Child Support Reforms: Stage One of the Child Support Scheme Reforms and Improving Compliance
The objective of the audit was to assess how effectively DHS (including CSA), FaHCSIA and Centrelink managed the implementation of stage one of the CSSR and the Improving Compliance program.
1. Commencing in 1988, the Child Support Scheme was designed to address concerns about the poverty of women and children following separation and divorce; and the increasing government expenditure to support children where parents were not meeting their financial obligations.1
2. In the same year, the Child Support Agency (CSA) was established as part of the Australian Taxation Office (ATO) to administer the Child Support Scheme and to support separated parents to transfer child support payments.2 In 1998, CSA was transferred to the Department of Family and Community Services3 before becoming part of the newly formed Department of Human Services (DHS) in 2004. While forming part of DHS, CSA largely operated as a separate agency until July 2008, when a departmental re-organisation brought together the enabling functions (such as information technology, human resources, finance and legal) of CSA within the department.
3. CSA's functions and operations are legislatively based4 and its role includes the registration of separated parents and their children; the assessment of child support liabilities; and the collection, enforcement and transfer of child support payments. CSA also manages customer complaints and objections, and reviews assessments when requested by customers through the change of assessment process. In fulfilling its role, CSA has over 1.5 million customers and, in 2008–09, assisted in the transfer of approximately $2.8 billion in child support payments.
Child Support Reforms
4. In 2003, the House of Representatives Standing Committee on Family and Community Affairs undertook an inquiry into child custody arrangements in the event of family separation and released a report which included a recommendation to examine the child support formula. The Australian Government accepted this recommendation and established an independent Ministerial Taskforce to undertake the review.
5. In June 2005, the Ministerial Taskforce on Child Support released its report,5 In the Best Interests of Children – Reforming the Child Support Scheme. The Taskforce made 30 recommendations covering all aspects of the Child Support Scheme including changes to the child support formula, the broader Child Support Scheme and CSA's role and resources.
6. In response to the report, the Government provided funding of $877 million over five years to implement a suite of measures known as the Child Support Reforms. These Child Support Reforms comprised three key initiatives, namely:
- the Child Support Scheme Reforms (CSSR) ($582.2 million);
- the Improving Compliance program ($165.1 million); and
- the Building a Better CSA program ($146.6 million).6
7. The CSSR were policy changes that aimed to ensure that the Child Support Scheme adequately addressed the needs and costs of supporting children and promoted shared parental responsibility. Given the complexity and number of changes involved, the CSSR were introduced in a phased manner over three years, commencing with the introduction of stage one on 1 July 2006 and concluding with the introduction of stage three on 1 July 2008.7
8. Impacting on approximately 500 000 customers, stage one of the CSSR (a focus of this audit) comprised six key changes to the Scheme and was primarily designed to address the customers most greatly affected by the variation between the existing formula and the new formula to be introduced in stage three CSSR. For example, stage one of the CSSR varied the child support liabilities of those customers who pay the most and the least amount of child support.8
9. The second key initiative, the Improving Compliance program, constituted seven ongoing compliance projects aimed at improving the accuracy of child support assessments and increasing the amount of child support collected and transferred between parents. It also included a Transitional Compliance project which sought to ‘minimise the risk of non compliance prior to implementation of the reforms'.
10. FaHCSIA, as the policy agency responsible for child support matters, was the lead agency for the implementation of CSSR and the Improving Compliance program and was accountable to Government for their delivery. However, in a practical sense, the day-to-day delivery of the CSSR and Improving Compliance program was primarily the responsibility of CSA.
11. A number of other departments and agencies were also involved in implementing the CSSR changes and Improving Compliance program; principally Centrelink, ATO and the Department of Veterans' Affairs (DVA).
12. The third key initiative, the Building a Better CSA program, was designed to make organisational and customer service enhancements and is the subject of a separate ANAO audit due to table in 2009–10.
13. The Child Support Reforms affected every part of CSA's organisation and represented the most significant event for CSA since its inception. In 2007 08, at the peak of implementing the reforms, CSA's departmental appropriation had increased by almost 60 per cent and its staffing level had increased by 20 per cent, against 2005–06 levels.
Audit objective and criteria
14. The objective of the audit was to assess how effectively DHS (including CSA), FaHCSIA and Centrelink managed the implementation of stage one of the CSSR and the Improving Compliance program.
15. The three main audit criteria were:
- The implementation of stage one of the CSSR and the Improving Compliance program was effectively planned.
- The targets and objectives of stage one of the CSSR and the Improving Compliance program were achieved.
- The ongoing impact of stage one of the CSSR and the Improving Compliance program are effectively monitored and evaluated, and this information is used to make adjustments and inform future decision making.
16. The Child Support Reforms were aimed at addressing growing concerns in the community about the adequacy of the then Child Support Scheme and its administration. Representing the most significant change to the Scheme since its inception, the CSSR were an important step to address concerns about the fairness and adequacy of the Scheme through better balancing the interests of both parents and increasing the focus on the needs and costs of children. Further, to complement the CSSR, a compliance program was considered necessary to address the growth in child support debt and maintain compliance, that is the number of parents who pay child support in full and on time, in the lead up to the change in the child support formula in July 2008.
17. The Child Support Reforms were led by FaHCSIA, with common governance arrangements, (including the establishment of the CSSR Steering Committee), at a whole of government level being adopted for both stage one of the CSSR and the Improving Compliance program. However, the day to day delivery of both initiatives were essentially undertaken and managed by CSA, in partnership with other agencies such as Centrelink, ATO and DVA, on specific projects.
Stage one of the Child Support Scheme Reforms
18. The changes to the Child Support Scheme associated with stage one of the CSSR took effect as planned on 1 July 2006. This was despite a compressed timeframe for planning and implementation due to the Child Support Reforms only being agreed and announced in February 2006; with Royal Assent for the necessary legislative changes being received in mid June 2006.
19. As is common with the delivery of any major policy reform, the planning and implementation of stage one of the CSSR experienced some difficulties. These issues impacted on systems and processes; and ultimately some customers. Many of these issues, however, could have been better managed, or in some cases avoided, if weaknesses in both whole of government and individual agency governance and project management arrangements (such as risk management, communication and performance monitoring and reporting) had been adequately addressed.
20. Those areas that contributed to some of the difficulties encountered included:
- CSA's inexperience with implementing significant policy reforms, and not having in place a robust project management framework supported by appropriate skills and resources;
- the absence of intra- and inter-agency agreements to support collaboration in the delivery of the reforms resulted in issues such as inefficient customer communication activities; and systems integration problems which limited the ability of agencies to exchange information and maintain a common understanding of progress; and
- insufficient risk management practices which led to some risks, such as communicating to customers the rationale for the CSSR, being identified but inadequately managed.
21. Stage one of the Child Support Scheme Reforms affected approximately 33 per cent of CSA's total customer base. From individual customer's perspectives, financial impacts varied significantly with the largest number of affected customers (190 359 cases) receiving an increase to their annual child support assessment from $260 to $320 (minimum payment) while over 3000 customers received a reduction in their child support assessment of over $500 per month (maximum payment).9
22. Changes implemented as part of stage one of the CSSR were expected to contribute to the broader outcomes of CSSR. Due to limitations in the setting, monitoring and reporting of performance indicators, it is difficult to determine if the intended outcomes of stage one of the CSSR and their contribution to the overall success of CSSR were achieved. CSA did, however, undertake a review of the implementation of stage one of the CSSR to identify areas that could be improved for the subsequent implementation of stages two and three of the CSSR.
Improving Compliance program
23. The Improving Compliance program was designed to achieve three key outcomes. Based on results to date, the program is on track to achieve one of those outcomes through meeting the adjusted child support collection target of $33910 million by 30 June 2010. In relation to the two remaining outcomes:
- the child support compliance rate was not maintained during the transitional compliance period; and
- it is unknown whether the revised Family Tax Benefit (FTB) savings of $43 million11 over four years will be achieved because savings attributable to cases that have been subject to CSA compliance action are not assessed.
24. Unlike stage one of the CSSR, CSA had scope to plan the projects which constituted the Improving Compliance program beyond the three projects recommended by the Ministerial Taskforce. CSA's planning did not, however, effectively utilise this opportunity. This was evident through a lack of strategic planning to identity and address key risks to the Child Support Scheme and some inadequate financial management practices regarding costing, budgeting and resourcing. The effects of these shortcomings include that some compliance risks to the Child Support Scheme remain unaddressed, and some individual projects have been unable to achieve their collection targets.
25. Contributing to limitations of the Improving Compliance program was the delay in implementing governance frameworks and the lack of robust project management strategies (including risk management and performance monitoring and reporting).
Areas for improvement
26. Since the introduction of stage one of the CSSR and the Improving Compliance program, DHS and CSA have taken some steps to improve operations. This included the July 2008 departmental reorganisation which, among other things, has helped to identify the overhead and corporate costs of the Child Support Program more accurately.
27. Notwithstanding these changes, there remain areas for improvement. Using the identified shortcomings in the planning and implementation of stage one of the CSSR and the Improving Compliance program, the ANAO has made six recommendations to help improve existing business practices and the implementation of future policy initiatives. These recommendations have a focus on:
- improving the clarity and implementation of project management (including risk management) and governance frameworks;
- more effectively utilising and integrating compliance tools, such as case selection and prosecutions, in CSA's operations; and
- better coordinating communication campaigns across the Human Services portfolio where initiatives are being delivered for a shared purpose.
28. Stage one of the CSSR and the Improving Compliance program were part of a significant package of measures, totalling almost $900 million, which were aimed at reforming the Child Support Scheme through changing customer behaviours, achieving better outcomes for those involved and improving administrative practices. There were common issues experienced in planning and implementing both stage one of the CSSR and the Improving Compliance program resulting from inadequate governance frameworks and a lack of robust project management arrangements (incorporating risk, budget and resource management, and performance monitoring and reporting). This highlights the importance of agencies evaluating existing organisational strengths and weaknesses to identify the changes required to support the implementation of major policy initiatives and delivery of expected outcomes.
Key findings by Chapter
Stage one of the Child Support Scheme Reforms
29. The changes associated with stage one of the CSSR took effect as planned on 1 July 2006. Stage one of the CSSR affected approximately 500 000 (33 per cent) of CSA's customers. The financial impact on individual customers varied in significance, with some customers experiencing an annual increase in their child support liability from $260 to $320 and other customers experiencing a decrease in their child support liability of over $500 per month.
30. An important purpose of stage one of the CSSR was to contribute to the achievement of the broader outcomes of the CSSR, such as encouraging greater cooperation between parents. However, due to limitations in the setting, monitoring and reporting of performance indicators, it is difficult to determine if the intended outcomes of stage one of the CSSR and their contribution to the overall success of CSSR were achieved. CSA did undertake a review of the implementation of stage one of the CSSR to identify areas for improvement for the implementation of stages two and three of the CSSR.
31. As is common with the delivery of any major policy reform, the planning and implementation of stage one of the CSSR experienced some difficulties that impacted on systems and processes and ultimately on customers. Many of these issues, however, could have either been better managed, or in some cases avoided, had greater attention been paid to both whole-of-government and agency governance and project management arrangements.
Improving Compliance program development
32. The Improving Compliance program presented the opportunity for CSA to assess the effectiveness of its existing compliance strategy and implement a program that addressed the risks associated with compliance in the Child Support Scheme.
33. In planning the Improving Compliance program, CSA did not undertake a robust assessment to identify the major compliance risks in the Child Support Scheme. Instead, the program was largely based on an extension of the existing National Integrated Compliance Strategy.
34. While the Improving Compliance program has addressed some of the risks in the Child Support Scheme, as a result of the approach adopted by CSA, the program did not identify and/or adequately address some key risks in the assessment, collection and debt recovery stages that could have been determined from the information available at the time.
Transitional Compliance project
35. The Transitional Compliance project was established to address the risk of customer non-compliance during the CSSR implementation period. Customer compliance indicators during the period 1 July 2006 to 1 July 2008 show that this was not achieved. Compliance levels for the proportion of customers paying their full child support liability decreased by 3.5 per cent (from 45.9 per cent to 42.4 per cent), while the proportion of customers paying no child support increased by 1.1 per cent (from 12 per cent to 13.1 per cent). During this period Total Child Support debt also increased by 12.8 per cent, growing from $899.5 million12 to $1.014 billion. 13
36. One factor that could have contributed to this result was CSA's decision to undertake additional compliance activities that were not originally part of the Transitional Compliance project. While these other compliance activities had an impact on compliance levels, they were not specifically targeted at the original objective of the project.
37. Tracing the correct addresses for customers, estimate reconciliation backlog, international debt and customer fraud were all areas that CSA could have considered as part of the Improving Compliance program had an assessment of the risks to the Child Support Scheme been undertaken when it was planned. CSA's attempt to address these areas as short term projects did not recognise their complexity or significance. This is demonstrated in various ways, including the need for CSA to re-establish a tracing project and seek further funding to address the estimate reconciliation backlog; and also the growing level of international debt.
38. Other projects, such as the Prosecution and Optical Surveillance projects, aim to address important compliance risks and continue to be supported as part of the ongoing Improving Compliance program. Through improved guidance and strategy, such as a case selection policy, these projects could be better employed to fully realise their potential.
39. Had CSA conducted a robust risk analysis during planning, the areas that have been targeted through the Transitional Compliance project could have been identified and potentially included as part of the Improving Compliance program. This could have then contributed to the development of sound ongoing strategies to deliver long term improvements in managing the risks, and allowed CSA to use the Transitional Compliance project to specifically target the intended objective – minimising the risk of non compliance prior to implementation of the reforms.
Delivery of the Improving Compliance program
40. The CSSR Steering Committee's oversight of the Improving Compliance program was limited given that the day-to-day implementation of the program primarily resided with CSA. The Steering Committee's role did not extend to budget and resourcing strategies, which were ultimately critical to the overall success of the program. Despite putting in place a project management plan, some identified key risks to the success of the Improving Compliance program were not effectively monitored or reported on and materialised, such as the growth in non-compliance during the transitional compliance period.
41. CSA recognised, at an early stage, the limitations of its project management framework to support the scope of change required for the Child Support Reforms and sought external assistance. However, project management arrangements, incorporating a risk management framework, were not fully developed until ten months after the Improving Compliance program had commenced and were incomplete; partly due to the day-to-day implementation of the Child Support Reforms taking priority.
42. In some instances this had a detrimental impact on the Improving Compliance program which was reflected through the:
- lack of clarity in roles and cooperation between some business areas;
- incomplete project plans being approved; and
- inadequate identification and/or management of some risks, such as the lack of a coordinated approach to case management, that directly impacted on the ability of some projects to achieve their targets.
43. The issues encountered during implementation of the Improving Compliance program highlight the importance of applying a sound project management approach to support the delivery of expected outcomes; in this case, increased child support collections and enhanced compliance results. Delivery of the Improving Compliance program would have benefited from the earlier adoption of governance arrangements that were supported by clear and effective project management arrangements, including a risk management framework.
CSA's budget and resource management
44. CSA's inability to effectively cost, budget and manage the financial and human resources for the Improving Compliance program had an ongoing, negative impact on its ability to achieve project targets.
45. In the 2009–10 Australian Government Budget, CSA received as part of its funding agreement an additional $223.2 million over four years to manage its workload, maintain service standards and prevent growth in uncollected child support. In May 2009, CSA had not yet determined which of its business streams14 would receive funding from this measure, indicating that CSA's New Policy Proposal (NPP) development processes remain unaligned with its organisational planning and resource allocation processes.
46. Since CSA was brought into the newly formed DHS in 2004, CSA has essentially operated as a separate agency with its own corporate functions. DHS advised the ANAO that a departmental reorganisation that came into effect in July 2008 has brought together the enabling functions (including finance) of CSA within the department. This is expected to improve the transparency of project costs and requirements; and to help DHS identify the overhead and corporate costs of CSA more accurately.
Improving Compliance program monitoring, reporting and outcomes
47. The monitoring and reporting of the Improving Compliance program improved over time as automated systems were introduced. While CSA undertook many reviews to assess the implementation of the Child Support Reforms and to improve operations, the ongoing performance reporting system was limited in its effectiveness due to some of the risks and issues that were repeatedly identified by programs and projects going unaddressed.
48. The Improving Compliance program was designed to achieve three key outcomes, namely: address the risk of customer non-compliance during the CSSR transition period; increase child support payments; and reduce FTB payments.
49. Various measures, such as the proportion of customers paying their full child support liability (declined 3.5 per cent) and the proportion of customers paying no child support (increased 1.1 per cent), indicate that compliance levels dropped during the CSSR transitional period. During this time other compliance measures demonstrated unfavourable trends, including debt levels which increased by $114.5 million to over $1 billion, and the accuracy of assessments which declined.
50. Child support collections have increased as a result of the Improving Compliance program with CSA likely to achieve its collection target of $339.3 million (over four years) if the current collection rates are maintained. It is unknown if the FTB savings target of $43 million (over four years) will be met because actual FTB savings resulting from compliance measures are not assessed by departments.
51. Underpinning the reporting of collection results, the ANAO identified some limitations relating to the accuracy of the data, such as including collection results attributable to activities outside of the Improving Compliance program and some collection results being counted twice. Therefore, these issues need to be considered when interpreting the collection results.
Summary of agency responses
Department of Human Services
52. DHS responded to the audit as follows:
The Department welcomes the audit and agrees with its recommendations. Since the implementation of Stage One of the Child Support Scheme Reforms and the Improving Compliance Program, the CSA has worked to improve the efficiency and effectiveness of the service it offers separated parents.
The audit report identifies a number of suggestions for further improvements, many of which have been addressed since stage one of the reforms. The recent integration into the Department has assisted in improving the portfolio communication approach as well as integrating the enabling services to improve internal budgeting processes.
The Improving Compliance program measure is in its final stages and is to be completed in 2010. However, a range of activities undertaken as part of this measure will continue in the CSA's ongoing compliance operations. The audit report provides a valuable assessment framework to develop changes to ongoing and future compliance operations.
The report makes reference to the delayed use of taxable income and prioritisation of the reassessment of cases. The current prioritisation is the result of formal government decisions taken after careful consideration of analysis of the caseload.
The Department notes the report's review of practices including risk and project management, as well as monitoring and reviewing processes and recognises the value of the improvements recommended to ensure effective and efficient best practice.
Department of Families, Housing, Community Services and Indigenous Affairs
53. FaHCSIA responded to the audit as follows:
The Department of Families, Housing, Community Services and Indigenous Affairs welcomes the findings of the audit report Child Support Reforms: Stage one of the Child Support Scheme Reforms and Improving Compliance. FaHCSIA recognises the importance of effective governance arrangements that are assessed and regularly reviews governance arrangements to ensure they continue to meet the needs for which they were established.
FaHCSIA agrees in part with Recommendation 6 in relation to possible benefits in specifically tracking these savings, for example better informing future policy initiatives. FaHCSIA notes it currently monitors Family Tax Benefit savings actually achieved from child support collections. These cannot currently be attributed to individual Child Support Agency compliance activities. FaHCSIA will continue to explore opportunities for more detailed analysis of FTB savings in the future, while ensuring that the costs of tracking these amounts are carefully balanced with the benefit they would provide.
1 Ministerial Taskforce on Child Support, In the Best Interests of Children – Reforming the Child Support Scheme, Commonwealth of Australia, Canberra, 2005, p. 43.
2 Appendix 2 shows the major developments in the Child Support Scheme since its introduction and CSA's establishment in 1988.
3 Now known as the Department of Families, Housing, Community Services and Indigenous Affairs, which is the reference used throughout this report.
4 Child Support (Registration and Collection) Act 1988 and the Child Support (Assessment) Act 1989. The Deputy Secretary, Child Support and Planning, is the Child Support Registrar for the purposes of the Acts.
5 House of Representatives Standing Committee on Family and Community Affairs, Every picture tells a story, Commonwealth of Australia, Canberra, 2003.
6 Figures do not add to $877 million due to anticipated savings from the reforms.
7 Stage two commenced on 1 July 2007.
8 Australian Government, Budget Paper No.2 2006-07 [Internet]. Commonwealth of Australia, 2006, available from <http://www.budget.gov.au/2006-07/bp2/html/bp2_expense-08.htm> [accessed 12 October 2009].
9 Department of Families, Housing, Community Services and Indigenous Affairs, Child Support Reform: Stage One Management Information Report, 2007.
10 This target was originally $463.6 million but was reduced due to an administrative oversight in setting the target.
11 This target was originally $52.7 million but was revised with the collection target.
12 Child Support Agency, Child Support Scheme Facts and Figures 2006-07, CSA, Canberra, 2007, p.51.
13 Child Support Agency, Collection Update Edition 9, 2008.
14 ‘Stream' is the term used by CSA to describe its business lines, for example, New customers stream