The audit objective was to assess the effectiveness of the Department of Veterans’ Affairs (DVA) administration of the veterans’ children education schemes.
1. The Department of Veterans’ Affairs (DVA) is the primary service delivery agency responsible for developing and implementing programs that assist the veteran community, including compensation and related support for veterans and their dependants. The Veterans’ Children Education Scheme (VCES) and the Military Rehabilitation and Compensation Act Education and Training Scheme (MRCAETS) are similar education schemes (Schemes) established to support the young dependants of deceased or severely disabled veterans. The purpose of these compensatory Schemes is to provide financial assistance, student support services, and guidance and counselling for eligible children to help them achieve their full potential in education or career training.1 These Schemes followed the Soldiers’ Children Education Scheme, which was established in 1921 to support the children of deceased and disabled World War I veterans.
2. Eligibility for the Schemes is generally restricted to the young dependants of veterans2 who have been killed or severely incapacitated as a result of service related injury or disease.3 In addition, Vietnam veterans’ children who are diagnosed with a depressive disorder or are assessed as vulnerable are eligible for assistance. Children whose veteran parent had operational service but whose death was not war-caused, and who are not in the care of their surviving parent, are also eligible for assistance. In 2011–12, expenses for the Schemes totalled $19.2 million, including $15.9 million in benefits4, assisting over 3500 students.5
3. As financial assistance alone may not be sufficient for eligible children to achieve their full potential in education or career training, the Schemes establish state-based volunteer Education Boards to support eligible children in their education and training.6 Board members may be nominated by ex‑service organisations, educational institutions or DVA, and must be personally interested in, and able to contribute to, the educational welfare of eligible students.7
4. The main functions of the Boards are to:
- provide or arrange expert guidance to assist students plan their studies;
- assist in supervising the education of primary and secondary students, and monitor their progress; and
- refer students and their families to community welfare, education, guidance and counselling services, where appropriate.8
5. DVA appoints a departmental officer as VCES Secretary to each Education Board.9 The VCES Secretaries provide secretariat support to the Boards and manage state-based business units responsible for client service delivery. The business units advise clients, assess eligibility, process claims and payments, monitor student progress and arrange student support services in consultation with the Boards.
6. The Schemes have rules established by legislation, which govern student eligibility and the level of veteran disability required to qualify a dependent child for assistance. In general, students must be between the minimum school age and 25 years at the time of application, and enrolled in full-time study in Australia. As defined by the Schemes, the ‘child’ of a veteran includes any young person who is, or was immediately before the death of the veteran, wholly or substantially dependent on the veteran.10
7. The Schemes are established to provide the following forms of assistance:
- financial assistance—education allowances, rent assistance, tertiary scholarships and tertiary fares allowance;
- student support services—additional tuition for remedial purposes (up to $2000 per year), and special financial assistance in exceptional circumstances (up to $2000 per year)11; and
- guidance and counselling—expert guidance to assist students in planning their studies, supervision of primary and secondary students’ education and monitoring their progress, referral to community services where appropriate, and visits to country students.12
8. Many of the financial benefits paid by the Schemes are also available to students in the general community under social security programs. For instance, the Schemes’ education allowances for students aged 16 years or more are set at Commonwealth Youth Allowance rates.13 However, in contrast to most social security benefits, the assistance provided by the Schemes is a form of compensation and not subject to a parental or student means test.
9. The VCES is established under the Veterans’ Entitlement Act 1986 (VEA), and the MRCAETS is established under the Military Rehabilitation and Compensation Act 2004 (MRCA). The VEA and MRCA are the principal Acts that provide military compensation for veterans and their dependants. The VEA covers service prior to July 2004, and the MRCA covers the subsequent period. Under the VEA and MRCA, the Repatriation Commission and the Military Rehabilitation and Compensation Commission (the Commissions) are responsible for the administration of their respective Schemes. In practice, the Commissions delegate most of their administrative functions to DVA.14
Audit objective and scope
10. The audit objective was to assess the effectiveness of DVA’s administration of the veterans’ children education schemes.
11. The scope of the audit was the administration of the VCES and MRCAETS, including the assessment of student eligibility. It did not include DVA processes for assessing veterans’ service related disabilities or cause of death. Further, the audit did not examine the Long Tan Bursary Scheme as it is administered by the Australian Veterans' Children Assistance Trust on behalf of DVA.
12. The Veterans’ Children Education Scheme and the Military Rehabilitation and Compensation Act Education and Training Scheme (the Schemes) provide assistance to the young dependants of Australian Defence Force (ADF) members who have died or been severely injured as a result of their military service. The Schemes provide assistance to students in the form of financial assistance, student support services, and guidance and counselling. In 2011–12 the Schemes assisted 3559 eligible students, providing an estimated $15.9 million15 in benefits, with administrative costs of $3.3 million.
13. The two Schemes comprise a mature program, and DVA has implemented generally effective administrative arrangements for their delivery. The department has established processes to accurately determine client eligibility, process claims and make payments. In the student sample examined by the ANAO, eligibility was accurately assessed in all cases, and benefit entitlements were paid in accordance with legislation. Further, the Schemes are supported by experienced VCES Secretaries with national responsibility for the Schemes’ day-to-day administration, operating out of Brisbane, Adelaide and Hobart.
14. However, there are aspects of the Schemes’ administration and current operations that would benefit from review. At a threshold level, there has been a degree of misalignment since 2007–08 between the legislative instruments establishing the Schemes16 and their practical operation. In 2007–08, DVA reduced the level of administrative support for student assistance provided through the Schemes’ volunteer Education Boards, particularly visits to students living outside capital cities, as provided for in the legislative instruments. While acknowledging the lack of alignment between current practice and the legislative instruments, DVA advised the ANAO that the Schemes’ development since the instruments were made reflects a situation where the level of support and assistance provided to students through the modern education system is much improved.17 As the Schemes have a legislative basis, the misalignment between the relevant legislative instruments and current administrative practice requires attention, a point acknowledged by DVA during the course of the audit.
15. Further, the department has not conducted significant formal planning or evaluation for the Schemes since their introduction and there would be benefit in developing an evaluation strategy to assess the extent to which they are achieving their objectives. An evaluation strategy could be developed concurrently with the proposed review of alignment between administrative practice and the legislative instruments, to establish a basis for assessing the effectiveness of any future changes to the Schemes.
16. During the life of the Schemes, changes in the wider social policy environment have at various times challenged DVA’s policy and coordination capacity. Changes in the external policy and program environment have included: the raising of the minimum school leaving age; and the shift from Youth Allowance to Family Tax Benefit as the main source of government assistance for families with older teenagers; the Education Tax Refund Payment; the Schoolkids Bonus; the Income Support Bonus and changes to student Relocation and Start-up Scholarships. No advice was provided to the Commissions18 and service delivery staff on the implications for the Schemes when the minimum school leaving age was raised. The ANAO’s analysis also indicates that at least as far back as 2004 some students may have been financially better off by claiming benefits other than those offered by the VCES.19 However, DVA did not formally notify affected clients of this option until January 2012. While the interaction between the Schemes and other government programs is often complex, appropriate liaison and coordination arrangements with other agencies can contribute to the effective administration of the Schemes. The establishment of an interdepartmental working group on student issues in August 2012 provides a vehicle to improve communication and policy coordination between DVA and the Department of Human Services (DHS).
17. The Schemes are treated as a stand-alone program in DVA’s Portfolio Budget Statement (PBS) and annual report, providing visibility for reporting purposes. However, DVA currently reports on Scheme deliverables solely in terms of student numbers as at 30 June each year. There is scope to further develop the reporting framework by reporting on the three main services delivered by the Schemes: financial assistance, student support services, and guidance and counselling. In addition, the Schemes’ performance information could be improved by developing key performance indicators (KPIs) to demonstrate the extent to which the Schemes are achieving their objectives, as the current KPI focuses solely on the proportion of critical errors in payments. DVA has acknowledged the benefit of reviewing its deliverables and KPIs with a view to developing measures that are outcomes and quality based, rather than purely output based.
18. The ANAO has made two recommendations directed towards DVA improving the alignment between administrative practice and legislation, and performance reporting for the Schemes. The ANAO has also noted, as discussed at paragraph 26 below, the need for DVA to ensure that all requirements for Working With Children Checks are satisfied.
Key findings by chapter
Chapter 2: Delivery of client services
19. A formal application must be lodged with DVA in order for students to receive assistance under the Schemes. As the Schemes are a form of compensation, it is important that DVA raises awareness of the Schemes in the eligible population. DVA advised the ANAO that veteran families are advised of the Schemes when a veteran qualifies for a pension for severe disability, or when his or her death is accepted as service related. However, eligibility for the Schemes is broader than these two client groups. Further, apart from recent war widow(er)s, DVA does not identify and follow-up eligible veteran families who have not claimed their compensatory entitlements under the Schemes.20 As DVA had not measured the take-up of the Schemes in the eligible population, the ANAO investigated DVA’s databases for this purpose. Departmental databases contain valuable information about the Schemes’ catchment population, in particular, the veteran families with school-age children who are not registered for assistance under the Schemes. DVA has advised that it will in future obtain regular reports of all clients with eligibility for the Schemes who are not claiming benefits, and follow-up such clients.
20. DVA has assisted the Commissions in preparing legislative instruments that provide a framework for administering the Schemes, and has also implemented a policy manual to guide the Schemes’ decision-makers. The Schemes had a comprehensive procedural manual that incorporated specific service delivery standards until 2007–08, when service delivery was rationalised from six state‑based locations to three, and the number of VCES Secretaries was halved. The Schemes continue to have coverage under the generic service delivery standards in DVA’s Service Charter, which apply to all programs administered by DVA.
21. The department has a strong focus on the accurate assessment of eligibility and payment of benefits. Financial assistance accounts for most of the Schemes’ costs (98 per cent of administered expenses), and is provided as direct payments to students or their parents in the form of education allowances, tertiary scholarships and rent assistance. The ANAO conducted an examination of the payment records of a sample of students and found that DVA had accurately assessed student eligibility, and processed and paid all claims in the sample in accordance with the Schemes’ rules. The ANAO also examined the payment of tertiary scholarships, which should be paid automatically to eligible tertiary students without the need to submit an additional claim. There was no evidence of non-payment of scholarships to eligible tertiary students in the sample examined.
22. Other benefits, including additional tuition and special financial assistance, are provided to a minority of students. In 2011–12, the Schemes provided additional tuition to an estimated 390 students (or 11 per cent of students) and special financial assistance to 23 students (or 0.6 per cent of students). The provision of additional tuition is restricted to remedial assistance.
23. Volunteer Education Boards, including experienced educationists and counsellors with links to the veteran community, have long been established in each state to oversight the education of eligible children. In practice, the Boards rely on referrals and resourcing from DVA to perform their functions, which include: providing and arranging expert guidance to assist students in the planning of their studies; assisting in supervising the education of primary and secondary students and in monitoring their progress; and referring students and their families to community welfare, education, guidance and counselling services where appropriate.
24. Since the number of VCES Secretaries was reduced from six to three in 2007–08, the Boards have largely ceased country visits (which are required by legislation) and most Boards review less than five per cent of students annually. DVA monitors the Schemes’ primary and secondary students by sending an annual questionnaire to each school. VCES Secretaries review the responses, and prioritise the most difficult cases for referral to the Boards for advice. While DVA’s annual survey helps to monitor students’ progress, the Boards and the VCES Secretaries consider that the survey does not replace the former outreach program, which was wound back with the reduction in VCES Secretaries and the VCES travel budget.21 Under the outreach program, in addition to seeking school reports, DVA sought direct contact with students and their families to offer support through meetings, workshops and school visits, in conjunction with Board members. The program often identified issues that schools were unaware of—such as students’ difficult home circumstances—and brought together the full range of support services offered by schools and the Schemes to assist students. The program also facilitated the mentoring of students by Board members. DVA advised that since their introduction, the Schemes have developed in a way which reflects a situation where the level of support and assistance provided to students through the modern education system is much improved.
25. Nevertheless, there are aspects of the Schemes’ administration and current operations that would benefit from review. At a threshold level, there has been a degree of misalignment since 2007–08 between the legislative instruments establishing the Schemes and current administrative practice. As the Schemes have a legislative basis, the misalignment between the relevant legislative instruments and current administrative practice requires attention, a point acknowledged by DVA. As part of the review, there would be merit in DVA considering support arrangements for eligible students in circumstances where local schools may not have the capacity to provide counselling and support.
26. The department has a system in place for obtaining Working With Children Checks for staff and Board members in Western Australia, South Australia and the Northern Territory, and maintains their currency. In contrast, the Working With Children Checks for staff and Board members in the eastern states have been patchy, with DVA not obtaining Checks for some individuals, while allowing others to lapse. In July 2012, the ANAO sought evidence of Checks for the Schemes’ staff and Board members, in accordance with statutory requirements and the requirements of the Education Schemes’ Policy Manual. The department did not apply for some Checks until 2013, and evidence of completed Checks for several individuals remained outstanding at the conclusion of the audit. There is scope for significant improvement in this area of DVA’s administration. In its response to the final report, as presented in Appendix 1, DVA has offered its assurance to the ANAO that the department’s responsibilities with respect to meeting the requirements for working with children have now been addressed (with the exception of one still outstanding), and will be closely managed in future.
Chapter 3: Advising clients and stakeholders
27. The VCES and MRCAETS are mature schemes with well established service delivery arrangements. However, there have been significant developments in the broader social policy environment, including changes to the minimum school leaving age and Commonwealth family assistance, which have implications for the Schemes.
28. The Schemes’ legislative instruments restrict the payment of homeless allowance to students who have reached the minimum school leaving age. When the minimum school leaving age was raised to 17 years, the homeless allowance was no longer available to 15 or 16 year old students, although it is not clear that this was the intent of the Commissions, who are responsible for the legislative instruments. However, no policy advice was provided to the Commissions, the Boards or service delivery staff on this issue.
29. The interaction between the Schemes’ entitlements and social security benefits is complex. Veteran families can receive both Family Tax Benefit (FTB) and payments from the Schemes until a child turns 16 years old, and families must then choose between the two. In addition, when a student turns 16, he or she cannot concurrently receive both the VEA orphan’s pension and a VCES education allowance.22 However, the VEA orphan’s pension and FTB payments may be received concurrently. The ANAO’s analysis indicates that at least as far back as 2004, VEA single orphans aged 16 years or more may have been financially better off by claiming the VEA orphan’s pension and FTB than claiming a VCES education allowance. However, DVA did not advise VEA orphans and their guardians of this option until January 2012. DVA’s service delivery staff were formally notified of the interaction between FTB, the VEA orphan’s pension and the Schemes in February 2012.
30. To effectively administer the Schemes, DVA needs to monitor wider developments, assess their implications, develop timely policy responses as necessary, and provide appropriate advice to clients to ensure that they are fully aware of their entitlement options. DVA’s policy development and coordination arrangements have at times struggled to keep pace with wider changes in social policy and programs that interact with the Schemes. DVA has advised the ANAO that it has recently established a DHS/DVA Student Working Group to strengthen the management of policy coordination, and that it has sought to more proactively engage with FaHCSIA, DEEWR and DHS in implementing a number of recent new policy proposals. The working group, in particular, provides a vehicle to improve communication and policy coordination with other agencies.
31. At the end of each financial year, DVA issues clients with payment summaries that show which payments are assessable income for taxation purposes. The Schemes’ clients rely on this advice to complete their income tax returns. In May 2012, DVA received advice from the Australian Taxation Office (ATO) that did not align with DVA’s previous understanding, and raised a number of questions about the taxation treatment of some of the Schemes’ benefits. DVA advised the ANAO that it is continuing to consult with the ATO on aspects of that advice.
Chapter 4: Reporting and evaluation
32. DVA has structured the Schemes as a single program under the government’s performance reporting framework, which provides visibility and enhanced accountability for the Schemes. In 2011–12 DVA changed the program’s objective from: ‘provide financial assistance to eligible students... to assist with their education needs’ to: ‘provide financial assistance and support services to eligible students to help them achieve their full potential in education’. The revised program objective better reflects the legislated purpose of the Schemes.
33. DVA currently reports on Scheme deliverables solely in terms of student numbers as at 30 June each year. The Government’s performance framework requires agencies to report their deliverables in terms of the goods and services produced and delivered by each program.23 There is scope to enhance the Schemes’ performance framework by reporting on the three main services delivered by the Schemes, which are: financial assistance, student support services, and guidance and counselling.
34. The Schemes currently have only one key performance indicator (KPI): critical errors less than five per cent—which relates to the accuracy of payments. Performance information could be improved by developing KPIs that report the extent to which the Schemes are assisting students to complete secondary or tertiary education. DVA has acknowledged the benefit of reviewing its deliverables and KPIs with a view to developing measures that are outcomes and quality based, rather than purely output based.
35. The Schemes’ main processing system, the Education Assistance Service, has not been fully implemented, and does not produce management information reports. Consequently, since 2007, the Boards have not been able to readily track individual students and their full case history, including the different forms of assistance provided to each student. As a minimum, the Boards would like to be able to identify the students entering and exiting the Schemes in order to better target support and manage student cases.
36. For each financial year, DVA reports the number of students expected to be assisted by the Schemes in its PBS, and the actual numbers of students assisted in its annual report. DVA measures student numbers as at 30 June of each financial year. For the last three years, the ANAO estimates that the cumulative number of students assisted by the Schemes during each financial year is 18 to 23 per cent higher than student numbers measured as at 30 June. The department has advised that the reported student numbers reflect a point in time rather than a whole-of-year count. However, DVA has acknowledged that the basis for its reporting has not always been clear in the annual report and portfolio budget statements, and has undertaken to clearly define the basis for reporting in the future.
37. DVA currently has no evaluation plan for the Schemes. The last whole‑of‑scheme evaluation was conducted in 1992. In 2006, the VCES Education Board for South Australia and the Northern Territory conducted an evaluation that demonstrated the effectiveness of a VCES guidance and counselling program for students in the last three years of secondary education, undertaken in conjunction with DVA’s Adelaide business unit. The evaluation compared the number of VCES students proceeding to tertiary education before and after the introduction of the program. The evaluation of program performance aids accountability and transparency, and contributes to improvements in program design. It is important for DVA to develop an evaluation strategy that is capable of determining the extent to which the Schemes are achieving their specified outcomes. An evaluation strategy could be developed concurrently with the proposed review of alignment between administrative practice and the legislative instruments, to establish a basis for assessing the effectiveness of any future changes to the Schemes.
Summary of agency response
38. DVA’s summary response to the proposed report is provided below. The full response is provided at Appendix 1.
DVA agrees with the two recommendations of the ANAO report, acknowledging that changes may be necessary to align the Schemes with existing processes in the overall environment of Commonwealth education policy and service delivery; and considering the ability to provide management reports to the extent possible under existing ICT systems.
The audit of DVA's education schemes was timely due to the significant changes that have occurred in recent years within the education environment and which impact on DVA students. DVA will use the audit findings, observations and recommendations to ensure that the Schemes continue to meet their objectives within this context.
DVA acknowledges the very high level of accuracy in its service delivery, as demonstrated by the results from the auditor's sampling of cases.
The ANAO recommends that the Department of Veterans’ Affairs reviews the Schemes as a basis for advising government on the alignment of current administrative and delivery arrangements with the Schemes’ legislative instruments, and concurrently develops an evaluation strategy to establish a basis for assessing the Schemes’ effectiveness and opportunities for improvement.
DVA’s response: Agreed
To further develop performance reporting for the Education Schemes under the outcomes and programs framework, the ANAO recommends that the Department of Veterans’ Affairs:
(a) develops KPIs to report on student outcomes, to enable an assessment of the extent to which the Schemes are achieving their objectives; and
(b) broaden its reporting to include the three main services delivered by the Schemes: financial assistance, student support services, and guidance and counselling.
DVA’s response: Agreed
 The Schemes are established by legislative instruments pursuant to the Veterans’ Entitlement Act 1986, Section 117, and the Military Rehabilitation and Compensation Act 2004, Division VI, Section 258. The relevant instruments are: Veterans’ Children Education Scheme Instrument 1992 No. 11, Section 1.4. Military Rehabilitation and Compensation Act Education and Training Scheme 2004, Instrument 2004 No. M4, Section 1.4.
 For the purposes of this audit the term ‘veteran’ refers to a veteran or a past, present or deceased member of the Australian Defence Force or Peacekeeping Force.
 DVA Factsheet DP43, Disability Pension and War Widow’s/Widower’s Pension Rates and Allowances, 20 March 2012, p. 5.
 The cost of benefits is estimated from DVA payment data. The Department of Veterans’ Affairs, Annual Report 2011–12, p. 128 reported that the Schemes incurred departmental expenses of $3.3 million.
 The number of students assisted is calculated from the number of students in receipt of an education allowance during 2011–12 (3559 students). It does not include a small number of students who may have received only additional tuition or special financial assistance.
 Veterans’ Children Education Scheme Instrument 1992 No. 11, Section 1.5.
 ibid., Section 6.2. The majority of Board members are experienced educationists, including current and former school principals, academics, psychologists, senior teachers and counsellors.
 ibid., Section 6.5.
 ibid., Section 1.2.
 Veterans’ spouses are not eligible for assistance under the Schemes.
 Veterans’ Children Education Scheme Instrument 1992 No. 11, Section 5.2–5.3. Military Rehabilitation and Compensation Act Education and Training Scheme 2004, Instrument 2004 No. M4, Section 5.2–5.3.
 Veterans’ Children Education Scheme Instrument 1992 No. 11, Section 1.4. Military Rehabilitation and Compensation Act Education and Training Scheme 2004, Instrument 2004 No. M4, Section 1.4.
 Youth Allowance is generally not available for students under 16 years old. Youth Allowance for secondary students 16 years or more and living at home was replaced by a higher rate of FTB Part A from 1 January 2012. The Schemes’ education allowances continue to be linked to Youth Allowance rates.
 Repatriation Commission, Annual Report 2010–11, p. 26. Military Rehabilitation and Compensation Commission, Annual Report 2010–11, p. 32.
 For 2011–12, DVA reported that the Veterans’ Children Education Scheme program had administered expenses of $16.8 million. These expenses include the cost of the Long Tan Bursary Scheme, which was outside the scope of this audit and is therefore not included in the $15.9 million mentioned in paragraph 12. Department of Veterans’ Affairs, Annual Report 2011–2012, p. 128.
 The Schemes are established by legislative instruments pursuant to the Veterans’ Entitlement Act 1986, Section 117, and the Military Rehabilitation and Compensation Act 2004, Division VI, Section 258. The relevant instruments are: Veterans’ Children Education Scheme Instrument 1992 No. 11, and the Military Rehabilitation and Compensation Act Education and Training Scheme 2004, Instrument 2004 No. M4.
 DVA advised the ANAO that: ‘The level of support and assistance provided to students through the modern education system is far superior than it was in 1993 when the current version of the Scheme was drafted.’
 The Repatriation Commission and the Military Rehabilitation and Compensation Commission, discussed in paragraph nine.
 VEA single orphans aged 16 years or more may have been financially better off by claiming the VEA orphan’s pension and FTB than receiving a VCES education allowance.
 DVA has initiated a project to follow-up all war widow(er)s whose partners died in service after 1999, to ensure that they are aware of their entitlements. These families account for about five per cent of the Schemes’ students.
 At the same time the number of VCES Secretaries was halved, the Schemes’ travel budget was reduced by 75 per cent from about $40,000 to $10,000.
 Veterans’ Entitlement Act 1986, Section 13(7)(h).
 Department of Finance and Deregulation, Guidance for the Preparation of the 2012–13 Portfolio Budget Statements, March 2012, p. 35.