Audit focus

In determining the 2019–20 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, as well as emerging risks from new investments, reforms or operating environment changes. In the Social Services portfolio, considerations predominantly relate to governance, service delivery, and grants administration challenges.

Governance

As the lead Australian Government entity for social security, families and communities, disability and carers, and housing, DSS must work effectively with a range of stakeholders to deliver major social policy reforms and diverse individual programs and payments. In particular, DSS must partner effectively with Services Australia and also manage the risk of delivering government objectives through third-party providers. In doing so, it is important that DSS gain adequate assurance over the delivery of accurate and timely services and the integrity of information provided by external parties.

Achieving outcomes for policy objectives and programs requires DSS to pay additional attention to both implementation planning and the monitoring and reporting of performance. Audits have highlighted that inadequate planning can lead to disconnects between short-term activities and long-term goals, and problems with the performance measures established. DSS must also more actively collect, use and report performance information and evaluations to refine the delivery of programs and demonstrate the achievement of policy objectives.

Service delivery

There are numerous risks associated with delivery of the National Disability Insurance Scheme (NDIS). The National Disability Insurance Agency (NDIA), as a corporate Commonwealth entity, is not subject to all rules and guidelines related to the Public Governance, Performance and Accountability Act 2013, but is nevertheless managing a significant volume of taxpayer funding through payments to individuals and private sector providers. The NDIA has to manage compliance risks to reduce the instance of fraud, ensure accurate payments, and also implement new regulation of the NDIS market to improve national consistency and promote safety and quality. There is also a need to support the growth and development of the disability services market and workforce to meet demand.

Grants administration

Particular challenges and risks are involved in DSS’s responsibilities to manage the Community Grants Hub, including effectively partnering with other Commonwealth entities, engaging with third parties, ensuring fit-for-purpose management of diverse grant programs, and developing adequate assurance arrangements.

Portfolio overview

The Social Services portfolio is responsible for achieving the Australian Government’s social policy outcomes and delivering social security priorities through policy advice, program administration and research.

The Department of Social Services (DSS) is the lead entity in the portfolio and has four core areas of responsibility — social security, families and communities, disability and carers, and housing. Further information on the department’s responsibilities can be obtained from its website at www.dss.gov.au.

In addition to DSS, the portfolio also includes the National Disability Insurance Agency, the Australian Institute of Family Studies and the National Disability Insurance Scheme (NDIS) Quality and Safeguards Commission. The entities within the Social Services portfolio partner with other government entities, non-government organisations, consumers and other stakeholders to deliver a range of programs and services.

In the 2019–20 Portfolio Budget Statements (PBS) for the Social Services portfolio, the aggregated budgeted expenses for 2019–20 total $144.7 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the 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. DSS represents the largest proportion of the portfolio’s expenses, and administered expenses are the most material component, representing 87 per cent of the entire portfolio’s expenses.

Figure 1: Social Services portfolio — total expenses and average staffing level by entity

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

Financial statements

Overview

Entities within the Social Services portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Social Services portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Department of Social Services

Non-corporate

Moderate

2

1

National Disability Insurance Agency

Corporate

High

3

0

Non-material entities 

Australian Institute of Family Studies

Non-corporate

Low

 

NDIS Quality and Safeguards Commission

Non-corporate

Low

Other audit engagements (including Auditor-General Act 1997 section 20 engagements) 

Nil

         

Material entities

Department of Social Services

The Department of Social Services (DSS) is responsible for social security, families and communities, disability and carers, and housing. DSS works in partnership with other government and non-government organisations on a range of policies, programs and services focused on improving the wellbeing of people and families in Australia.

DSS’s total budgeted expenses for 2019–20 are just under $127 billion, with 91 per cent of these expenses are attributable to personal benefits, supplier expenses, and writedown and impairment of assets, as shown in Figure 2.

Figure 2: Department of Social Services’ total budgeted expenses by category ($’000)

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The three key risks for DSS’s 2018–19 financial statements that the ANAO has highlighted for specific audit coverage in 2019–20, including those that the ANAO considers potential Key Audit Matters (KAMs), are the:

  • high volume and varying complexity of personal benefit payments processed by Services Australia on complex IT systems and the reliance on the correct disclosure of personal circumstance information by a large number of recipients across diverse social economic groups (KAM – Accuracy and occurrence of personal benefit expenses);
  • significant judgements and assumptions made in the estimation models for the valuation of personal benefit provisions and receivables; and the accuracy and completeness of the source data used by the actuary in developing the estimation of the provisions and receivables (KAM – Valuation of personal benefit provisions and personal benefit receivables); and
  • a large number of grants programs with differing legislative and policy requirements, which makes the management of grant processes complex(KAM – Accuracy and occurrence of grants expenses).

National Disability Insurance Agency

The National Disability Insurance Agency (NDIA), which commenced operations on 1 July 2013, was established under the National Disability Insurance Scheme Act 2013. The NDIA is responsible for delivering the National Disability Insurance Scheme (NDIS). The NDIS is designed to provide individual control and choice in the delivery of reasonable and necessary care and support; to improve the independence, and social and economic participation, of eligible people with disability, their families and carers; and to provide associated referral services and activities.

The NDIA’s total budgeted expenses for 2019–20 are just over $17.85 billion, with 91 per cent of these expenses attributable to participant plan expenses, as shown in Figure 3.

Figure 3: National Disability Insurance Agency’s total budgeted expenses by category ($’000)

Source: ANAO analysis of PBS 2019–20 Budget related papers pre–machinery-of-government changes announced on 29 May 2019.

The NDIA’s three key risks for its financial statements are the:

  • volume and complexity of payments made to participants and providers, which continues to be in a high growth phase as the NDIA approaches the full scheme rollout. This is coupled with reliance on a developing assurance framework and associated compliance program to support the accuracy and integrity of claims made by participants and service providers (KAM – Accuracy and occurrence of participant plan expenses);
  • significant judgement and assumptions required in the actuarial estimate of outstanding claims at year end (KAM – Valuation of participant plan provisions); and
  • complexities around the valuation and accounting for in-kind contributions provided by the Commonwealth or state and territory governments directly to organisations providing disability services under existing funding relationships, where a proportion of the funding has been allocated to be made available to NDIS participants. The allocation of cash versus in-kind contributions is outlined in the respective state and territory bilateral agreements with the Commonwealth (KAM – Accuracy and completeness of other gains).