Delivery of the Hearing Community Service Obligation
The objective of the audit was to assess the effectiveness of the Department of Health’s and Australian Hearing’s administration of the Community Service Obligations program for hearing services.
1. In 2005, one in six Australians experienced some form of hearing loss, a condition that is predicted to increase due to an ageing population and unsafe exposure to harmful levels of noise.1 At a personal level, a hearing impairment can isolate the person from other family members, pose barriers to involvement in the community, as well as present obstacles to educational achievement and employment opportunities.
2. The estimated cost of hearing loss in Australia, in 2005, was $11.75 billion or 1.4 per cent of gross domestic product.2 More than half of this financial cost was attributed to a loss in productivity as people with a hearing impairment found it difficult to secure employment.
Hearing Services Program
3. The Australian Government has subsidised hearing services for eligible people since 1947. The Government’s current policy objective for hearing services is to reduce preventable hearing loss and provide access to high quality hearing services and devices (such as hearing aids) for people who have been diagnosed with a hearing loss and referred to a hearing services provider for treatment.
4. The Government’s Hearing Services Program has two service delivery components:
- Voucher (Voucher program)—delivered to eligible clients by contracted private service providers and Australian Hearing Services (Australian Hearing). Clients are issued with a voucher for hearing services and devices that they can use at a service provider of their choice; and
- Community Service Obligations (CSO program)—delivered solely by Australian Hearing under a Memorandum of Agreement (MOA)3 with the Department of Health4 (DoH) to meet the hearing needs of special needs groups, including children, Indigenous Australians and adults with complex hearing needs. The primary goal of the CSO program is to provide clients with access to hearing services and hearing devices that help them to manage their hearing needs and maximise their communication ability in everyday life.5
5. Two Australian Government agencies6 have defined responsibilities in administering and delivering the Hearing Services Program to eligible people—DoH is responsible for policy and funding for hearing services and administers the CSO program through its Office of Hearing Services7, and Australian Hearing delivers hearing services nationally to eligible clients of the program.
6. The Department of Human Services (Human Services) also has responsibility for aspects of hearing service delivery. Human Services and Australian Hearing are part of the Social Services portfolio. Australian Hearing is a Commonwealth statutory authority established by the Australian Hearing Services Act 1991 (the Act) and subject to the Commonwealth Authorities and Companies Act 1997. Its Board of Directors is appointed by the Minister for Human Services. The Minister for Human Services and the Minister for Health share responsibility for administering the Act.8
Community Service Obligations program
7. Hearing services provided under the CSO program—the focus of this audit—are intended to contribute to whole‑of‑government objectives, including educational attainment, workforce participation and social inclusion. The following groups of people are eligible for assistance under the CSO program: young Australians (under 21 years of age); young adults (21–25 years of age inclusive); adults with complex hearing needs; adults residing in designated remote locations; and certain Indigenous Australians (as specified in legislation). Participants in the National Disability Insurance Scheme (NDIS)9 under 26 years of age, who have hearing needs, may be referred to the CSO program.10 Existing CSO program clients, who also access the NDIS, will continue to have access to the CSO program for as long as they remain eligible.
8. Table S 1 shows the CSO program budget, client numbers and services delivered by Australian Hearing in 2012–13 from its permanent, visiting, remote and Indigenous outreach sites (urban and non‑urban).
Source: Australian National Audit Office (ANAO) analysis of DoH and Australian Hearing documents.
9. Under the MOA, the funding required by Australian Hearing to deliver services for the CSO program is estimated by Australian Hearing and then agreed and allocated annually by DoH from within its broader appropriation for the Hearing Services Program.11 The MOA sets out the roles and responsibilities between DoH and Australian Hearing, including the monitoring and reporting arrangements for the CSO program.
10. In the 2011–12 Budget, the Government announced an additional $47.7 million over four years for the Hearing Services Program to improve access to hearing services under the CSO component of the program. The additional funding was intended to support the delivery of CSO hearing services to an increasing client base over a four‑year period from 2011–12 to 2014–15.12
11. In May 2010, the Senate Community Affairs References Committee inquired into Australia’s hearing services. The inquiry’s report, Hear Us: Inquiry into Hearing Health in Australia, made 34 recommendations. The then Government’s response, released in May 201113, accepted 17 recommendations either outright or in principle, with the remaining recommendations considered matters for state and territory governments or non‑government organisations.14
Previous performance audits
12. The ANAO last examined Australian Hearing’s program administration and service delivery in Performance Audit Report No.5 1995–96 Provision of Hearing Services. However, given the time that has elapsed and subsequent Government reforms to Australia’s hearing market in 1997, the audit’s three recommendations have been superseded. The former Office of Evaluation and Audit’s (OEA)15 2008 Performance Audit of Australian Hearing Specialist Program for Indigenous Australians Report found that improvements could be made to the specialist program in a number of areas, including planning the delivery of services and measuring program effectiveness. DoH, Human Services and Australian Hearing agreed to the audit’s eight recommendations.
Audit objective, criteria and scope
13. The objective of the audit was to assess the effectiveness of DoH’s and Australian Hearing’s administration of the CSO program for hearing services.
14. To form a conclusion against this objective, the ANAO adopted the following high‑level audit criteria:
- formal arrangements between DoH and Australian Hearing effectively support delivery of the CSO program;
- there is adequate monitoring and reporting of CSO program outcomes, including customer feedback and complaints; and
- relevant recommendations have been implemented from: the 2010 Senate Community Affairs References Committee report Hear Us: Inquiry into Hearing Health in Australia;and the OEA’s 2008 Performance Audit of Australian Hearing Specialist Program for Indigenous Australians Report.
15. An examination of funding for Australian Hearing’s research division (the National Acoustic Laboratories16), and Australian Hearing’s governance arrangements and internal controls, was not included in the audit scope.
16. The ANAO examined records and interviewed staff in DoH, Human Services and Australian Hearing and met with key non‑government stakeholders. With client consent, the audit team observed clinical appointments at different Australian Hearing sites for clients of the CSO program.
17. Hearing loss affects up to one in six Australians, impacting on their daily family life, social participation and potential for educational and employment achievements, with broader economic costs for the nation as a whole. The Community Service Obligations program (CSO), a component of the Australian Government’s wider Hearing Services Program, aims to provide eligible clients with access to hearing services and devices that help them manage their hearing needs and maximise their communication in everyday life. In 2012–13, the $56 million CSO program provided subsidised hearing services and devices to 56 379 clients.17 The CSO program is delivered by Australian Hearing under a Memorandum of Agreement (MOA) administered by the Department of Health (DoH).
18. Overall, the CSO program is being effectively administered by Australian Hearing in accordance with an MOA developed jointly with DoH. The MOA reflects relevant legislative and key program requirements, and incorporates a generally effective monitoring and reporting framework that enables the parties to assess progress towards achieving program objectives. However, there is scope for DoH to develop a methodology, in consultation with Australian Hearing, to enable reporting on achievement of: new service targets funded by a 2011–12 Budget measure; and other outcomes for the CSO program.
19. Operating since 2004 under a Memorandum of Understanding (MOU), revised program arrangements for the CSO took effect from 2012–13 through a formal MOA, which Australian Hearing and DoH agreed should be legally enforceable.18 The MOA clearly sets out the key program arrangements including: objectives; roles and responsibilities; services; funding; and reporting requirements. The MOA also reflects the relevant legislative requirements for client eligibility for services and devices under the CSO program.19 The agencies meet regularly20 to discuss program issues, service planning and priorities, progress against key performance indicators and targets, and to monitor client satisfaction. While the management of program funding requirements under the MOA has been generally effective, there have been minor fluctuations in Australian Hearing’s overall annual forecasts of service demand (and associated budget forecasts) compared to actual services provided.21 There has also been variability in Australian Hearing’s projections of service demand for specific client groups.22 In this context, there is scope for Australian Hearing to work with DoH to further refine the accuracy of its annual client demand and cost projections.
20. The performance management framework under the MOA provides a generally effective basis for DoH and Australian Hearing to monitor program delivery and achievements against the CSO program’s objectives for service delivery by Australian Hearing, including the provision of hearing devices, to eligible clients. Quarterly reports from Australian Hearing measure performance against a series of quantitative and qualitative key performance indicators (KPIs) for each of the CSO client groups and other service measures, which are tracked and analysed regularly by DoH and Australian Hearing. In 2012–13, Australian Hearing reported that it fully met most of the relevant KPIs.
21. There has, however, been limited monitoring and reporting on: performance in meeting new service targets funded through a $47.7 million measure in the 2011–12 Budget23; and broader program outcomes. In early 2014, during the course of the audit, DoH and Australian Hearing established a joint MOA Data Technical Group (DTG) that DoH advised will be central to DoH’s reporting against the outcomes of the Budget measure. Where government policy initiatives have provided additional resources to agencies in the expectation of a measurable return on that investment, the ANAO has previously commented on the desirability of agencies implementing mechanisms to effectively monitor and report on the delivery of those outcomes.24
22. The ANAO also assessed the implementation status of 18 recommendations from two previous reports prepared by a 2010 Senate inquiry and the former OEA in 2008. Of the recommendations assessed, 11 were adequately implemented and five were partially implemented. Many of those recommendations were addressed through the new MOA and the 2011–12 Budget. Two recommendations from the Senate inquiry had been delayed by the need to consider potential changes in policy or to coordinate activity with other levels of government before full implementation could be realised. In this context, the ANAO has previously observed that the value of review activity is only fully realised with the timely and adequate implementation of recommendations.25
23. The ANAO has made one recommendation to support DoH’s monitoring and reporting activities under the MOA, in particular to support DoH’s reporting on targets achieved through the 2011–12 Budget measure and other outcomes for the CSO program.
Key findings by chapter
Management of the Memorandum of Agreement (Chapter 2)
24. DoH and Australian Hearing have a long‑standing and cooperative relationship for the delivery of the hearing CSO program, underpinned by a formal business level agreement. In 2012–13, both parties supported a change in program management arrangements, moving from an MOU to an MOA, to enhance accountability and transparency for the delivery of the CSO program.
25. The MOA reflects key requirements of the hearing services legislation—the Act and the Determination—and contains a detailed set of program objectives. It includes a clear statement of: roles and responsibilities between DoH and Australian Hearing; and services excluded from the CSO program.26 The MOA also clearly sets out the CSO’s financial arrangements, KPIs and administrative arrangements, including monitoring and reporting requirements. The clear articulation of key matters within the MOA establishes a sound overall framework for administration of the agreement by both parties.
26. Funding for the CSO program, under the MOA, is allocated annually by DoH from its appropriation under Outcome 7—Hearing Services27 and is based on annual projections provided by Australian Hearing of expected demand for services in each client category and the cost of devices such as aids and appliances.28 Australian Hearing is then required to provide CSO services, according to the defined service standards and largely within that agreed budget. Compared to the previous MOU, these arrangements provide increased transparency and a more reliable basis for DoH to forecast the CSO program’s budget.
27. In 2012–13, Australian Hearing met key MOA requirements relating to payments, reporting and quarterly progress meetings. However, there is scope to further refine the forecasting of future demand for hearing services and their potential cost. In 2012–13, Australian Hearing’s total actual CSO costs exceeded its MOA budget of $56 million by 1.5 per cent ($822 000), with more significant budget variations experienced between individual client groups. As its CSO budget is largely fixed, Australian Hearing funded the budget shortfall from profits realised from providing commercial services under the (separate but complementary) hearing Voucher program; in effect, a subsidy of the CSO component by the Voucher component of the Hearing Services Program.29 This cross‑subsidy arrangement between the two components of DoH’s Hearing Services Program (Voucher and CSO) has been operating since 2006. As both the Voucher and CSO components are funded from within the DoH Budget appropriation, the department also relies on accurate budget estimation for the CSO program to support its management of the overall program finances.
28. As the program funds holder, DoH was aware of underlying inaccuracies30 in Australian Hearing’s methodology for estimating annual projections; however, DoH has advised it is satisfied that Australian Hearing had addressed these matters in advance of preparing its 2013–14 MOA budget proposal.31 There would be value in Australian Hearing and DoH continuing to monitor the demand forecasts and cost estimates to mitigate the risk of any significant cross‑subsidisation from Australian Hearing’s Voucher program revenue into the future.
Performance Monitoring and Reporting (Chapter 3)
29. The performance measures and reporting requirements in the MOA were developed jointly by DoH and Australian Hearing, including a set of 16 KPIs (14 quantitative indicators, including two for complaints management; and two qualitative indicators). The KPIs are designed to measure the timeliness, quality and/or accessibility of the services being provided by Australian Hearing to CSO program clients. In 2012–13, the first year of the MOA, the relevant KPIs were actively monitored by DoH and reported against by Australian Hearing as being mostly fully met.
30. While the quantitative and qualitative KPIs complement the CSO program objectives—for the delivery of hearing services and hearing devices— the MOA does not contain KPIs that measure the quality of outcomes for clients of the program more broadly, for which DoH is responsible. Measuring rates of access to suitably qualified professionals and the fitting of hearing aids or other assistance are proxy measures for health outcomes and do not, at present, directly measure the beneficial outcomes for an individual client. DoH and Australian Hearing have committed to the further development of KPIs for the CSO program, for example, measuring workforce and education participation rates of clients. To that end, DoH and Australian Hearing established a joint DTG in March 2014 whose terms of reference include consideration of the potential for new KPIs for the CSO program.
31. Complaints recorded over recent years by Australian Hearing have been consistently very low compared to the number of CSO services provided to a diverse national client base. In 2012–13, Australian Hearing reported receiving a total of 24 complaints, with the time taken to resolve complaints being within one day for most complaints. Notwithstanding, DoH monitored and followed‑up Australian Hearing’s reporting against the MOA complaints management KPIs. Stakeholder groups interviewed by the ANAO32 also reported generally positive views of Australian Hearing’s professionalism and the quality of service delivery for the CSO program.
32. Throughout 2012–13, DoH and Australian Hearing analysed KPI data quarterly, and at year‑end, for ongoing and emerging trends. In June 2013, DoH and Australian Hearing met the MOA requirement to conduct annual high‑level service planning for the following year. The local service data collected by Australian Hearing is a potentially valuable source of information on local or regional variations in access and the timeliness of service provision, which merits consideration before it is aggregated for KPI purposes. There would also be benefit in DoH and Australian Hearing considering options for engaging external stakeholders as part of the annual service planning process. Within DoH, CSO program reporting informs broader policy and funding decisions for the Hearing Services Program. In this context, the Office of Hearing Services could also provide succinct information on CSO program activities and outcomes to other areas of the department, particularly with regard to health outcomes for Aboriginal and Torres Strait Islander Australians.
33. In the 2011–12 Budget, the Government announced an additional $47.7 million for the Hearing Services Program to improve access to hearing services under the CSO component of the program. In 2012–13, DoH used Australian Hearing’s quarterly reports to monitor progress against the MOA annual budget, client numbers seen and services provided, and achievement against the KPIs. However, there is currently no separate monitoring by DoH of Australian Hearing’s delivery of additional services under the 2011–12 Budget measure, with the exception of young adults, a new client category that was introduced on 1 January 2012.33
34. The development of suitable monitoring and reporting arrangements—to assess the outcomes achieved relative to the policy objectives—is expected for Budget measures, and those arrangements operate most effectively when embedded within agencies’ business as usual processes. DoH is aware that under the MOA there is largely no visibility or monitoring of the increased client numbers to be funded from the 2011–12 Budget measure and advised that the establishment of the DTG will address this issue before the end of the MOA.34
Agencies’ Implementation of Report Recommendations (Chapter 4)
35. The 10 Senate inquiry recommendations selected for assessment by the ANAO were primarily DoH’s responsibility. All of the eight OEA report recommendations were assessed by the ANAO and were either independently or jointly implemented by DoH and Australian Hearing. Given the time elapsed since the recommendations were originally made (2008 and 2010), both agencies were considered to have had sufficient opportunity to take action towards their implementation.
36. Of the 10 Senate inquiry recommendations selected for analysis, DoH adequately implemented four of the recommendations and partially implemented another four recommendations. However, two recommendations35 addressed matters that could remain outstanding in the longer term as they would require either a change in Australian Government policy or further consultation (including with other levels of government) for their implementation.
37. The ANAO identified that elements incorporated in the current MOA by DoH and Australian Hearing addressed a number of the OEA recommendations. For the OEA recommendations, seven of the eight recommendations were adequately implemented by DoH and Australian Hearing, with one partially implemented. There is the potential for the remaining recommendation to be adequately implemented by the end of the current MOA.36
Summary of agencies’ responses
38. The proposed audit report was provided to DoH, Human Services and Australian Hearing. The three agencies each provided a formal response to the proposed report. The agencies’ summary responses to the audit are provided below and formal agency responses are included at Appendix 1.
39. DoH’s summary response to the proposed audit report:
Recommendation 1: The Department agrees the importance of monitoring and reporting.
The Department will take a consistent data analysis approach to reporting across the timeframe of 2011–12 to 2014–15.
In relation to the two Senate Inquiry recommendations that remain outstanding, the Department notes that the implementation or otherwise requires a decision by the Government.
40. Human Services’ summary response to the proposed audit report:
The Department of Human Services welcomes this report, and considers that implementation of the recommendation by the Department of Health, in consultation with Australian Hearing, will enhance delivery of the hearing Community Service Obligations program.
41. Australian Hearing’s summary response to the proposed audit report:
In summary, Australian Hearing believes the report to be accurate. The report results reflect the high level of cooperation and dedicated work put into the management and delivery of the program by the Department of Health (DoH) and Australian Hearing.
To support its monitoring and reporting of outcomes achieved from the 2011–12 Budget measure for the hearing Community Service Obligations program, the ANAO recommends that the Department of Health establish a methodology, in consultation with Australian Hearing, for measuring performance against the projected service targets and other outcomes for eligible client groups from 2011–12 to 2014–15.
DoH’s response: Agreed.
Australian Hearing’s response: Agreed.
 Access Economics Pty Limited, Listen Hear! The Economic Impact and Cost of Hearing Loss in Australia,2006, p. 7.
 ibid., p. 5.
 Operating from 2012–15.
 Known as the Department of Health and Ageing before machinery of government changes in September 2013. For simplicity, the department’s new name is used throughout this report except where documents produced by the department under its former name are quoted.
 The Hearing Services Administration Act 1997 establishes the eligibility and other parameters for the Voucher program and the Declared Hearing Services Determination 1997 (the Determination) defines eligibility for the hearing CSO program.
 In this report the term ‘agencies’ has been used when referring to one or more of the three auditees: DoH, Human Services and Australian Hearing.
 The Office was established in 1997 for the management and administration of the Hearing Services Program.
 Responsibilities for the relevant parts of the Act are specified in the Commonwealth of Australia, Administrative Arrangements Order, 18 September 2013, pp. 22 and 25. Among other matters, the Act establishes Australian Hearing.
 On 1 July 2013, the NDIS was launched under the National Disability Insurance Scheme Act 2013 and is being rolled out in stages across Australia.
Declared Hearing Services Determination 1997, ss. 4, 8, 12, pp. 5–8 and Schedule 1, Part 1, p. 9.
 Department of Health and Ageing, Portfolio Budget Statements 2013–14, Outcome 7 – Hearing Services, Commonwealth of Australia, Canberra, 2013, p. 148.
 From 2011–12 to 2014–15, an additional 39 600 young Australians and young adults, 18 400 adults with complex hearing needs, and 11 500 Indigenous people were expected to receive hearing services under the CSO program.
 Recommendation 32 was noted by the Government. Recommendations 20 and 33 were noted as well as being considered matters for consideration by state and territory governments.
 In December 2009, the Office of Evaluation and Audit (Indigenous Programs) was merged into the ANAO.
 The three‑year funding agreement (2012–15)—Research and Development into Hearing Health, Rehabilitation and Prevention—for research to be undertaken by the National Acoustic Laboratories, is valued at $12.5 million.
 In 2013–14, the CSO program’s budget was $59.1 million. ANAO analysis of DoH and Australian Hearing documents.
 The development of an MOA was consistent with other DoH Hearing Services Program funding arrangements, for example, those with service providers for the Voucher program. Australian Hearing is a service provider for the Voucher program.
 Eligibility is defined in the Declared Hearing Services Determination 1997.
 DoH and Australian Hearing formally meet each quarter to monitor the CSO program. The CSO program is also discussed at separate quarterly governance meetings between Human Services and Australian Hearing.
 Australian Hearing’s costs have ranged from 99.85 per cent of the CSO budget allocation in 2008–09 to 101.26 per cent in 2011–12. In 2012–13, when the CSO program was overspent by 1.5 per cent ($822 000), Australian Hearing decided to fund the budget shortfall from its 2012–13 profits.
 In 2012–13, for example, Australian Hearing overestimated its projected costs for young adults by 30 per cent while its projected costs for Indigenous Australians were underestimated by 41 per cent. Australian Hearing advised that some of the variability can be accounted for because: the majority of young adults were returning (new) rather than existing clients in that category; and growth in the number of Indigenous clients returning to Australian Hearing for review as well as new referrals for hearing services.
 There is currently no separate monitoring by DoH of Australian Hearing’s delivery of additional services under the Budget measure, with the exception of a component relating to young adults.
 For example, see ANAO Audit Report No.26 2013–14 Medicare Compliance Audits, p. 20.
 ANAO Audit Report No.25 2012–13 Defence’s Implementation of Audit Recommendations, p. 9, and ANAO Audit Report No.53 2012–13 Agencies’ Implementation of Performance Audit Recommendations, p. 54.
 Services excluded are those that are the responsibility of state and territory governments.
 Department of Health and Ageing, Portfolio Budget Statements 2013–14, Outcome 7—Hearing Services, Commonwealth of Australia, Canberra, 2013, p. 148.
 Aids and appliances include: hearing aids; cochlear speech processor repair and maintenance; and batteries, repair and maintenance.
 In 2012–13, Australian Hearing claimed $8.4 million against services from the Voucher program that were provided to ‘complex [adult] clients’ of the CSO program.
 Trends or changes in client demand were not considered when Australian Hearing prepared its 2012–13 CSO budget under the MOA.
 A final outcome from Australian Hearing’s revised budget forecasting was not available before the end of this audit for the ANAO to assess.
 The groups interviewed by the ANAO were selected on the basis of their potential to inform the ANAO’s understanding of the operation of the CSO program rather than as a representative sample of stakeholders involved in hearing health matters.
 A total of 3966 young adult clients received services from Australian Hearing in an 18‑month period up to the end of 2012–13, which is more than four times greater than DoH’s original estimate for that period.
 As part of a broader data and reporting strategy for the Hearing Services Program, DoH began work on establishing a DTG in 2013.
 To extend eligibility for the Voucher program to include all Australians, subject to eligibility and a means test, and to install hearing loop technology in all (levels of) government service shopfronts.
 In March 2014, DoH and Australian Hearing agreed to evaluate Australian Hearing’s Specialist Program for Indigenous Australians later in 2014 separately, but in conjunction with a broader evaluation of the MOA’s performance.