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.

In addition to DSS, the portfolio also includes Australian Hearing Services, National Disability Insurance Scheme (NDIS) Launch Transition Agency (the National Disability Insurance Agency), the Australian Institute of Family Studies, the NDIS Quality and Safeguards Commission, and the Digital Transformation Agency. The entities within the Social Services portfolio administer services and programs with other government entities, non-government organisations, program participants and other stakeholders. The portfolio includes Services Australia — audit considerations for this entity are discussed separately.

In the 2019–20 Portfolio Budget Statements (PBS) for the Social Services portfolio — excluding Services Australia, and after accounting for Portfolio Additional Estimates Statements (PAES) — the aggregated budgeted expenses for 2019–20 total $144.15 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 portfolio’s expenses.

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

Note: Excludes Services Australia.

Source: ANAO analysis of 2019–20 PBS and 2019–20 PAES.

Audit focus

In determining the 2019–20 audit work program, ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement, and emerging risks from new investments, reforms or changes in the operating environment. As a lead entity coordinating access to resources and enabling legislation for the government’s COVID-19 measures to support individuals and households, the Department of Social Services, along with other portfolio entities, have heightened risks. These risks include compliance management and the business impacts of changing risk tolerance levels during a pandemic, the accuracy and timeliness of payment arrangements, and ensuring system availability and response during periods of peak demand.

Additional business-as-usual strategic risks predominantly relate to governance, service delivery and grants administration.

Governance

As a frontline service response and policy development portfolio for both the COVID-19 pandemic response and bushfire recovery assistance, risk management is critical in responding rapidly to implement new policy measures and meet increased demand for services. If risk tolerances change during an emergency response period, these need to be documented, implemented consistently, and the broader impacts considered.

DSS is responsible for the delivery of diverse individual programs and payments with portfolio entities and third-party providers. This requires active monitoring and effective oversight of the delivery of services to ensure they are meeting the agreed requirements and expectations. Active management of shared service delivery risks is integral to mitigating risks to achieving broader program and policy objectives. It is important that DSS gain adequate assurance over the delivery of accurate and timely services and the integrity of information provided by third parties.

DSS information technology functions and staff transferred to Services Australia when it was established as an executive agency in February 2020. New risks are introduced by reliance on Services Australia’s information technology systems and IT control environment, which forms a significant component of the overall integrity and reliability of financial transactions.

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 actively collect, use and report performance information and evaluations to refine the delivery of programs and demonstrate the achievement of policy objectives.

Service delivery

The National Disability Insurance Agency (NDIA) manages a significant volume of taxpayer funding through payments to individuals and private sector providers, and has to manage compliance risks to reduce the instance of fraud, ensure accurate payments and also implement new regulation of the disability services market to improve national consistency and promote safety and quality. However, as a corporate Commonwealth entity, the NDIA is not subject to all the rules and guidelines related to the Public Governance, Performance and Accountability Act 2013. There is also a need for the NDIA 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.

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

Australian Hearing Services

Corporate

Low

1

2

National Disability Insurance Scheme Launch Transition Agency

Corporate

Moderate

3

0

Non-material entities 

Australian Institute of Family Studies

Non-corporate

Low

 

 

 

NDIS Quality and Safeguards Commission

Non-corporate

Low

Digital Transformation Agency

Non-corporate

Low

     

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 $126 billion, with 91 per cent of these expenses attributable to personal benefits, supplier expenses, and writedown and impairment of assets, as shown in Figure 2. In addition, $23.8 billion in additional funding will be provided to DSS due to the COVID-19 pandemic and the implementation of the stimulus packages.

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

 

Source: ANAO analysis of 2019–20 PAES.

The three key risks for DSS’s 2019–20 financial statements that the ANAO has highlighted for specific audit coverage in 2019–20, all of which 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. In addition, as a result of the COVID-19 pandemic, there have been changes in DSS’s compliance program, including the implementation of stimulus measures where eligibility criteria have been relaxed, which increases the risks associated with accuracy of personal benefit expenses (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, the accuracy and completeness of the source data used by the actuary in developing the estimation of the provisions and receivables, and the potential impacts of COVID-19 on the actuarial valuations (KAM – Valuation of personal benefit provisions and personal benefit receivables); and
  • a large number of grant programs with differing legislative and policy requirements, which makes the management of grant processes complex (KAM – Accuracy and occurrence of grants expenses).

Australian Hearing Services

Australian Hearing Services (Hearing Australia) is responsible for the provision of government-funded hearing services through a national network of hearing centres to eligible clients under the Australian Government’s Hearing Services Program. Hearing Australia is managed by a board of directors appointed by the Minister for Government Services and is constituted under the Australian Hearing Services Act 1991.

Hearing Australia’s total actual expenses for 2018–19 were over $226 million, with 52 per cent of these expenses attributable to employee expenses, as shown in Figure 3.

Figure 3: Australian Hearing Services’ total actual expenses by category ($’000)

 

Source: ANAO analysis of Australian Hearing Services’ 2018–19 annual report.

The three key risks for Hearing Australia’s 2019–20 financial statements are the:

  • estimates of deferred revenue, provision for make good, employee provisions and accruals, due to the application of significant judgement by management in determining these balances;
  • accounting for the recognition and valuation of property, plant and equipment, and intangibles, which include internally generated software, as these balances involve the application of judgement by management to determine the amount that can be appropriately capitalised; and
  • recognition of revenue, due to the complexity and timing of the recording of revenue.

National Disability Insurance Scheme Transition Launch Agency

The National Disability Insurance Scheme Transition Launch 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, 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 $17.87 billion, with 91 per cent of these expenses attributable to participant plan expenses, as shown in Figure 4.

Figure 4: National Disability Insurance Scheme Launch Transition Agency’s total budgeted expenses by category ($’000)

 

Source: ANAO analysis of 2019–20 PAES.

The three key risks for the NDIA’s 2019–20 financial statements, all of which the ANAO considers potential key audit matters (KAMs) 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 full implementation of the National Disability Insurance Scheme. 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 – Completeness, occurrence and accuracy of in-kind revenue and expenses).

Potential audits

In progress audits