Entity overview

Services Australia is part of the Social Services portfolio and is the Australian Government’s primary payment and service delivery provider. Services Australia delivers a range of payments and services to support individuals, families and communities, as well as providers and businesses. These include income support payments and services, aged care payments, Medicare payments and services, child support services and a range of ICT functionalities for Australian Government departments and agencies. Further information is available from Services Australia’s website.

In the 2023–24 Portfolio Budget Statements (PBS) for the Social Services portfolio, the aggregated budgeted expenses for Services Australia for 2023–24 total $6.9 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 are shown in Figure 1. Departmental expenses are the most material component representing 72 per cent of the total budgeted expenses.

Figure 1: Services Australia – total expenses and average staffing level by entity

Portfolio expenses and staffing level

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

Audit focus

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 risks identified for Services Australia relate to the integrity of decision making and risk management, cyber security and administration of its ICT systems. The testimony before the Royal Commission into the Robodebt Scheme has highlighted issues with culture, program governance, engaging with risk at senior levels and ineffective relationships with policy entities which Services Australia will need to address to provide assurance to Parliament and the community of its effective, efficient, economical and ethical use of public resources. Effective delivery of the modernisation agenda, ICT reforms and compliance programs is required to maintain the integrity of the services and payments which Services Australia manages on behalf of the Australian Government.

Specific risks in Services Australia relate to governance, service delivery, procurement, regulation and asset management and sustainment.

Governance

With a reduction in Services Australia’s operational budget for 2022–23 and 2023—24, to reflect a return to business as usual after surging to respond to natural disasters and the COVID-19 pandemic over recent years, Services Australia must reassess priorities and deliverables. The pressure to rebalance its budget requires effective risk management and consultation with policy entities to maintain service delivery standards and meet key performance measures.

Services Australia delivers programs through a large number of ICT systems. IT control weaknesses increase the risk of fraudulent, unauthorised or erroneous transactions being processed, and increase the risk of such transactions not being detected in a timely manner. Given the dependencies on the appropriate governance of the ICT environment to ensure accurate payments, the ANAO’s work includes a focus on access management, change management and program development.

The size and scale of Services Australia’s current operations and desired future state creates financial, human and systems related sustainability risks. Services Australia will need to focus on building corporate knowledge and capability amongst its Australian Public Service workforce and maintaining appropriate controls as it transitions away from relying on a large number of contractors.

Service delivery

The range of payments delivered on behalf of policy entities and services offered by Services Australia continues to expand. In 2023, Services Australia will deliver phase one of the implementation of the Government Enterprise Resource Planning platform to provide corporate capability to Australian Government departments. The testimony to the Royal Commission and ANAO findings have highlighted the importance of service delivery arrangements being documented in fit-for-purpose agreements and shared risks being proactively managed in partnership with relevant policy entities.

A priority for Services Australia is improving the digital service offer and welfare payment infrastructure through projects and investment in core technology enablers. Services Australia faces challenges around the effective implementation of new ICT systems while also maintaining the entity’s current ageing ICT infrastructure, including implementing legislative and policy changes. Under-delivery or overspending in this area will put pressure on planned expenditure or delivery in other areas.

The volume and sensitivity of the personal and business information held by Services Australia requires the prompt identification and remediation of cyber security vulnerabilities and robust information access and incident management processes.

Procurement

In 2022–23 Services Australia entered into contracts with a total value of more than $1.5 billion which makes it one of the largest contracting entities (in terms of the number and value of contracts entered into and amended) relative to other Commonwealth entities.

The ANAO’s audit of Services Australia’s establishment and use of panels identified weaknesses in compliance with the Commonwealth Procurement Rules, particularly in relation to demonstrating achievement of value for money and transparent decision making.

The ‘Independent Review of Services Australia and NDIA Procurement and Contracting’ report published in March 2023 contains 12 recommendations for Services Australia relating to the use of limited tenders, transparency, conflict of interest, documentation of the rational for decisions, use of probity and legal advisors, ministerial briefings and procurement training.

Regulation

Services Australia is responsible for monitoring, promoting and enforcing compliance with social security and welfare legislation for the payments it delivers on behalf of policy entities. Effective regulatory approaches are required to maintain the public’s trust and achieve the desired outcomes. Audit work has identified deficiencies in relation to the implementation of risk based and data driven strategies for regulatory activities, governance arrangements, compliance with procedural and legislative requirements, and performance measurement and evaluation.

The delivery of services on behalf of policy entities places a responsibility on Services Australia to provide adequate assurance in relation to its management of fraud and payment integrity risks to support policy entities meeting their responsibilities under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

Asset management and sustainment

Services Australia is continuing to undertake a major transformation and modernisation program across each of its service delivery channels – digital, face-to-face and telephony. Appropriate physical asset management includes consideration of asset risks, development of a strategic asset management strategy that is aligned to entity purposes and reporting against asset performance measures.

Previous performance audit coverage

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 Services Australia was included in 15 performance audits. The conclusions directed toward Services Australia were as follows:

  • one was unqualified;
  • nine were qualified (largely positive);
  • five were qualified (partly positive); and
  • none were adverse.

Figure 2 shows the number of audit conclusions for Services Australia 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: Services Australia 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 Services Australia.

Figure 3: Audit conclusions by activity for audits involving Services Australia, 2018–19 to 2022–23

 

Source: ANAO data.

Performance statements audit

The audit of the 2022–23 Services Australia annual performance statements is being conducted following a request from the Minister for Finance on 16 January 2023, under section 40 of the Public Governance, Performance and Accountability Act 2013. The audit is conducted under section 15 of the Auditor-General Act 1997.

The 2022–23 Services Australia audit is an initial engagement which increases the inherent risk due to unknowns around the overall quality of performance statements preparation processes. Given the high level of complexity of Services Australia’s operating environment and the misalignment of the purposes, key activities and performance measures, the engagement has been assessed as high risk.

Key risks for Services Australia’s performance statements that the ANAO has highlighted include:

  • The appropriateness and completeness of the revised performance information included in the Services Australia 2022–23 Corporate Plan to explain its performance for the year;
  • The data sources and IT controls supporting the Services Australia performance measures; and
  • Performance statements preparation processes that ensure the completeness and accuracy of reported performance information.

Financial statement audits

Overview

Services Australia is part of the Social Services portfolio. Services Australia’s risk profile is shown in Table 1.

Table 1: Services Australia risk profile

 

Type of entity

Engagement risk

Number of higher risks

Number of moderate risks

Material entities 

Services Australia

Non-corporate

High

0

3

         

Material entities

Services Australia

Services Australia has responsibility for delivering a range of payments and services to support individuals, families and communities, as well as providers and businesses. These include income support payments and services; aged care payments; Medicare payments and services; and child support services. Social and health-related payments and services delivered by Services Australia on behalf of other entities are recognised within each of the individual policy agencies’ financial statements.

Services Australia’s total budgeted assets for 2023–24 are just under $6.7 billion, with 19 per cent of these assets attributable to child support receivables and 37 per cent attributable to land and buildings, encompassing right-of-use assets, as shown in Figure 4.

Figure 4: Services Australia’s total budgeted financial statements by category ($’000)

 
 

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

There are three key risks for Services Australia’s 2022–23 financial statements that the ANAO has highlighted for specific audit coverage. ANAO considers all three risks potential key audit matters (KAMs).

  • The valuation of receivables related to the Child Support Scheme due to the value of child support payments yet to be paid by non-paying parents at the end of each financial year, which involves an actuarial estimation process, and requires significant judgement and assumptions. (KAM - Valuation of receivables related to the Child Support Scheme)
  • The valuation of intangible assets due to the complexities in capturing the actual costs of various internally developed software applications and consideration of the indicators of impairment to estimate the value of intangible assets in accordance with relevant accounting standards. (KAM – Valuation of intangible assets)
  • The valuation of right-of-use (ROU) assets and liabilities due to the large property and ICT lease holdings, which involves an assessment of key judgements associated, particularly the treatment of lease options and assurance processes for identifying and recognising lease modifications and new or terminated leases. (KAM – Valuation of right-of-use (ROU) assets and liabilities)