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Centrelink's Tip-off System
The objective of the audit was to examine the efficiency and effectiveness of the administration of the tip-off system, including Centrelink's management of privacy issues related to the tip-off management process.
Centrelink is a statutory agency within the Human Services Portfolio. Centrelink is responsible for delivering a range of social security payments and services on behalf of other government departments, including the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and the Department of Education, Employment and Workplace Relations (DEEWR).
In 2007–08, Centrelink administered $70.6 billion in payments to 6.5 million customers. Payments administered by Centrelink include the Age Pension, Newstart Allowance and Parenting Payment.
Centrelink has one Outcome which is:
Access to Government services that effectively support: self-sufficiency through participation in employment, education, training and the community; families and people in need; and the integrity of government outlays in these areas.1
A key component of Centrelink's Outcome is to protect the integrity of government outlays. This responsibility largely relates to ensuring that customer payments are correct. Centrelink manages compliance and fraud programs aimed at collecting and analysing information relevant to customers' circumstances and using it to review customers' eligibility for Centrelink benefits. The management of tip-off information is one element of Centrelink's broader compliance program.
Centrelink defines tip-offs as:
allegations and/or other information provided by members of the public about individuals who they believe are obtaining part or all of their Centrelink payment without disclosing complete and accurate details of their circumstances.2
In 2007–08, Centrelink received 101 5953 tip offs via a range of channels including the Internet, call centres, the Australian Government Services Fraud Tip-off Line, mail and email.
Tip-off cases represent approximately seven per cent of all compliance reviews and fraud investigations completed. While not a large proportion of Centrelink compliance and fraud programs, tip-offs can be difficult to manage due to the involvement of informants and the challenges often encountered in verifying the information received.
Centrelink's management of tip-offs
Centrelink's approach to managing tip-offs involves:
- specialised tip-off line operators that answer calls from the Australian Government Services Fraud Tip-off Line;
- tip-off processing teams that focus on the assessment of tip-offs; and
- compliance review officers and fraud investigators.
These Centrelink officers and Centrelink's broader staff network, in which an officer in any position may be required to record a tip-off, are supported by Centrelink's Tip-off Recording System (TORS) that is used to manage tip-off information, including the initial recording process.
Centrelink's tip-off recording system is used to record tip-offs received via all sources. The process for initially recording tip-offs varies according to the source of the tip off received. For example, tip-offs received via call centres are entered by the Centrelink call centre operator who receives the call, and tip-offs received via the Australian Government Services Fraud Tip-off Line4 are directed to operators specifically trained to record tip-offs.
Tip-offs entered in TORS are assessed by specialised teams, known as the Tip-off Processing Site (TIPS) teams, who determine whether the tip-off should be verified or investigated. This process involves identifying the person in the tip-off as a Centrelink customer; editing information in tip-offs to ensure the information is relevant; and where appropriate, referring tip-offs to compliance or fraud teams and other government departments and agencies.
The nature of the tip-off determines whether it is forwarded to a compliance team or fraud investigation team. Tip-offs indicating that the customer is attempting to defraud Centrelink are referred to fraud investigation teams with all other tip offs streamed to compliance review teams.
Audit scope, objective and conduct
The objective of the audit was to examine the efficiency and effectiveness of the administration of the tip-off system, including Centrelink's management of privacy issues related to the tip-off management process.
The audit examined Centrelink's management of the tip-off process using two main criteria:
- the fraud tip-off line is an efficient and effective method of identifying debt and fraud; and
- the privacy of callers and customers is managed appropriately and in accordance with social security law5 and the Privacy Act 1988.
As part of assessing the effectiveness and efficiency of Centrelink's administration of the tip off system, the ANAO examined Centrelink's compliance review and fraud investigation processes which are the mechanisms for identifying and raising debts against customers.6
Regardless of the manner in which Centrelink receives a tip-off, such as phone, Internet or mail, all tip-offs are subject to the same process once recorded in TORS. The ANAO adopted a systematic approach to evaluating Centrelink's management of tip-offs, including how tip-offs from different sources are recorded.
For the fieldwork component of this audit, the ANAO examined Centrelink's internal guidance relating to tip offs, including privacy and process guidelines for the Centrelink network and TIPS teams. The ANAO examined tip-off management performance information for the network, including internal measures and actual results.
The ANAO interviewed Centrelink officers located in its National Support Office, State Offices and call centres. The ANAO also observed Centrelink call centre operators receive and record tip-off calls.
The ANAO consulted representatives from the Office of the Privacy Commissioner, the Commonwealth Ombudsman's Office, an advocacy group for the rights of welfare recipients, the Department of Finance and Deregulation (Finance), and Centrelink's two key policy departments, FaHCSIA and DEEWR.
Tip-offs are one element in the spectrum of Centrelink's compliance measures designed to ensure that eligible customers receive the correct entitlement. They need to be managed in a manner that delivers the best outcome from each tip-off, while protecting the privacy of customers and safety of informants.
Of the tip-offs received and/or reviewed or investigated7 in 2007–08, 17 332 or 16.2 per cent resulted in a reduction, increase, cancellation, rejection or suspension to a customer's payment and/or a debt being raised against the customer.
Centrelink has a documented process and guidelines for the collection and recording of tip offs that is supported by a tip-off recording system. The tip-off recording system, introduced in March 2008, incorporates collection and recording functions designed to capture relevant information and reduce the time taken to process tip-offs.
Centrelink's guidelines and processes recognise Centrelink's privacy responsibilities in managing informants and customers. However, Centrelink would benefit by improving the guidelines and processes that relate to:
- the collection and retention of tip-offs in order to provide greater consistency in their practical application and protection of customers' and informants' privacy and confidentiality; and
- contacting customers and informants as part of compliance reviews and fraud investigations, to provide a balanced approach to managing the interests of both informants and customers.
Centrelink's compliance and fraud program performance measures are primarily quantitative and can be improved by introducing qualitative measures to provide a more balanced assessment of the compliance review and fraud investigation performance.
Centrelink's ability to reliably estimate the funding and cost of managing the tip-off process, and the subsequent savings generated from the tip-offs received, is limited. The tip-off capability is only one part of Centrelink's broader compliance capability. However, an improvement in Centrelink's ability to cost respective compliance capabilities can assist with decisions about the allocation of resources within Centrelink's compliance and fraud program; and also enhance the quality of advice to stakeholders.
The ANAO made six recommendations aimed at Centrelink's: retention of tip-off information; compliance and investigation practices and measures; and capability to reliably estimate funding, costs and savings.
Key findings by chapter
Tip-off information collection (Chapter 2)
Collecting sufficient and relevant information at the initial point of tip off recording can be fundamental for the progression and outcome of a tip off. The process of collecting and recording tip-offs needs to be underpinned by a framework that is in accordance with Centrelink's legislative responsibilities and provides for consistent and clearly understood procedures, and the efficient collection of information.
In the 2006–07 Budget, Centrelink received funding to develop and implement a new tip-off recording system, which became operational in March 2008. Centrelink's previous tip-off recording system allowed for more indiscriminate collection of information about customers and therefore, was more likely to result in the collection of tip-off information which was inconsistent with Centrelink's privacy responsibilities. The new TORS has a responsive questioning capability to improve the relevance of information collected from tip offs and enhance consistency with Centrelink's privacy responsibilities. The new TORS also includes functions designed to reduce the time taken to process tip offs.
Collecting and recording tip-off information
Centrelink's guidelines on collecting and recording tip off information generally meet its privacy requirements. However, the ANAO identified potential risks associated with the collection of tip offs both through call centres and the Australian Government Services Fraud Tip-off Line (tip-off line).
While it is the responsibility of the TIPS teams to provide training to tip off line operators, face-to-face training had not been delivered since 2005. Instead, Centrelink has relied on online training modules to train operators. The ANAO considered that these circumstances increase the risk that tip off line operators may not develop a robust understanding of all aspects relevant to tip-off recording. The ANAO observed varying approaches by call centre operators to the collection and recording of information and an inconsistent understanding of issues such as the type of information relevant for collection; and how to manage allegations that are irrelevant to Centrelink's business but may be relevant to another government department or agency.
Functions of the TIPS team
TIPS teams play an important role in the tip-off process. Once tip off information has been collected and recorded in TORS, it is the responsibility of the TIPS teams to attempt to identify the person in the tip off as a Centrelink customer; determine whether the tip-off should be verified or investigated; edit the information in the tip off; and where appropriate, refer tip-offs for compliance review or fraud investigation.
Centrelink retains tip-offs in TORS which have been determined as unsuitable for review or investigation, except those where the subject of the tip-off is not, or has not been, a Centrelink customer. Retained tip offs are then considered as part of any future review or investigation. The Office of the Privacy Commissioner advised the ANAO this practice may be inconsistent with Centrelink's privacy responsibilities. There is a risk associated with organisations retaining personal information that the information may be misused. In this instance, Centrelink has the potential to minimise this risk by reviewing the treatment of retained tip offs, with a view to updating its current policy.
Tip-off investigations and reviews (Chapter 3)
Tip-offs can be referred for either a compliance review or a fraud investigation if the information provided indicates that the customer is attempting to defraud Centrelink. The ANAO reviewed Centrelink's guidelines for compliance officers and fraud investigators in relation to three key areas relevant to the management of tip-offs:
- contacting customers;
- advising customers of the finalisation of a review or investigation the customer has been informed of; and
- contacting and managing informants.
Contacting customers during reviews or investigations
Centrelink has clear guidance for compliance officers on when it is appropriate to contact customers during the course of a review. However, Centrelink's guidance to fraud investigators is not as clear and does not adequately cover all aspects of contacting customers.
Improved guidance would assist in preventing customers from being unnecessarily contacted as a result of an unsubstantiated allegation.
Advising customers of the finalisation of reviews and investigations
Prior to this audit, Centrelink did not have guidelines requiring compliance officers or fraud investigators to advise customers of the finalisation and outcome of a review or investigation, when the customer had been informed that a review or investigation had been initiated. However, during the course of the audit, Centrelink introduced a policy, Review Finalisation: Customer notification policy, instructing fraud investigators to advise customers of the outcome of an investigation where customer contact had occurred.
The opportunity also exists for Centrelink to introduce a similar policy for compliance officers to replicate the fraud investigation notification process. This would improve the consistency of customer treatment.
Contacting and managing informants as part of reviews or investigations
In situations where a compliance officer or fraud investigator contacts an informant, a level of personal information about the customer is disclosed, even if only by the contact occurring. Therefore, to protect the privacy and confidentiality of customers, it is important that informants are not unnecessarily contacted as part of an investigation or review.
There is a lack of guidance on the decision and process for contacting informants during compliance reviews and fraud investigations. The relevant officer or investigator exercises their discretion as to whether to contact an informant and, if so, when that contact should take place.
Centrelink could improve its guidance to compliance officers about when it may be appropriate to contact an informant. With regard to fraud investigators, Centrelink would benefit from the introduction of an informant management policy (consistent with the Australian Government Investigation Standards guidance). This finding is consistent with a Quality Assurance Review conducted by the Australian Federal Police in 2007.
Internal measures for compliance officers and fraud investigators
Compliance officers and fraud investigators each have internal measures, which are used to assess their performance. These measures are primarily quantitative and do not fully reflect the purpose of a review or investigation. The internal measures could be improved with the introduction of complementary qualitative measures to provide a balanced assessment of the work undertaken by compliance officers and fraud investigators.
Cost and savings (Chapter 4)
Since 2000–01, the Australian Government and Centrelink have allocated significant resources to the tip-off management process. As part of evaluating the effectiveness of Centrelink's tip-off management process, the ANAO sought to confirm the:
- amount of funding Centrelink receives to manage tip-offs;
- cost of the tip-off process; and
- savings estimates resulting from the tip-off process.
Funding of the tip-off process
Centrelink receives a base level of funding from policy departments, including DEEWR and FaHCSIA, to undertake standard business operations, including managing tip-offs. Centrelink also receives funding through budget measures to undertake specific activities, including increasing its level of output for existing activities.
Centrelink is not adequately capturing funding information, particularly at the additional funding level, that could be usefully relied upon to support organisational decision making.
It is important for Centrelink to have a clear understanding of the amount of funding it receives to deliver specific outcomes, so that it can:
- monitor its funding against actual costs to help determine adequate funding levels and possible efficiency gains; and
- provide financial and performance information to policy departments for consideration in evaluating the success of a program.
Cost of the tip-off process
Centrelink's tip-off process extends across a broad range of functions, including call centres and fraud investigations. In order to effectively allocate limited resources it is important that the costs involved with the tip-off process are identifiable and underlying cost drivers are understood.
Centrelink was unable to provide a robust cost estimate for managing the tip off process in 2006–07, nor the cost of conducting the 52 597 reviews and investigations that were completed as a result of tip offs. The ANAO has previously reported similar findings about Centrelink's inability to cost particular activities9 and signalled that there are clear benefits to Centrelink if it was to improve its cost identification capacity, including the ability to undertake cost benefit analysis of activities and improve future costing estimates.
Savings estimates from the tip-off process
Expected savings estimates often support a government decision to proceed with an initiative, particularly in relation to compliance and fraud activities. Savings estimates are also used to measure performance and determine internal budget allocations.
Centrelink uses two main savings methodologies: Benchmark method and Finance method. Each methodology is designed to serve a different purpose with the Benchmark method calculating the amount of savings identified10 and the Finance method measuring the impact of identified savings over the forward estimates period. However, both methods have limitations that impact on the accuracy of figures calculated, including: uncollectable debt; debt recovery; the applicable restoration period; and the extrapolation factor of 26 fortnights.
Given the inherent limitations with the savings methodologies, savings estimates calculated using either method have the potential to be misleading. Various publications such as annual reports, media statements and press articles report savings estimates achieved through compliance activities. These publications use savings estimates without appropriate caveats such as that the savings estimates may not reflect savings actually realised.
Accurate costs and savings estimates enable cost effectiveness analysis and consequently, informed decision making in relation to the allocation of limited resources and establishing priorities for Centrelink's compliance and fraud programs.
Summary of agencies' responses
Centrelink provided the following response to the proposed report:
Centrelink agrees with the recommendations and findings of the audit of its tip-off recording program. The tip-off recording program is a valuable tool in Centrelink's fraud and compliance programs and any improvements that can be realised as a result of the audit are welcomed by Centrelink.
Department of Education, Employment and Workplace Relations
DEEWR provided the following response to a relevant extract of the proposed report:
The Department of Education, Employment and Workplace Relations (DEEWR) welcomes the performance audit of Centrelink's Tip-off System.
With Centrelink and other departments, DEEWR has participated in several reviews of compliance arrangements. The findings of these reviews, together with this audit, will assist in the development of a more comprehensive approach to compliance.
Department of Families, Housing, Community Services and Indigenous Affairs
FaHCSIA provided the following response to a relevant extract of the proposed report:
FaHCSIA welcomes Recommendation 6 of the Australian National Audit Office (ANAO) to participate, in consultation with, the Department of Finance and Deregulation, Centrelink and other policy departments in the development and implementation of a new, robust savings methodology.
Department of Finance and Deregulation
Finance provided the following response to a relevant extract of the proposed report:
The Department of Finance and Deregulation supports the findings in relation to savings and agrees with recommendation 6.
Department of Human Services
DHS provided the following response to the proposed report:
The Department welcomes the report on an important control aimed at ensuring the integrity of Government outlays by Centrelink, the primary payment agency with responsibility for social security payments to eligible customers. The Department accepts the conclusions and notes the Centrelink response to the recommendations.
1 Department of Human Services 2008, Portfolio Budget Statement 2008–09, DHS, Canberra p. 72.
2 Centrelink 2007, Tip-Off Recording System (TORS): Tip-off Identification & Processing Site (TIPS): Guidelines, Version 1.6, Centrelink, Canberra p. 7.
3 Advice from Centrelink, 3 September 2008.
4 Centrelink also collected tip-offs through the ‘Report-a-fraud' line until it was decommissioned on 16 April 2008.
5 This includes, but is not limited to, the Social Security Act 1991 and the Social Security (Administration) Act 1999.
6 In addition to raising a debt, compliance reviews and fraud investigations can also result in a reduction, increase, cancellation, rejection, suspension or no change to a customer's payment.
7 In addition to completing reviews and investigations resulting from tip-offs received in 2007-08, Centrelink also completed reviews and investigations which resulted from tip-offs received in previous financial years. The number of completed reviews and investigations may also include tip-offs recorded by the TIPS teams in instances where more than one Centrelink customer has been identified in a tip-off.
8 Centrelink received this funding as part of a broader compliance measure called, ‘Fraud and Compliance – enhanced focus on serious social security fraud'.
9 ANAO Audit Report No.34 2004–05 Centrelink's Complaints Handling System, p. 21; ANAO Audit Report No.35 2004–05 Centrelink's Review and Appeals System, pp. 17 & 20; and ANAO Audit Report No.40 2006–07 Centrelink's Review and Appeals System Follow-up Audit, p. 24.
10 Not necessarily the amount that will be realised.