are the Coal Mining Industry (Long Service Leave Funding) Corporation and Comcare.

In the 2023–24 Portfolio Budget Statements (PBS) for the Employment and Workplace Relations portfolio, the aggregated budgeted expenses for 2023–24 total $6.2 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through annual appropriation Acts.

The level of budgeted departmental  and administered  expenses, and the average staffing level for entities in the GGS within this portfolio are shown in Figure 1. The Department of Employment and Workplace Relations represents the largest proportion of the portfolio’s expenses, and administered expenses of the portfolio are the most material component, representing 76 per cent of the entire portfolio’s expenses.

Figure 1: Employment and Workplace Relations portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

In determining the 2023–24 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement. The ANAO also considers emerging risks from new investments or changes in the operating environment.

The primary risk identified for the portfolio relates to the effective management of the new employment services model, Workforce Australia, which was implemented on 1 July 2022.

Specific risks in the Employment and Workplace Relations portfolio relate to service delivery, regulation and financial management.

Service delivery

From 1 July 2022, Workforce Australia replaced the Jobactive program  and the new model carries implementation risk. A key risk for Workforce Australia is that the greater focus on online service provision for job seekers will not achieve intended employment outcomes and efficiencies in terms of accessibility. Monitoring of performance under the new model will be crucial to ensuring that the program is being delivered effectively and meeting its intended outcomes. 

Regulation

A number of portfolio entities have responsibility for regulatory functions — Australian Skills Quality Authority, the Fair Work Commission, Office of the Fair Work Ombudsman, Comcare, and Seacare. This raises risks regarding maintaining effective regulation in the face of change or reforms to ensure consistent, fair and accurate decision-making. 

Financial management

The Coal Mining Industry (Long Service Leave Funding) Corporation collects levies from industry employers, estimates the liabilities for long service leave entitlements, manages the pooled fund, and makes reimbursements to participating employers. Similarly, Comcare collects workers’ compensation scheme premiums from Australian Government employers, manages the premium pool, predicts claims liabilities, and pays supports to claimants. For both entities, the estimation of liabilities requires a significant level of judgement to select appropriate underlying assumptions. This raises risks regarding transparency, consistency and appropriateness of the valuations. 

The ANAO’s performance audit activities involve the independent and objective assessment of all or part of an entity’s operations and administrative support systems. Performance audits may involve multiple entities and examine common aspects of administration or the joint administration of a program or service.

During the performance audit process, the ANAO gathers and analyses the evidence necessary to draw a conclusion on the audit objective. Audit conclusions can be grouped into four categories:

• unqualified;
• qualified (largely positive);
• qualified (partly positive); and
• adverse.

In the period between 2018–19 to 2022–23, entities within the Employment and Workplace Relations  portfolio were included in tabled ANAO performance audits nine times.  The conclusions directed toward entities within this portfolio were as follows:

• three were unqualified;
• three were qualified (largely positive);
• three were qualified (partly positive); and
• none were adverse.

Figure 2 shows the number of audit conclusions for entities within the Employment and Workplace Relations portfolio that were included in ANAO performance audits between 2018–19 and 2022–23 compared with all audits tabled in this period.

Figure 2: Audit conclusions 2018–19 to 2022–23: entities within the Employment and Workplace Relations portfolio compared with all audits tabled

Source: ANAO data.

The ANAO’s annual audit work program is intended to deliver a mix of performance audits across seven audit activities: governance; service delivery; grants administration; procurement; policy development; regulation and asset management and sustainment. These activities are intended to cover the scope of activities undertaken by the public sector. Each performance audit considers a primary audit activity. Figure 3 shows audit conclusions by primary audit activity for audits involving entities in the Employment and Workplace Relations portfolio.

Figure 3: Audit conclusions by activity for audits involving entities within the Employment and Workplace Relations portfolio, 2018–19 to 2022–23

Source: ANAO data.

Overview

Entities within the Employment and Workplace Relations portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Employment and Workplace Relations portfolio entities and risk profile

Department of Employment and Workplace Relations

The Department of Employment and Workplace Relations is responsible for ensuring Australians can experience the social well-being and economic benefits that training and employment provide. The department is also responsible for workplace relations and work health and safety, rehabilitation and compensation.

The Department of Employment and Workplace Relations’ total budgeted expenses for 2023–24 are just over $5.5 billion, with suppliers and subsidies representing 46 per cent and 25 per cent respectively, as shown in Figure 4. Trade and other receivables represent 82 per cent of total budgeted assets.

Figure 4: Department of Employment and Workplace Relations’ total budgeted financial statements by category ($’000)

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are four key risks for the Department of Employment and Workplace Relations 2022–23 financial statements that the ANAO has highlighted for specific audit coverage, including three risks that the ANAO considers potential key audit matters (KAMs).

• The completeness and allocation of financial statements transactions and balances, due to the complexities in implementing machinery of government changes including the establishment of the department including governance arrangements and systems relating to risk and control. (KAM – Completeness and allocation of transactions and balances resulting from machinery of government changes)
• The completeness and accuracy of Workforce Australia program expenses, due to the complexities in implementing this new program including new payment structure and compliance requirements. (KAM – Completeness and accuracy of Workforce Australia expenses)
• The valuation of the Vocational Student Loans program (VSL) and Trade Support Loans (TSL) receivables, due to the complexity of the actuarial estimation process. (KAM – Valuation of VSL and TSL receivables)
• The completeness and accuracy of financial balances, as a result of the complexity and range of IT systems that are used to maintain information and process payments.

Coal Mining Industry (Long Service Leave Funding) Corporation

The Coal Mining Industry (Long Service Leave Funding) Corporation (Coal LSL) collects levies from employers to fund long service leave payments made to employees in the Australian black coal mining industry. The levies collected are invested until the employee takes long service leave, at which point the employer makes a payment to the employee and seeks reimbursement from Coal LSL in accordance with legislative arrangements.

Coal LSL’s total actual assets for 2021-22 were $2.0 billion, with unit trusts attributable to 93 per cent, as shown in Figure 5. Total liabilities were just over $1.7 billion, with the majority of these liabilities attributable to the provision for reimbursements.

Figure 5: Coal LSL’s actual financial statements by category ($’000)

Note: Investment revenue is shown as a negative figure to reflect the balance as per the statement of comprehensive income in Coal LSL’s 2021-22 Annual Report.

Source: ANAO analysis of Coal LSL’s 2021-22 Annual Report.

There are two key risks for the Coal LSL’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage.

• The complex valuation processes used to determine the fair values attributed to unlisted trust investments.
• The significant judgement required by management to estimate the value of the liability for reimbursement of employers’ long service leave obligations, due to a range of assumptions relied on to underpin the valuation methodology and estimation process.

Comcare

Comcare is the Commonwealth’s work health and safety regulator with the stated purpose to ‘promote and enable safe and healthy work’. It also administers the Commonwealth’s workers compensation scheme and acts as an insurer and claims manager. Comcare’s enabling role is focused on supporting engagement and better practice approaches to health and safety across its scheme.

Comcare’s total budgeted liabilities are just over $2.6 billion, with other provisions representing 98 per cent as shown in Figure 6. Budgeted revenue is just over $306.5 million, with 61 per cent attributable to workers’ compensation premiums, 15 per cent attributable to other revenue and seven per cent attributable to regulatory contributions.

Figure 6: Comcare’s budgeted financial statements by category ($’000)

Note: Amounts in Figure 6 represent departmental components of the PBS. Administered components relate to the Seafarers Safety, Rehabilitation and Compensation authority (Seacare Authority).

Note: Other expenses are shown as a negative amount due to write-down and impairment of assets being budgeted as negative $22.311 million.

Source: ANAO analysis of 9 May 2023–24 Portfolio Budget Statements.

There are two key risks for Comcare’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage.

• Valuation of Workers’ Compensation and Asbestos Claims Provision due to the judgements involved in the assumptions, calculations underpinning the actuarial assessment, and the availability, quality and completeness of data used to derive the valuation; and
• Revenue Recognition due to the complexity of legislation involved and the significance of the amounts involved in the ongoing operations of Comcare.