The objective of this audit was to assess how effectively FaHCSIA and DEEWR have undertaken their roles and responsibilities for specialist disability employment services under the current (third) CSTDA.



Work enables individuals to participate in the social and economic life of their communities. Australian Government programs recognise that many people with disabilities can work and want to work, however sometimes there can be barriers to their employment options. Disability employment services are aimed at ensuring that people with disabilities can access quality services that provide high level and appropriate support, affording the same workplace participation rights and opportunities as other Australians.

There are two types of disability employment services:

  • supported employment services, also known as Business Services. Business Services employ and support people (for whom competitive employment is unlikely) in specialist workplaces, such as packaging, horticulture and laundry. Over 90 per cent of Business Services' clients receive a Disability Support Pension, with the majority of clients reported to have an intellectual or learning disability; and
  • open employment services, also known as the Disability Employment Network (DEN). DEN service providers assist people with disabilities find, start and maintain employment in the open labour market. DEN clients are, on average, younger than those of Business Services, with primary disabilities mainly spread across three main categories: intellectual/learning, psychiatric and physical/diverse. DEN has two streams:

-- Capped stream – assistance, through a fixed number of places, to people with disabilities who are able to work a minimum of eight hours per week at award-based wages in the open employment market and are likely to require on-going support to retain employment once they have found a job.

-- Uncapped stream – assistance to people with disabilities who are required to look for work in order to meet the part-time participation requirements associated with Government income support payments. This stream generally provides up to two years of disability employment assistance for participants assessed as able to work between 15 and 29 hours per week independently at full award wages.

The principal means for people with disabilities to access Business Services, is through self-referral by people either in receipt of, or meet the impairment requirements to receive, the Disability Support Pension, who are not subject to part-time participation requirements. In contrast, a job-seeker needs to be assessed for their work capacity in order to access DEN. These assessments, known as Job Capability Assessments (JCAs), determine eligibility for open employment services and the DEN stream to which the person is referred. People with disabilities can also be referred to Business Services as a result of a JCA.

Business Services and DEN are tailored to the different needs of jobseekers with disabilities, but share a common goal - to achieve an employment outcome for each client. To achieve the employment outcome a phased approach is adopted that is common across all services types. The approach is defined by an: 

  • intake phase;
  • employment assistance phase;
  • and employment maintenance (or post placement) phase.

Broadly, Figure 1 shows the steps a person takes to access disability employment services, the program phases they participate in and the outcome they can expect to achieve.

Figure 1 Disability employment services pathways

Source: ANAO analysis of DEEWR and FaHCSIA documents.

In 2006–07, the Australian Government provided $470 million in funding to 1072 disability employment service outlets. Of these, 654 were open employment services, and 418 supported employment services. These outlets provided services for almost 83 000 people, 73 per cent of whom accessed open employment services.

Services are funded on a fee-for-service case-based funding model, with fees relating to:

  • type of service provided; 
  •  phase of employment placement; 
  • level of support required; and 
  •  in the case of DEN service provision, the achievement of employment milestones.

Examples of the range of fees involved for clients with high and low support needs follow:

  • a Business Services client assessed as having the highest level of support needs (level 4) with the shortest possible assessment phase (three months), will attract a combined intake and assessment fee of $2180 and an on-going employment maintenance fee of $13 020 per annum; and
  • a DEN uncapped stream participant assessed as having the lowest level of support needs and supported by the service for the minimum period to successfully achieve an employment outcome, will attract the following fees:

-- intake and assessment fees of $913;

-- employment assistance over three months and three month post-placement of $247.50 per month, totalling $1485

-- full employment outcome fees at 4-weeks, 13-weeks, 26-weeks and additional outcome fee, totalling $5170

Administrative responsibilities

Disability employment services are funded by the Australian Government under the Commonwealth State/Territory Disability Agreement (CSTDA). The CSTDA provides a national framework for the delivery, funding and development of specialist disability services. The CSTDA specifies that the Commonwealth has sole responsibility for the planning, policy setting, funding and management of disability employment services.

The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) is the Australian Government department with overall policy responsibility for people with disabilities. This includes the CSTDA's administrative requirements and ensuring that all providers delivering funded employment services meet quality standards.
The role of administering the delivery of disability employment services is split between FaHCSIA, responsible for Business Services and the Department of Education, Employment and Workplace Relations (DEEWR), responsible for DEN.

Recent and current developments

The CSTDA is in its third iteration and, at its commencement, covered the period July 2002 to June 2007. However, following the reforms to the Commonwealth-State funding arrangements announced by the Council of Australian Governments (COAG) in March 2008, the period of the agreement was extended to 31 December 2008. As part of the COAG reforms, a new National Disability Agreement, replacing the CSTDA is expected to be in place from 1 January 2009.

Disability employment services have undergone considerable change over the course of the third CSTDA (and its extension to 2008), including the introduction of:

  • third-party accredited quality assurance certification;
  • a fee-for-service case based funding (CBF) model;
  • new income support eligibility and part-time participation requirements, introducing a second open employment service stream (the uncapped stream);
  • JCAs to direct job seekers to the most suitable support service; and
  • DEEWR as the department with responsibility for open employment services.

Further initiatives underway will impact on DEN service provision. The Australian Government intends to implement a new approach to employment services including disability employment. To inform the new approach a review of universal employment services, The Future of Employment Services in Australia, was undertaken. A further Review of Disability Employment Services, aimed at improving DEN and Vocational Rehabilitation Services, is drawing on the outcomes of the universal employment services review and the development of the National Mental Health and Disability Employment Strategy. Contracts with DEN service providers will be extended until 28 February 2010, so that service provision in the subsequent contract period can reflect the outcome of the Review of Disability Employment Services.

Audit Scope and Objective

The objective of this audit was to assess how effectively FaHCSIA and DEEWR have undertaken their roles and responsibilities for specialist disability employment services under the current (third) CSTDA. The two major criteria for this audit are whether:

  • FaHCSIA and DEEWR effectively planned, managed and implemented policy for the provision of specialist disability employment services under the current CSTDA; and
  • FaHCSIA and DEEWR met relevant reporting requirements for the specialist disability employment services they were respectively responsible for under the current CSTDA.

In order to determine the extent to which these major criteria had been met, the audit focussed on the following aspects:

  • policies and procedures for placing individuals in disability employment services, assessing the integration and interrelation of JCAs and the different disability employment service types to ensure access to services appropriate to individual capabilities;
  • CBF models, assessing the impact of these models on outcomes and on service provider processes;
  • the Quality Strategy for Disability Employment Services and Rehabilitation Services, assessing the contribution of the quality assurance certification process, continuous improvement and the complaints resolution procedures to achieve quality delivery of disability employment services; and
  • monitoring of disability employment services, through assessing 

-- compliance and performance monitoring of individual service providers, and
--  overall performance reporting of disability employment services, as set out in the CSTDA.


The period of the third CSTDA 2002–2007 (including its extension to 2008) has been characterised by many fundamental changes to the disability employment services delivery model. These have included changes to: the way service quality is assessed; how services are funded; the eligibility criteria and types of funded service provision; and the means by which job-seekers are placed with service providers.

Business Services and DEN aim to achieve an employment outcome for every client; however each program is designed to provide a different disability employment service, depending on the job-seeker's individual circumstances. In particular:

  • Business Services aim to employ people with disabilities on an on-going basis, with FaHCSIA responsible for funding the services provided to individuals by Business Services providers; and
  • DEN assists people with disabilities seeking employment in the open employment market. DEEWR is responsible for funding the services provided to individuals by DEN providers.

The Business Services placements largely come about through self-referrals whereas DEN relies on JCAs.

During the third CSTDA, FaHCSIA and DEEWR have responded to the changing environment and effectively planned, managed and implemented policy initiatives in the disability employment sector. In particular:

  • policies and procedures implemented by FaHCSIA and DEEWR have supported the integration of JCAs with disability employment services, recognising that Business Services placements are largely through self referral. Further, in recognition that an individual's situation can change, FaHCSIA has sought to address some of the barriers to movement from supported to open employment services through measures such as guaranteeing a place in a Business Service up to two years after clients commence trialling DEN services;
  • the introduction of CBF has contributed to greater numbers of clients in both the Business Services and DEN streams achieving employment outcomes than under BGF. In particular, 92 per cent of Business Services clients achieved an employment outcome in 2006–07, 20 per cent higher than in the period prior to the introduction of CBF. Similarly, employment outcomes for capped DEN clients increased by 18 per cent with the introduction of CBF;
  • the successful implementation of the Quality Strategy for Disability Employment Services and Rehabilitation Services. All service providers achieved third-party accredited quality assurance certification by the legislated deadline of 31 December 2004; and
  • the establishment and improvement in the contract monitoring and reporting frameworks for Business Services and DEN providers.

Disability employment services is a mature program reflected by its administration and outcomes. Nonetheless, there remain issues that need to be addressed. These issues arise from the complexity of the funding model and balancing accountability and administrative workloads on service providers. In particular:

  • there is a risk that some Business Service providers are not fully complying with contract requirements by extending the period in which clients, with lower support needs, remain in the employment assistance phase rather than progress to the employment maintenance phase, to maximise the fees they can claim from FaHCSIA. This risk is currently not adequately managed, with evidence indicating that it is occurring;
  • DEEWR has an IT system that assists DEN providers to make accurate payment claims. However, the IT system does not give DEN providers assurance of the accuracy of total payments from DEEWR. This places an unnecessary administrative workload on providers as the complexity of DEN funding models does not facilitate a straightforward determination of this amount by service providers; and
  • DEEWR uses its general employment services framework to monitor and report on its DEN providers and this is overlayed with the quality assurance audits administered by FaHCSIA. While comprehensive, DEEWR's model has resulted in providers raising concerns about administrative workload, particularly around duplication of information provision requirements.

While there have been improvements in data collection for performance reporting required under the CSTDA, the reporting of the performance data remains fragmented, is significantly delayed in its public release and does not fully address the requirements set out in the CSTDA. As such, the ANAO considers that the reporting requirements under the CSTDA have not been fully met.

The ANAO has made four recommendations to assist FaHCSIA and DEEWR address the identified issues that arise from the complexity of the funding model; balancing accountability and administrative workloads on service providers; and the capture and reporting of performance data.

Further changes to Business Services and DEN can be expected with the re-negotiation of the CSTDA under the new COAG architecture and following the outcome of the Review of Disability Employment Services. This provides an opportunity for FaHCSIA and DEEWR to refine their approaches, including addressing the issues highlighted in this report.

Key findings by chapter

Chapter 2 – Placing Individuals in Disability Employment Services

People with disabilities can access Business Services through self-referral or a JCA, and can access DEN only through a JCA. FaHCSIA and DEEWR have effectively incorporated JCA procedures into the disability employment services eligibility and streaming processes.

The circumstances and aspirations of people with disabilities may change, requiring them to move between service types. FaHCSIA has sought to address some of the barriers to movement from supported to open employment services. Measures include guaranteeing a place in a Business Service up to two years after clients commence trialling DEN services.

While DEN clients are able to move to Business Services, they are required to be referred through a JCA in order to access these services. Greater flexibility of movement between the service types has been raised by the Government in seeking input to the current Review of Disability Employment Services.

Chapter 3 – Funding of Disability Employment Services

The CBF model incorporates fee-for-service arrangements based on the relative support needs of individual job seekers, with payments linked to the achievement of employment milestones. The current CBF arrangements applied to all new job seekers from 1 January 2005, while existing clients transitioned to CBF through a staged process.

The CBF model has achieved improved employment outcomes for Business Services and DEN clients. In particular:

  • the percentage of all Business Services clients achieving 13-week employment outcomes increased from 63 per cent in 2003–04 under the BGF model to 92 per cent in 2006–07 under the CBF model; and
  • DEEWR's evaluation of its CBF model for DEN capped stream clients showed that 43 per cent had achieved a 13-week employment outcome within 18 months under CBF, compared with 25 per cent of clients who achieved this outcome within the longer period of two years under BGF.

The Business Services CBF model is relatively straightforward compared with the DEN model. It has a standard fee for the intake phase, a monthly employment assistance fee for the period up until the client achieves an employment outcome (working 8 hours per week), and a monthly employment maintenance fee at four levels, reflecting client support needs. Additional fees such as work-based personal assistance and rural/remote location are also available.

The time a service provider takes to complete a Disability Maintenance Instrument (DMI) with respect to the achievement of a 13-week employment outcome for a client, impacts on the overall payment level received by the provider. FaHCSIA is managing most of the risks associated with providers influencing the time taken to complete the DMIs, in order to maximise their funding. However, in line with one of these risks occurring, the ANAO found that in the majority of States and Territories, Business Services spend less time to complete a DMI assessment for high support need clients than for low support need clients. With wages and hours information now required to be recorded in the FaHCSIA Online Funding Management System (FOFMS) by service providers, FaHCSIA has better means to manage this risk. (See Recommendation No.1)

The DEN CBF model is more complex. In particular:

  • for the capped stream, in addition to the standard intake fee, the employment assistance phase and employment maintenance phase have four levels of monthly payment. When combined with the additional fees available that are similar to Business Services (but greater in number), the capped stream has seven core payment types, five of which are paid at four different levels, and 11 additional payment types; and
  • the uncapped stream has similar fees to the capped stream for the intake and employment assistance phases. The uncapped stream also has four different levels of post-placement fees that can be claimed after the achievement of an employment outcome. As well as additional fees similar to those for the uncapped stream, providers are entitled to range of full or intermediate milestone and outcome fees. Overall, there are 10 core payment types, eight of which are paid at four different levels, and five additional payment types.

There is an associated complexity in the DEN funding deed, potentially impacting on the clarity and certainty with which providers manage the needs of clients. DEEWR provides a range of guidance to providers in order to clarify contract requirements. In addition, its IT system calculates the payments that providers are entitled to, limiting the need for a detailed understanding of the contents of the funding deed. However, the IT system does not give providers assurance that the payments made by DEEWR for program participants are accurate. (See Recommendation No.2)

Despite the complexity of the DEN CBF models, DEEWR's IT system (EA3000) largely supports providers to make accurate payment claims, with nearly all the payments processed automatically through the system.

Chapter 4 – Assuring Quality in Disability Employment Services
The Quality Strategy for Disability Employment Services and Rehabilitation Services has three key components:

  • quality assurance — a system of independent third party accredited certification against the legislated Disability Services Standards (the Standards) as a pre-condition for Australian Government funding;
  • continuous improvement aimed at increasing service providers' ability to fulfil, and exceed, the requirements of the Standards; and
  • complaints resolution and referrals.

Quality assurance

All service providers must be certified that they meet the Standards as determined through quality audits conducted by certification bodies. JAS-ANZ regulates the accreditation of these certification bodies. JAS-ANZ's role contributes to the objectivity and independence of the quality assurance system.

FaHCSIA effectively facilitated the transition to the new quality assurance system, assisting all service providers to meet the legislated deadline for compliance of 31 December 2004.

There are a range of relationships that need to be managed for the quality assurance processes to operate effectively; these are between JAS-ANZ, the certification bodies, FaHCSIA and DEEWR. FaHCSIA has effectively managed the risks associated with the relationships, drawing on formal and informal arrangements, such as Memoranda of Understanding (MOUs) with DEEWR and JAS-ANZ, and active communication with certification bodies.

Some service providers also deliver services funded under the CSTDA by State and Territory governments. These services are subject to both the relevant State/Territory government's quality assurance processes in addition to those of the Australian Government. FaHCSIA is pursuing the alignment of quality assurance processes through the Disability Program and Research Working Group. Currently, the Queensland and Australian Governments have similar processes and standards.

Continuous improvement

The continuous improvement component of the Quality Strategy aims to increase service providers' ability to fulfil and exceed the requirements of the Standards. FaHCSIA directly, and indirectly through JAS-ANZ, has supported continuous improvement in disability employment services. In particular, continuous improvement is incorporated into the requirements of certification audit reports, and guidance to the service providers on quality. Further, FaHCSIA has facilitated continuous improvement by supporting a range of activities aimed at promoting and recognising quality service delivery.

Complaint resolution and referral

The resolution and referral processes for service delivery and certification process complaints are consistent with the Commonwealth Ombudsman's good practice recommendations.
However, the ANAO found some areas where complaints about certification could be improved and made suggestions to address these issues:

  • there is some inconsistency between the information FaHCSIA provides on its web-site about the processes for making certification complaints and other guidance;
  • there is no specified timeframe in which JAS-ANZ is required to report on such complaints to FaHCSIA; and
  • there is no formal reporting to JAS-ANZ or the departments on complaints received on certification body auditors.

Chapter 5 – Monitoring and Reporting of Disability Employment Services

Monitoring of Business Services providers

FaHCSIA's Disability Employment Assistance Performance Framework outlines its program monitoring processes which comprise of quality assurance audits, data analysis and contract compliance audits. FaHCSIA draws on administrative and transactional data to monitor and report on Business Services providers. Further, it undertakes audits to assess the compliance of service providers with the terms and conditions of their funding agreement with FaHCSIA.
Each service provider is audited over a two-year period. The compliance audits take a risk-based approach to determine the focus of the audits; FaHCSIA draws on administrative and transactional data to initially assess each provider's risk profile and uses this information to schedule the audits. Through these three processes, FaHCSIA has in place a sound performance monitoring approach to manage the significant risks associated with contract service provision.

Monitoring of DEN service providers

DEEWR's National Contract Management Framework provides a consistent approach to contract management across DEEWR's employment programs. For monitoring DEN, DEEWR's standardised approach is supplemented by the quality assurance audits undertaken by JAS-ANZ accredited compliance bodies, managed through FaHCSIA.

DEEWR has developed and implemented a comprehensive risk management approach for the compliance risks associated with DEN. The plan outlines risk treatments for each of the risks identified with program monitoring activities forming the basis of many risk treatments. DEEWR's active management of risk is reflected in monthly assessments of contract management risks associated with each DEN provider.

DEEWR's approach to contract compliance, particularly when overlayed with quality assurance activities managed through FaHCSIA, risks duplicating monitoring activities and increasing the administrative workload on service providers. Each of the DEEWR reference documents employed in monitoring DEN providers serves a different purpose and each is expected to stand alone. However, while DEEWR has sought to address areas of duplication in its performance monitoring system, there is no formal monitoring of the effectiveness of these measures. Due to the use of multiple reference documents and auditing activities, an administrative workload risk remains. (See Recommendation No.3)

Commonwealth State/Territory Disability Agreement performance reporting

Developments in the CSTDA National Minimum Data Set have allowed the collection and presentation of higher quality data on disability employment services, with less administrative workload on providers. This has included drawing on administrative data held on DEEWR and FaHCSIA's IT systems for reporting rather than relying on returns from service providers; and ‘cleansing' to address double counting of clients who move interstate during the collection period.

Information is collected to meet the disability employment services reporting requirements of the CSTDA. Across all publicly available reports, a large amount of information is available, however, the current reporting system in some cases duplicates, and in other cases fragments, performance reporting across at least six different publications.

The published information does not cover all CSTDA reporting requirements. The CSTDA Annual Public Report does not constitute, as it could be expected, a comprehensive performance reporting mechanism for reporting on disability employment services as required under the Agreement. The information in that report must be complemented by published and unpublished material in order to fully demonstrate achievements in the delivery of disability employment services. (See Recommendation No.4)

Reporting on the disability employment service provision as required by the CSTDA is not timely. The CSTDA Annual Public Report for 2005–06 had been drafted at August 2007 but had not been released as at August 2008, as its publication has been awaiting endorsement from three State/Territory Ministers.

FaHCSIA's response

The Department of Families, Housing, Community Services and Indigenous Affairs does not have any further comments to make regarding the proposed report and agrees with Recommendations Nos.1 and 4. The department will continue to work with the Australian National Audit Office to implement the findings of the audit.

Summary of DEEWR's response

DEEWR welcomes the performance audit of Disability Employment Services examining DEEWR and FaHCSIA's fulfilment of their roles and responsibilities for specialist disability employment services under the Commonwealth State/Territory Disability Agreement 2002–07. This audit is particularly timely as its recommendations will be considered in conjunction with the current Review of Disability Employment Services.

DEEWR agrees with Recommendation No.2. One of the guiding principles of the Review of Disability Employment Services is to reduce complexity where possible and the funding model is an area the Government has identified as overly complex (see p.13 of the Discussion Paper: Review of Disability Employment Services Disability Employment Network and Vocational Rehabilitation Services). DEEWR will develop a package of information to assist DEN providers to more easily reconcile their payments and claims.

DEEWR agrees with Recommendation No.3. Through the Review of Disability Employment Services, the Government is focusing on creating streamlined service delivery and administration processes that provide transparency and accountability and minimise any unnecessary administrative burden on DEN providers (see p.12 of the Discussion Paper: Review of Disability Employment ServicesDisability Employment Network and Vocational Rehabilitation Services). DEEWR will evaluate the impact of the relevant initiatives once the new disability employment services model has been implemented and bedded down.