The Age Pension is Australia's largest social security programme delivering approximately $22 billion to 1.9 million Australians in 2005-06. The Age Pension programme is administered by Centrelink on behalf of its client agency the Department of Families, Community Services and Indigenous Affairs.

The objective of the audit was to examine the effectiveness of Centrelink's administration of complex assessments of customer entitlements for the Age Pension programme, particularly through the use of Complex Assessment Officers.



1. The Age Pension is Australia's largest social security programme delivering approximately $22 billion to 1.9 million Australians in 2005–06. The Age Pension programme is administered by Centrelink on behalf of its client agency the Department of Families, Community Services and Indigenous Affairs.

2. The Age Pension is available to people of Age Pension age1, if they meet a range of eligibility criteria established in social security legislation2. It can be a complex task for Centrelink to determine whether an individual has met these eligibility criteria, and what their level of payment should be.

3. Typically the complexity of assessing an individual's claim3 to an Age Pension payment is related to his or her level of income and assets, and in particular whether they have any involvement in business structures such as trusts and companies. Centrelink often refers to assessments of people with income generating assets, or income from business holdings, as complex assessments. These types of assessments represented 7.8 per cent of total Age Pension assessments undertaken over the period 1 July 2005 to 31 July 2006.

4. Complex Assessments require processing by a specialist Centrelink officer known as a Complex Assessment Officer (CAO). CAOs are expected to possess advanced knowledge of business structures and general-purpose financial reports, and to be able to apply their knowledge of these issues to Social Security Law to assist in determining a customer's entitlement. Accordingly, they are experienced officers with a skill-set that allows them to undertake often complex analytical work.

5. There are four elements to the role of CAOs within the Centrelink network: assessing and processing complex customer cases; providing leadership within the offices where they are located; providing a consultancy service to other Centrelink staff; and training other Centrelink staff to identify, refer or assess complex entitlements. Technical assessment is the CAOs' major role, accounting for approximately 75 per cent of their workload.

6. As of October 2006, there were 166 CAOs distributed throughout the Centrelink network. CAOs processed around 93 000 cases between 1 July 2005 and 31 May 2006, of which nearly half (46 000) were complex Age Pension assessments. CAOs typically assess cases across social security programmes, rather than specialising in a particular programme, such as Age Pension. This is because the core assessment requirements (especially calculation of income from companies and trusts) are common across programmes.

7. The ANAO has identified in previous audits of social security payments that complex assessments pose a significant business risk to Centrelink in terms of ensuring the correctness of payments to customers4. The ANAO has also identified previously, that CAOs can make a positive contribution to mitigating this business risk, by ensuring a correct calculation of the customer's entitlement through the application of their specialist knowledge of business structures and social security legislation.5

Audit Approach

8. The objective of the audit was to examine the effectiveness of Centrelink's administration of complex assessments of customer entitlements for the Age Pension programme, particularly through the use of Complex Assessment Officers.

9. The audit focused on Centrelink's ability to effectively manage its current level of Age Pension customers requiring complex assessments, as well as its ability to plan for the projected future increases in this type of customer. The audit considered Centrelink's administration of complex Age Pension assessments across the Centrelink network, however, there was a greater focus on Areas with higher levels of Age Pension customers.6

10. The audit focused on complex assessments for the Age Pension programme for two main reasons. Firstly, the ANAO had previously undertaken audits on the processing of Age Pension claims, and sought to examine Centrelink's progress towards rectifying issues identified in these audits relating to the processing of complex assessments. Second, the Age Pension programme presents Centrelink with a number of challenges relating to the processing of complex claims in the future, due to Australia's ageing population.7

Overall audit conclusion

11. In 2005–06, Centrelink processed around 50 000 complex Age Pension assessments, consisting of both new claims for the Age Pension and re-assessments of existing entitlements, involving annual payments of approximately $400 million. These assessments pose a significant business risk to the integrity of related outlays administered by Centrelink. To mitigate this risk, Centrelink uses specialist officers known as CAOs to process these claims.

12. Monitoring the effectiveness of treatments to mitigate risk is a key element in the application of risk management8. To allow Centrelink (and others) to reach an informed and accurate assessment of the effectiveness of CAOs in reducing the risk that complex Age Pension assessments will not be undertaken correctly, it is important for Centrelink to have access to reliable performance information regarding the work of CAOs, and the contribution they are making to the accurate processing of complex Age Pension assessments.

13. However, due to deficiencies in mechanisms for measuring payment correctness, timeliness and efficiency of complex Age Pension assessments, limited reliable performance information about the effectiveness of CAO's is currently available. In this circumstance, Centrelink's capacity to monitor the effectiveness of its risk management approach to these assessments is reduced.

14. Ongoing review is essential to ensure that the risk management approach of using CAOs remains relevant 9 in supporting the efficient, effective and timely processing of complex Age Pension assessments. The ANAO noted that:

  • Centrelink could not determine whether the use of specialist CAOs was a more cost effective means of assessing complex entitlements than the previous approach of using generalist CSOs, which was criticised by the ANAO in a previous audit tabled in June 2001; 10
  • while the role of CAOs is similar throughout Centrelink, there are a number of different structures for administering CAOs in its network, and it is not clear which model best suits particular circumstances; and
  • there is expected to be a strong growth in the number of complex Age Pension assessments in the near future but none of Centrelink's Area Offices has developed succession planning strategies to ensure adequate numbers of CAOs in the future.

15. Notwithstanding that limited reliable performance information is currently maintained, the ANAO considers it likely that CAOs are contributing to more accurate processing of complex Age Pension assessments. Throughout the ANAO's programme of fieldwork interviews, CAOs impressed as being knowledgeable in their field, and were highly regarded by other Centrelink staff for their expertise and contribution to processing complex assessments, as well as providing training and internal consulting services.

Key Findings

Monitoring the performance of Complex Assessment Officers (Chapter 2)

16. Centrelink had limited data to measure the effectiveness and efficiency of complex assessment processing by CAOs. Limitations in monitoring the performance of CAOs undertaking complex Age Pension assessments mainly comprised:

  • a lack of adequate measures of the level of payment correctness for claims assessed by CAOs as compared to claims processed by CSOs;
  • a lack of timeliness data for complex Age Pension assessments that could gauge the contribution of CAOs to Centrelink's achievement of internal timeliness key performance indicators (KPIs) for the Age Pension programme; and
  • an absence of measures of CAO's efficiency or productivity.

17. There are opportunities available to improve Centrelink's capacity to determine the impact CAOs have on the processing of complex assessments, through improvements to the agency's performance measurement systems, especially the CAO Toolbox11 and the Random Sample Survey12. Such improvements could allow for the accurate measurement and reporting at a national level on the quality, timeliness, and efficiency of CAOs.

18. Centrelink advised the ANAO that it intends to introduce a new version of the CAO Toolbox in March 2007. The new version should be able to produce national level reports on CAO performance relating to timeliness, and efficiency. However, the ANAO notes that improvements to the system of this kind cannot by themselves address the separate issue identified in this audit related to inaccuracy of data in the system caused by CAOs failing to enter performance data into the Toolbox, or incorrectly entering data. Further work is needed to improve the controls around the capture of this data.

19. The Random Sample Survey (RSS) is the primary mechanism established by Centrelink's key purchaser departments (FaCSIA, the Department of Employment and Workplace Relations and the Department of Education, Science and Training) to measure the accuracy of outlays on social security payments administered by Centrelink. The RSS provides point-in-time analysis of a sample of customers' circumstances designed to establish whether customers are being correctly paid across programmes delivered by Centrelink, including the Age Pension programme.13 However, the sample does not distinguish between complex and non-complex cases for any programme. Therefore, it is not possible to separately gauge the correctness of complex Age Pension entitlements that CAOs had assessed using RSS data.

20. The ANAO examined the latest full year RSS data available for the Age Pension programme as a whole. This related to the 2004–05 financial year. The RSS results indicated that around half of all Age Pension cases checked as part of the RSS process in 2004–05 contained one or more errors, with 30 per cent of all cases having an error that resulted in an incorrect payment. These findings were similar to those from the 2000–01 Age Pension RSS. ANAO Audit Report No. 17 2002–2003 Age Pension Entitlements reported that ‘according to the 2000–01 Age Pension RSS undertaken by FaCS and Centrelink, 28 per cent of Age Pensioners were receiving an incorrect entitlement.'14 The findings of similar high rates of incorrect payment for both periods suggests that Centrelink would benefit from further analysis of errors in Age Pension assessment, including for complex cases.15

21. Centrelink classifies error into two main categories; customer error and administrative error. Error identified as a result of the RSS is attributed to customer error where the incorrect rate paid to the customer, or the incorrect information recorded on the customer file, can be shown to be the result of action or inaction by the customer. Administrative error is attributed to three categories: Centrelink staff error16, Systems error17 and Legislation/Guide error.18

22. In the 2004–05 RSS, the 745 reviews with error contained 1 212 errors19. Of the 1 212 errors, 91 (7.5 per cent) were administrative errors which resulted in an incorrect payment to the customer. The remainder of errors which resulted in incorrect payments to customers (497) were due to customer error.20

23. The ANAO has identified in previous audits that ‘Centrelink is responsible for the integrity of its outlays as a whole, and should not adopt a narrow definition of its responsibilities through attributing error.21' As well, the Allen Consulting Group, in conducting a 2004 review of Centrelink's compliance processes for the then Department of Family and Community Services, advised Centrelink against discounting the importance of administrative error that does not contain a dollar impact.22

24. In this context, the ANAO notes that Centrelink has taken steps aimed at addressing the issue of customer error across its programmes, including for complex Age Pension assessments, notably:

  • the introduction of regular account statements sent to customers outlining Centrelink's records of their income and assets;
  • on-line services which allow customers to view, and in some cases update, their income and asset information held by Centrelink;
  • an automated review of customers' income streams from financial institutions; and
  • seminars on financial planning and articles in relevant newsletters.

Business processes supporting complex Age Pension assessments (Chapter 3)

25. In order to accurately assess the increasing number of complex Age Pension assessments, Centrelink requires efficient and effective business processes, which support CAOs to apply the various legislation and policy guidelines governing the payment of Age Pension entitlements.

26. Centrelink has developed, and made available to relevant staff, a list of circumstances that it defines as complex and which staff were advised must be referred to a CAO. CSOs follow the guidance on this list and appropriately refer complex cases to CAOs in most instances, especially the most common cases, such as those involving companies and trusts. However, the ANAO found that some of the less common complex cases are often not being referred to CAOs as required by National Support Office guidelines, or are not adequately covered by supplementary guidelines that Centrelink's Area Support Offices are responsible for providing.

27. The ANAO found that Centrelink had made significant improvements in the referral processes for complex assessments since the ANAO had previously examined the issue in 2000–01 and 2002–0323. The main process improvement was the introduction of a referral scriptor. The scriptor is an on-line workflow tool developed by Centrelink to standardise and automate processes used by CSOs to refer complex claims to CAOs.

28. Throughout 2005–06, Centrelink introduced a new business model that significantly reformed the way it delivers services. The model divides Centrelink's operations into four business lines: Working Age Participation; Families and Child Care; Business Integrity; and Seniors, Carers and Rural, which includes the Age Pension programme. Each of Centrelink's Area Support Offices24 have adopted structures to support the operation of these business lines that the management of the particular Area considers best suited their Area's individual needs.

29. The introduction of Centrelink's new business model resulted in changes to the management of CAOs, with four distinct models evident in the five Areas visited by the ANAO during fieldwork for this audit. The ANAO noted that each of the Area structures adopted for processing complex Age Pension assessments had advantages and disadvantages for the successful operation of CAOs. Centrelink has not analysed each structure to determine whether there would be benefits in introducing standardised arrangements to facilitate efficient processing of complex assessments, having regard to the operating environment of each Area.

30. The main internal control mechanism for CAOs is the Quality On-Line (QOL) checking system. The QOL system is an on-line quality tool which automatically selects a sample25 of each CAO's work.26 The sampled work is then referred to a qualified QOL checker27 to have its quality assessed. If an error is identified, the work is referred back to the CAO for rectification, and feedback is provided to the CAO by the QOL checker.

31. The ANAO found that while Centrelink has introduced changes to the QOL checking process in recent years, there remain some shortcomings in its capacity to provide adequate quality control over complex Age Pension assessments. In particular:

  • QOL is still not easily applied to specialist tasks such as complex Age Pension assessments, as it does not cover all of the major tasks undertaken by CAOs28. As a result, QOL checkers must voluntarily check the processes that QOL does not cover. This approach is likely to lead to inconsistent effectiveness of QOL as an internal quality control tool for complex Age Pension assessments; and
  • there was an absence of ‘check the checking' procedures29 for complex Age Pension assessments, which test the adequacy and accuracy of QOL checks conducted by CAOs.

32. In light of these findings, the ANAO considers that Centrelink should review how QOL is applied to complex Age Pension assessments, and introduce any identified improvements that would strengthen controls to the correctness of complex Age Pension assessments.

Resourcing Complex Assessment Officers (Chapter 4)

33. To support efficient, effective and timely processing of complex Age Pension assessments, Centrelink requires adequate numbers of CAOs to be appropriately positioned throughout its network. CAOs in the Centrelink network are managed primarily through individual Area Support Offices. Each Area Office is responsible for developing the resource strategies that determine the number of CAOs to be employed in the Area and their distribution. As each Area contains different numbers of customers requiring a complex assessment, the resourcing of CAOs differs between Areas.

34. During fieldwork, many Area Support Offices advised the ANAO that they determined the number of CAOs for the forthcoming year mainly on the basis of existing numbers, sometimes reduced in line with achieving an efficiency dividend. 30

35. After a peak of around 223 CAOs in the Centrelink network during 2002–03, the number of CAOs remained relatively stable at around 180 until mid–2005, when the number began to decrease. The current number of CAOs is 166.

36. The circumstances of Age Pensioners who receive less than the maximum rate are generally more complex to assess than the circumstances of those customers who qualify for the full rate of pension. There is evidence that Centrelink's complex Age Pension entitlements assessment caseload will increase substantially in coming years as the overall numbers of recipients of Age Pension payments increases while the proportion of Age Pension recipients who qualify for the maximum rate of pension decreases.

37. The Treasurer highlighted this expected future trend in the Intergenerational Report 2002–03, where he stated:

In the future, the key driver of Age Pension spending is likely to continue to be the increase in the population in the eligible age range….. In addition, the proportion of pensioners receiving a full Age Pension is also projected to decline, while the proportion with a part Age Pension will increase significantly. These restraining factors reflect the impact of the maturing superannuation system, which both encourages and requires greater self provision for retirement.31

38. From 20 September 2007, the pension assets test taper rate will be halved.32 These changes are expected to significantly increase the number of people eligible for a part Age Pension. The ANAO considers that the trends identified by the Treasurer in the 2002–03 Intergenerational Report are likely to be accelerated by these policy changes announced in the 2006–07 Federal Budget as part of the Government's A Plan to Simplify and Streamline Superannuation. 33

39. Despite this likely trend, none of Centrelink's 15 Area Support Offices has developed succession planning strategies for CAOs. It would be prudent for all Centrelink Area Support Offices to implement a succession planning regime that considers the likely number of CAOs required, their continuing role and the best sources for the recruitment of CAOs.


40. The ANAO made four recommendations aimed at improving Centrelink's administration of complex Age Pension assessments. These recommendations are also relevant to complex assessments undertaken for other programmes delivered by Centrelink.

Centrelink response

41. Centrelink welcomes the report and agrees with the four recommendations. Implementation of these recommendations will strengthen the management of CAOs and enhance the administration of complex Age Pension assessments.


1 In the financial year 2006–07, the qualifying age for men was 65, and for women 63 years. On 1 July 2007, the qualifying age for women will increase to 63.5 years and will progressively increase to 65 years by 2014.

2 Social Security Act 1991 (Cth), Social Security Administration Act 1999 (Cth), and Social Security (International Agreements Act) 1999 (Cth).

3 Age Pension claims include new claims and re-assessments. New Claims are claims for an Age Pension payment by an individual who has never previously received such a payment. A re-assessment involves Centrelink staff considering how an Age Pensioner's changed circumstances may affect their level of entitlement.

4 ANAO Audit Report No. 34 2000–2001 Assessment of New Claims for the Age Pension by Centrelink and ANAO Audit Report No. 17 2002–2003 Age Pension Entitlements.

5 ANAO Audit Report No. 34 2000–2001 Assessment of New Claims for the Age Pension by Centrelink, pp. 79-80.

6 Fieldwork was conducted between March and May 2006, in Area East Coast (NSW), Area Hunter (NSW), Area Western Australia, Area South Australia and Area Brisbane. The audit team also visited Area Tasmania to interview the National CAO Coordinator.

7 In the future, Centrelink will face a steadily increasing stream of Age Pension customers requiring complex assessments of their claims, due to an increase in the number of people reaching Age Pension age, and the proportion of these people possessing income generating assets and superannuation.

8 See Australian/New Zealand Standard: Risk Management, AS/NZS 4360:2004, Standards Australia/Standards New Zealand, p. 22.

9 ibid.

10 ANAO Audit Report No. 34 2000–2001, op. cit.

11 The CAO Toolbox is an on-line data system that consists of a number of data variables that aim to measure both activity and performance of CAOs.

12 Paragraph 19 describes the Random Sample Survey.

13 The ANAO conducted a performance audit of the Random Sample Survey Programme in 2005–06. See Audit Report No.43 2005–06, Assuring Centrelink Payments – the role of the Random Sample Survey Programme, May 2006.

14 ANAO Audit Report No. 17 2002–03, op. cit., p. 41.

15 If the accuracy of complex cases increased between 2000–01 and 2004–05, then the accuracy of less complex cases must have dropped.

16 Where the incorrect rate paid to the customer, or the incorrect information recorded on the customer file, can be shown to be the result of action or inaction by Centrelink staff.

17 Where the incorrect rate paid to the customer, or the incorrect information recorded on the customer file, can be shown to be the result of a computer system error.

18 Where the incorrect rate can be shown to be the result of anomalies in the legislation and/or the Guide that Centrelink staff have access to.

19 A customer can have more than one error in his/her record, hence the total number of errors (1 212) is greater than the number of reviews with error (745).

20 The median value of customer debt for the Age Pension programme was $27, with an average value of $926.

21 ANAO Audit Report No. 17 2002–03, op. cit., p. 56, and ANAO Audit Report No.43 2005–06, op. cit., p. 58.

22 The Allen Consulting Group, FACS and Centrelink: Compliance Review, Final Report, January 2004, p. 43.

23 ANAO Audit Report No. 34 2000–2001, op. cit., and Audit Report No. 17 2002–03, op. cit.

24 Centrelink has a total of 15 Area Support Offices.

25 For an inexperienced CAO, 100 per cent of their work is selected for QOL checking. For an experienced CAO, five per cent of their work is selected for QOL checking.

26 The QOL system is not limited in its use to CAOs. It is the main quality control tool for all Centrelink staff processing customer casework.

27 In the case of CAOs, a QOL checker is an experienced CAO who has undergone the appropriate training in applying the QOL tool. They are located in same Centrelink Area as those they are checking, and depending on the business model, may be located in the same CSC, group of CSCs, cluster of CSCs or Area Office.

28 Examples of processes undertaken by CAOs which are not covered by the QOL tool include: ensuring the appropriate financial statements of a trust and/or company have been applied; the correct information has been drawn from these statements; and the appropriate documentation has been examined when assessing a customer who holds interests in a self-managed superannuation fund.

29 ‘Check the checking' is a control mechanism applied to CSO work, where a sample of work that has been QOL checked, is re-checked to assure the integrity of the QOL process.

30 An efficiency dividend for CAOs involves reducing the overall number of CAOs for an Area, while increasing the workload for the remaining CAOs. Efficiency dividends can be applied by Areas where there has been a reduction in overall funding for that Area for the next financial year.

31 The Honourable Peter Costello MP, 2002–03 Budget Paper No.5, Intergenerational Report 2002–03, p. 42.

32 Under the existing pension assets test taper rate, $3 per fortnight in pension is withdrawn for every $1 000 in assets above the relevant threshold. Under the new pension assets test taper rate to apply from 20 September 2007, recipients only lose $1.50 per fortnight of pension for every $1 000 in assets above the relevant threshold. This would allow a single retiree homeowner to have around an additional $165 000 of assets before losing the Age Pension, while a couple could have around $275 000 of additional assets (not including the family home) before losing the Age Pension.

33 Accessed on Treasury website, 21 November 2006 at,