Introduction

1.1 The Child Care Subsidy (CCS) is administered by the Department of Education (Education) under the Family Assistance Law (FAL)¹:

to improve access to quality early childhood education and care by providing assistance to meet the cost of early childhood education and care for families engaged in work, training, study or other recognised activity.²

1.2 At a cost of $13.6 billion in 2023–24, CCS is one of the ‘fastest-growing major payments’ of the Australian Government, with forecast average annual growth of 5.5 per cent over 2024–25 to 2034–35.³ As of September 2024, CCS supported 1.45 million children to attend approved care (Figure 1.1). This equates to 32.6 per cent of all 0 to 13 year old’s in Australia.⁴

1.3 Education has policy responsibility for the CCS, including the CCS special appropriation. Services Australia is accountable for delivering payment and ICT services on behalf of Education, and for prioritising the service delivery within its budget appropriation.⁵

Figure 1.1: CCS expenditure^a and children^b supported^c

Note a: Expenditure does not precisely correspond to the number of children supported in each financial year, due to the reconciliation process undertaken after the end of each financial year.

Note b: The lower number of children in 2020–21 is because of the COVID-19 pandemic, especially service closures.

Note c: Figures include Additional CCS (ACCS), which provides support for: child wellbeing; grandparent care; temporary financial hardship; and transitioning to work.

Source: ANAO analysis based on the Education’s quarterly CCS data reports and annual reports.

1.4 Families apply to Services Australia to receive CCS. Entitlement to CCS depends on family income thresholds (Table 1.1) and activity requirements (Table 1.2). Families with more than one child aged 5 or under in care may get a higher subsidy for their second child and younger children.

Table 1.1: Standard CCS subsidy rates, 2024–25

Source: ANAO based on the Education documents.

Table 1.2: CCS activity^a requirements^b, 2024–25

Note a: Recognised activities can include paid or unpaid work or leave, including parental leave and setting up a business, doing an approved course of education or training, actively looking for work, or other activities on a case-by-case basis. Families that are exempt from activity requirements (such as grandparents who are the principal carer of a grandchild) can access 100 hours of subsidised care per child per fortnight.

Note b: On 13 February 2025, legislation passed in Parliament to replace these activity requirements with guaranteed access to three days subsidised child care for CCS eligible children from 1 January 2026. See Parliament of Australia, Early Childhood Education and Care (Three Day Guarantee) Bill 2025, available from https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr7316%22 [accessed 17 February 2025].

Source: ANAO based on Education and Services Australia documents.

1.5 CCS is paid directly to approved providers by Services Australia and passed on to eligible families in the form of fee reductions. Families pay the difference between the provider’s fee and the subsidy amount (the ‘gap fee’) to the provider. Additional CCS (ACCS) may be paid to some families to provide additional support for: child wellbeing (if a child is vulnerable or at risk of harm, abuse or neglect); grandparent care; temporary financial hardship; and transitioning to work.

1.6 Throughout each year, a family’s CCS subsidy rate is based on estimated income. They must then confirm their annual income at the end of each financial year, generally by lodging a tax return with the Australian Taxation Office (ATO).⁶ If there is a difference between the person’s actual and estimated income, Services Australia repays the family for any underpayment, or recovers any overpayment as a debt. (See paragraphs 3.24 and 3.25).

1.7 Education is responsible for approving providers and services to receive CCS payments on behalf of eligible families. Each provider must operate at least one service which provides care.⁷ In order to gain and maintain approval, providers and services must meet conditions set out in the FAL. The provider is the person or business entity responsible for operating the child care service (or services).⁸ Under the FAL, the provider is the legal entity that receives CCS payments, passes on payments in the form of fee reductions, and incurs a debt to the Commonwealth where CCS is paid incorrectly and the debt was caused by provider actions.⁹ The approval and payment process is summarised in Appendix 3 (controls to ensure the integrity of access to the CCS are discussed in Chapter 3).

1.8 Under the Education and Care Services National Law Act 2010 (Vic) (the National Law), state and territory regulatory authorities (SRAs) are responsible for assessing and approving early childhood education and care services and providers to provide care.¹⁰ SRAs assess applications against educational quality, child health and safety, physical environment, staffing, relationships with children, families and communities, and governance and leadership requirements under the National Quality Framework, which is administered by the Australian Children’s Education & Care Quality Authority (ACECQA).¹¹ The interface between state and Australian Government regulatory arrangements is discussed at paragraphs 2.28 and 2.30.

1.9 There are four types of care that can be approved for CCS and ACCS (Table 1.3). Of these, most subsidised care is provided by Centre Based Day Care, which received 85.3 per cent of CCS and ACCS funding in the September 2024 quarter.

Table 1.3: Services and children^a supported by CCS and ACCS for the September 2024 quarter

Note a: The ratio of children to educators, or children to care locations, cannot be inferred from this table. Each service may engage many educators across a large geographical region. See Australian Children’s Education & Care Quality Authority, Educator to child ratios, ACECQ, available from https://www.acecqa.gov.au/nqf/educator-to-child-ratios [accessed 17 February 2025].

Note b: Amounts include both CCS and ACCS payments.

Note c: As children may use more than one service type, and due to rounding, the sum of the component parts may not equal the total.

Source: ANAO based on Education information.

Non-compliance in the CCS

1.10 Between 2018–19 and 2023–24, identified non-compliance accounted for an estimated $2.7 billion of total CCS expenditure of $58.7 billion (Table 1.4).¹² Over this period, Education identified $13.0 million lost to CCS fraud, and recovered $116,707 of this from seven cases.

Table 1.4: Estimated total cost^a of CCS non-compliance, 2018–19 to 2023–24

Note a: The rate of inaccurate payment is based on the Random Sample Parent Check (RSPC), which collects information from families about their children’s attendance at approved child care services. A comparison between the information provided by the families and the attendance information reported by services is used to measure payment accuracy. A payment is inaccurate if the information provided by the parent does not match that provided by the service. On 28 August 2024, Education advised the ANAO that RSPC data is the best available measure of all fraud and non-compliance within the CCS.

Note b: Values may not sum to total due to rounding.

Source: ANAO based on Education documents.

1.11 As of 2024–25, Education and Services Australia compliance activities are jointly funded via three budget measures summarised in Table 1.5.¹³ These measures contribute to funding staff in both entities, as summarised in Table 1.6. Appendix 4 provides more details about these measures and other key program changes.

Table 1.5: Funding for departmental investment in activities to address non-compliance in the CCS, 2022–23 to 2024–25

Note a: 2022–23 (October) Budget funded. This measure did not include any departmental funding for Services Australia.

Note b: 2023–24 Budget funded.

Note c: 2024–25 Budget funded.

Source: ANAO analysis of Australian Government budget papers.

Table 1.6: Staffing^a to address non-compliance in the CCS, 2022–23 to 2024–25^b

Note a: Staffing to address non-compliance activities in the CCS is comprised of budget measures funding and funding through departmental budget allocations. The Average Staffing Level (ASL) figures provided for 2022–23 and 2023–24 are actual ASL as at the end of each financial year, the 2024–25 ASL are the budgeted ASL for the financial year. Actuals for 2024–25 will not be known until the end of financial year.

Note b: This does not include staff undertaking functions that are not specifically identified and funded as compliance-related. This excludes the approximately 2,877 customer-facing staff in Services Australia (at 30 June 2024) trained to deliver CCS-related services (such staff usually also complete work on other programs).

Source: ANAO based on Education and Services Australia documents.

Previous audits and reviews

1.12 Auditor-General Report No. 10 2019–20 Design and Governance of the Child Care Package found that Education’s design and governance of the Child Care Package, which included the CCS, was largely effective, except that the focus on key policy objectives for the Package in key documentation had diminished over time, and ongoing oversight arrangements were not established in a timely manner.¹⁴

1.13 CCS was also considered as part of Auditor-General Report No. 28 2022–23 Debt Management and Recovery in Services Australia, which found that Services Australia’s debt management and recovery of social security and welfare debt on behalf of policy entities was partly effective. Services Australia did not have a coordinated approach for the debt management lifecycle including detecting potential overpayments, determining whether a potential overpayment is a legally recoverable debt, raising the debt and either waiving or recovering the debt.¹⁵

1.14 The need for improved compliance monitoring in the CCS was identified in ANAO Audit Report No. 13 2013–14 Audits of the Financial Statements of Australian Government Entities for the Period Ended 30 June 2013.¹⁶ In response, the Random Sample Parent Check (RSPC), which provides the basis for current measurements of non-compliance (paragraph 1.10) was introduced in 2014–15.¹⁷

1.15 Since 2021–22, performance statements audit has considered the effectiveness of the RSPC in measuring payment accuracy.¹⁸

Rationale for undertaking the audit

1.16 The CCS was estimated to be one of the top 20 expense programs in 2024–25.¹⁹ Australian Government spending on CCS was $13.6 billion in 2023–24, of which an estimated 3.6 per cent ($484.1 million) was lost to incorrect payments, including fraud and non-compliance. Fraud and non-compliance reduces available funds for public goods and services.

1.17 This audit was conducted to provide assurance to the Parliament over the effectiveness of the management and oversight of compliance activities within the Child Care Subsidy program. This audit was identified as a priority by the Parliament’s Joint Committee of Public Accounts and Audit in the context of the ANAO’s 2023–24 Annual Audit Work Program.

Audit approach

Audit objective, criteria and scope

1.18 The objective of the audit was to assess the effectiveness of the management and oversight of compliance activities within the Child Care Subsidy program.

1.19 To form a conclusion against the objective, the following high-level audit criteria were adopted:

• Have effective governance arrangements been established?
• Is the approach to compliance activities effective?

Audit methodology

1.20 To assess the audit objective and criteria, the audit methodology included:

• examination and analysis of Education and Services Australia records;
• meetings with relevant Education and Services Australia staff; and
• extraction and analysis of compliance data from Education and Services Australia systems.

1.21 The audit was open to contributions from the public between 11 July and 15 December 2024. The ANAO received and considered one submission from a member of the public.

1.22 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $725,100.

1.23 The team members for this audit were Hazel Ferguson, Klein Anderson, Shannon Clark, Margaret Dunlop, Amanda Elliot, Kayla Hurley, Kristian Marchiori, Dale Todd, and David Tellis.

1.24 The ANAO has co-operative evidence gathering arrangements in operation with entities. On 4 July 2024 Services Australia advised the ANAO that it was unable to voluntarily provide certain information requested by the ANAO due to legislative restrictions on the disclosure of requested information. On 25 July 2024, the audit team issued Services Australia with a notice to provide information and produce documents pursuant to section 33 of the Auditor-General Act 1997 to enable it to provide the requested information taking account of legislative requirements. Services Australia provided the information requested within the specified time, following receipt of the notice.

2.1 Effective oversight is critical to proper use and management of public resources.²⁰ To ensure oversight is effective where service delivery is split from policy responsibility, roles and responsibilities must be clearly defined, risks understood and addressed, and reporting frameworks in place to enable the entity with policy responsibility to have oversight of the services delivered by the other entity.²¹

2.2 Where entities are performing regulatory functions, their governance arrangements should be as set out in the Department of Finance Resource Management Guide 128, Regulator Performance (RMG 128), including the adoption of a risk based and data driven approach to operational policy development, administration, compliance and enforcement activities.²²

Have effective arrangements been established to oversee compliance activities?

Roles and responsibilities

2.3 Education has policy responsibility for administering the CCS, and Services Australia delivers CCS payments and IT systems on behalf of Education.

2.4 The Education Secretary, as the accountable authority for Education, is responsible for administering the CCS, including the CCS special appropriation, under the Family Assistance Law (FAL).²³ The Education Secretary delegates certain powers under the FAL to the CEO of Services Australia, to allow Services Australia to determine individuals’ entitlement to be paid CCS, make relevant payments, recover overpayments, and undertake internal reviews of decisions.

2.5 Each entity’s responsibilities are affirmed in a Statement of Intent between the CEO of Services Australia and the Secretary of Education, and subordinate Program Delivery Services Schedule for Child Care Subsidy Program (the Services Schedule) (Appendix 5).

2.6 As the accountable authority, the Education Secretary is responsible for establishing governance arrangements to promote the proper use and management of public resources, and an appropriate system of risk oversight and management, as well as encouraging officials to cooperate with others to achieve common objectives, where practicable.²⁴ The Public Governance, Performance and Accountability Act 2013 (PGPA Act) requires that an Accountable Authority ensure the entity has an audit committee.²⁵ The Department of Education Governance Framework provides for an independent Audit and Assurance Committee (AAC), and four strategic governance committees which report to the Executive Board, Education’s key decision-making body (Figure 2.1).²⁶

2.7 Education’s AAC was provided with information about CCS compliance work in 2022–23 and 2023–24. CCS compliance matters were discussed twice during this period by Education’s key governance committees. The Project and Investment Committee considered:

• Approving change to the schedule, budget and scope for a project related to the Civil Penalties Management System, which is used to send infringement notices, and conduct electronic funds transfer (EFT) provider audits and campaigns.²⁷
• Consideration of a proposed budget for the Child Care Subsidy Digital Data Exchange project, which aims to automate early childhood education and care data extraction from Services Australia, and agreement that work would be undertaken to reduce the budget before it could be considered again.

Figure 2.1: Department of Education, key governance committees, 2022–23 and 2023–24^a

Note a: In November 2024, Education’s governance arrangements were updated to remove the Risk, Security and Governance Committee, and rename the Audit and Assurance Committee the Audit and Risk Committee.

Source: ANAO based on Education documents.

2.8 Education’s oversight of its internal CCS compliance activities is generally provided via CCS specific committees, which do not report directly to Education’s key governance committees as set out in Figure 2.1. Instead, they are accountable to, and must have decisions ratified by, the accountable SES Band 2 or SES Band 1 officer. In 2022–23 and 2023–24, a total of 20 CCS compliance related decisions were escalated above the SES Band 2 to the Deputy Secretary or Secretary. These predominantly related to legal or funding approvals, or engagement with Services Australia or other entities. The committees do not directly report to the Deputy Secretary, Early Childhood and Youth, or Education Secretary.

Table 2.1: Department of Education oversight of CCS compliance functions

Key: ✔ Yes ✘ No.

Note a: No oversight or coordination of Services Australia activities is provided by these bodies.

Note b: The FIOC was preceded by the Compliance Fraud Management Team (CFMT), which performed similar functions. The activities of the CFMT are not analysed in the table.

Source: ANAO based on Education documents.

2.9 In 2022–23 and 2023–24, the FIGB and FIOC met every six weeks, and operated in line with their respective stated purposes. For example:

• FIGB approved the Financial Integrity Strategy 2023–2027; and
• FIOC received operational updates, including teams’ caseloads, IT system updates and hot topics, and approved cases for referral.

2.10 Two deficiencies in these arrangements were identified:

1. The FIGB had not established arrangements for members to declare conflicts of interest. The Australian Public Service Commission identifies regulators as having a ‘heightened risk’ of conflict of interest.²⁸ While CCS staff must adhere to Education’s enterprise Conflict of Interest Policy, Education has not established specific guidance for its staff to manage conflicts of interest issues particular to regulators, such as issuing or reviewing fines or penalties. In accordance with Education’s Conflict of Interest Policy, staff attending FIGB meetings are required to declare actual and/or apparent conflicts (the SES requirement is to do so annually), but are not required to make a declaration at the opening of each meeting. Staff attending FIOC meetings are asked to declare conflicts at the opening of each meeting.
2. Oversight arrangements did not cover the entire program. Despite having oversight of compliance activities administered internally, during 2022–23 and 2023–24, Education’s FIGB and FIOC did not have oversight of Services Australia’s compliance-related work, or the impact of this work on CCS compliance. The ANAO identified some examples of FIGB and FIOC members attending bilateral meetings with Services Australia, but these were meetings provided by the Statement of Intent, which focus on service standards rather than compliance activities (Table 2.2). During the audit, Education revised its governance arrangements to include Services Australia SES Band 2 and SES Band 1 membership in a new Joint CCS Program Board.

2.12 Within Services Australia, the Families and Child Care Branch provides oversight of the entity’s work on CCS through its line management and committee structure. Relevant internal Services Australia meetings are documented via agendas only. As a consequence, there is no evidence these arrangements are used to oversee CCS compliance activities, except for the Services Australia Audit and Risk Committee, which was updated about major CCS fraud investigations that the entity engaged in, in 2022–23 and 2023–24. Services Australia provides regular reporting to Education under the Services Schedule but this does not include key compliance risks and controls (paragraph 2.20).

Table 2.2: Implementation of bilateral CCS governance arrangements^a by Education and Services Australia

Note a: Bilateral governance arrangements are taken from the Statement of Intent signed in July 2024, and Services Schedule, signed in March 2022. The previous Statement of Intent, signed in April 2021, also included the Bilateral Management Committee and supporting Operational Committee.

Source: ANAO based on Education and Services Australia documents.

Risk management

2.13 The Statement of Intent provides for the establishment of shared risk management arrangements. It states:

Managing shared risk is a crucial element of effective policy and program delivery. Entities will implement arrangements and jointly manage shared risk in accordance with the Commonwealth Risk Management Policy.

Entities agree to discuss the requirements for undertaking risk assessments and to cooperate in conducting any assessments required.

Entities will inform each other of risks relating to the performance of the services that come to its attention.

Specific risk management arrangements, including the requirement for any risk registers, are to be set out in the individual bilateral arrangements.

2.14 The Services Schedule identifies entities’ respective risk management responsibilities.

• Education is responsible for controlling risks to CCS payment accuracy in relation to:
  • child care service providers;
  • other third party or combined child care service providers; and
  • individual non-compliant behaviours, such as where individuals and service provider collude in non-compliant behaviours.
• Services Australia is responsible for controlling risks to payment accuracy that are solely the result of CCS customer behaviours, changed circumstances, and system issues.

2.15 These arrangements mean risks involving individuals failing to accurately report their income or activity levels, or providing inaccurate information about their eligibility for CCS, are managed by Services Australia. Education is responsible for managing any risk that involves the provider or service, including where an individual colludes with a provider to fraudulently claim more CCS than they are entitled to. As CCS payments are made to the provider, the bulk of the non-compliance risk is managed by Education.

2.16 The risk management section of the Services Schedule does not address risks associated with legislation and policy, or IT system effectiveness, although responsibly for these is with Education and Services Australia respectively (Appendix 5).

2.17 In respect to shared risks, the Services Schedule specifies entities will:

cooperate in communicating and managing any identified risks and to discuss in good faith the requirements (including key resources, activities, deliverables and timeframes) for the conduct of risk assessments, privacy impact assessments, fraud assessments, business continuity assessments and other assessments.

…

The Operational Committee will be responsible for the management of shared risks.

2.18 The Operational Committee does not consider shared compliance risks. Between August 2023 and June 2024, Education attempted to address this deficiency. It shared information relevant to CCS fraud risks, and sought information from Services Australia on the same. In response, Services Australia provided a copy of its risk management plan, and a redacted risk control pressure test report.²⁹

2.19 Separately from the Operational Committee, on 9 September 2024, Education and Services Australia held the first meeting to discuss shared risk management arrangements. Meetings to discuss shared risks continued in 2025.

Reporting

2.20 Services Australia’s reporting to Education is compliant with its obligations under the Services Schedule. It comprises:

• an annual assurance statement, which aligns with strategic principles set out in the Statement of Intent;
• monthly CCS and ACCS reports of claim processing, payments, reconciliations, and debts;
• a quarterly operational managers report, which summarises CCS and ACCS claim processing, reconciliation, debts, breaches, complaints, and internal and external reviews; and;
• daily and monthly financial reporting.

2.21 This reporting does not cover compliance risks or Services Australia’s management of these.

Multi-agency and intergovernmental engagement

Multi-agency engagement

2.27 Education engages with other Australian Government entities via:

• the Fraud Fusion Taskforce, a forum for Australian Government entities, including the Australian Criminal Intelligence Commission (ACIC), Australian Federal Police (AFP), and Australian Taxation Office (ATO), to work together to share information and build skills detect and prevent fraud — Education proactively discloses intelligence via this forum;
• Task Force Reston, an ACIC operation which facilitates the sharing of criminal information within the Fraud Fusion Taskforce and supports the development of enhanced national responses to identify, prevent and disrupt fraud and related criminal activity within Australian Government payments and programs;
• the Government Payments Program, an ATO-led program to improve system integrity across Commonwealth programs through better use of ATO data;
• project-specific or investigation-specific engagement with other Australian Government entities, such as:
  • search warrant assistance from the AFP (paragraphs 3.50 to 3.53);
  • intelligence-related investigations assistance from the ACIC;
  • work with the ATO to introduce Statement of Tax Record requirements to the CCS application process from 1 April 2025;
  • work with the Australian Transaction Reports and Analysis Centre to identify people who have high unexplained wealth with connections to early childhood education and care;
  • work with the ACIC, which is in the early stages of development, to increase information available about possible unsuitable and/or fraudulent actors applying for CCS approval; and
  • work with the National Disability Insurance Scheme Quality and Safeguards Commission (NQSC) and the ACIC, which is in the early stages, to improve the identification of serious and organised crime and systemic fraud across programs.

Intergovernmental engagement

2.28 Education’s Child Care Subsidy Financial Integrity Strategy 2023–2027 (Integrity Strategy, paragraphs 2.32 to 2.33) states that Education’s regulation of providers and services under the FAL is separate from state and territory government regulatory authorities’ responsibilities for the safety and quality of early childhood education providers and services under the National Law.

2.29 The Integrity Strategy identifies ‘limited coordination with states and territories and other regulators’ as a challenge to be addressed. Work with state and territory governments on early childhood education system reform is progressed via the Education Ministers Meeting and subordinate Australian Education Senior Officials Committee and Early Childhood Policy Group. Inter-jurisdictional work with state and territory early childhood education and care regulatory authorities (SRAs) and the Australian Children’s Education & Care Quality Authority (ACECQA) to improve regulation in early childhood education and care takes place via³⁰:

• project-specific work on regulatory systems reform, such as ‘Joined Up Approvals’, to allow Education and SRAs to use a single application system (completed in June 2023, see paragraph 3.8), and the Joint Compliance Monitoring Program (under which joint investigations are conducted, see paragraphs 3.55 to 3.57);
• direct engagement with SRAs to share intelligence and perform complimentary regulatory action (for example attendance by the SRA at the execution of search warrants resulting from Education investigations);
• two non-decision-making regulatory communities of practice with SRAs and ACECQA:
  • the Regulatory Practice Committee (RPC), a non-decision-making community of practice to share information and improve practice and ‘establish consistent, effective and efficient procedures for the operation of the NQF [National Quality Framework]’; and
  • the Lead Investigator Network, a working group of the RPC, with a focus on investigative practice in monitoring and enforcing compliance with the Education and Care Services National Law and Regulations.

2.30 Limitations at the intersection between state and territory regulators and Education’s enforcement actions is discussed at paragraph 3.72.

Has a risk based and data driven approach to compliance been established?

2.31 Principle 2 of RMG 128 states that regulators should adopt a ‘risk based approach to operational policy development, administration, compliance and enforcement activities, and [be] informed by data, evidence and intelligence.’ ³¹ This includes maintaining a compliance and enforcement strategy that articulates the regulator’s approach to risk and how this informs decision-making, publishing where appropriate.

Compliance approach

2.32 Education’s compliance approach is set out in the Integrity Strategy. The Integrity Strategy outlines a ‘whole-of-system’³² approach to address CCS ‘fraud and non-compliance’. Education published the Integrity Strategy on 26 August 2024, replacing the previous strategy, which had been in place since 2019. The Integrity Strategy is in the process of being implemented, with change actions ongoing to 2027 (paragraphs 2.38 to 2.44, 2.48, and 2.65 to 2.67).

2.33 Education’s intended approach to addressing behaviours across the integrity continuum is depicted in a compliance pyramid (Figure 2.2), which includes enforcement, correction, information, and support activities, based on a provider’s risk profile and pattern of compliance behaviours, with most activity concentrated on preventative activity at the bottom of the pyramid. According to the pyramid, the entity’s pattern of compliance behaviour corresponds to Education’s likely intervention response. In the Integrity Strategy, for example, opportunistic non-compliance, where the entity ‘generally disregards compliance, has limited/poor compliance systems, governance and management is not compliance oriented or takes opportunities to exploit for personal gain’ would be addressed via corrective measures including EFT provider audits, infringement notices, and sanctions to limit, vary, suspend or cancel CCS access.

Figure 2.2: Department of Education CCS financial integrity compliance pyramid

Source: ANAO adapted from the Department of Education, Child Care Subsidy Financial Integrity Strategy 2023–2027.

2.34 Services Australia controls to mitigate CCS non-compliance risks are set out in a risk management plan, which is reviewed and updated annually (paragraphs 2.50 to 2.52). On 12 July 2024, Services Australia advised the ANAO that the CCS compliance strategy is ‘managed by our partner Agency, Department of Education’. Education’s Integrity Strategy does not account for any regulatory actions that may be taken by Services Australia, including those described in Service Australia’s risk management plan. As such, there is no document that provides strategic direction or describes how risk and data inform decision-making regarding Services Australia’s CCS compliance activities.

2.35 In 2024, both entities documented their regulatory approach in respective Statements of Intent, which respond to Ministerial Statements of Expectations, as detailed in guidance for entities that perform regulatory functions (including standalone regulators and those located within larger entities) in RMG 128.³³

Data driven approaches to compliance

2.36 According to RMG 128, data driven regulation involves use of intelligence and data to inform a risk based approach to compliance and enforcement.

2.37 Education’s Integrity Detection Framework (the Framework) sets out its approach to managing, analysing, and sharing CCS compliance-related data to achieve the objectives of the Integrity Strategy. Key data sets for CCS compliance functions identified in the Framework are:

• CCS data, which covers all sessions of care (that is, the period for which a family is charged a fee for care of their child) that take place at each approved service;
• CCIS data, which records all CCS compliance activities;
• data from the Australian Business Register (Australian Business Name information is used to identify persons with management and control at child care centres); and
• Department of Home Affairs data (the movement record database is used to identify if any children and educators were overseas at the time a session of care is claimed to have taken place).³⁴

2.38 Beginning in 2022–23, Education’s approach to compliance and enforcement is informed by analysis of CCS data against financial integrity risk indicators. A risk rating (from low to high³⁵) is allocated to each service against each indicator. An overall rating is attributed to the service based on aggregating the service’s score on all indicators.

2.39 Six indicators were used to guide compliance activities in 2023–24. These were developed based on consultation with internal and external stakeholders, to develop profiles of non-compliant providers. Validation was then undertaken to test the applicability of the profiles beyond individual staff experience. As of December 2024, nine additional indicators have been added, and work is underway to introduce further indicators.

2.40 CCIS information and other administrative data on regulatory activity is accessed by staff to understand the compliance history of certain providers or services. These data sources are used in intelligence analytics reports, risk indicators work, and intelligence assessments (paragraph 2.47). ANAO analysis identified limitations in CCIS data quality including incomplete record keeping and incorrect categorisation of investigations (paragraph 3.60).

2.41 Data from Services Australia reporting (paragraph 2.20) is used to:

• provide information across the whole program (using Education and Services Australia data) in the form of ‘dashboards’ provided to senior executives;
• track trends via the Quarterly Operational Managers Report, and raise issues with Services Australia where Education has relevant concerns; and
• monitor the financial position of the program, including debt recovery outcomes and doubtful debt (i.e. estimates of debt not likely to be repaid).

2.42 Services Australia reporting (paragraphs 2.20) is not integrated into Education’s compliance-related analytics (paragraph 2.37 to 2.39).

2.43 On 27 September 2024, Services Australia advised ANAO that it uses data in the development and monitoring of risk management plans. Data matching forms the basis of many key controls in Services Australia’s Child Care Subsidy Risk Management Plan 2024–25 — this includes monitoring payroll data for certain CCS recipients, immigration data (for both children and educators) and immunisation data (for children) to confirm payment eligibility.

2.44 Education’s Integrity Strategy identifies addressing a ‘mismatch of data holdings and systems’ and ‘limited measurement of performance against outcomes’ between 2023 and 2027. Under the Integrity Strategy, the (January 2024) Data Improvement Plan sets out an approach to improve how Education collects, modifies, analyses, and uses CCS compliance-related data. The Data Improvement Plan was informed by interviews, a data survey across stakeholders and subject matter experts, and benchmarking against other organisations. As of March 2025, work under the Data Improvement Plan has focused on developing and refining risk indicators (paragraph 2.39).

Risk based approaches to compliance

2.45 RMG 128 states that risk based regulation involves considering risks in decision-making, actively monitoring and planning for emerging risks, and focusing compliance and enforcement activity where risks and impact of harm are greatest.

2.46 Regulators are also required to adhere to other risk management requirements, which apply to all Commonwealth entities, including managing shared risks (paragraphs 2.13 to 2.18) and managing fraud and corruption risks under the Commonwealth Fraud and Corruption Control Framework 2024.

Education

2.47 Education’s Integrity Strategy provides that enforcement, correction, information, and support activities should be taken based on a provider’s risk profile (paragraph 2.33), which is developed using session data (paragraphs 2.37 to 2.39).

2.48 In 2023–24, Education implemented arrangements under the Integrity Strategy for using risk profiles in decision-making and focusing compliance and enforcement activity where risks and impact of harm are greatest (summarised in Figure 2.3).³⁶ All decisions to take compliance activity made by FIOC (known as ‘referrals’ to the relevant team for further action) are supported by an assessment of provider or service risk profile. Bulk referrals are supported by a referral report with accompanying spreadsheets of services with risk rating information.³⁷ Referrals based on information received via tip-off, complaint, or referral, may be supported by detailed intelligence assessments, which include risk ratings and compliance history information.

Figure 2.3: Education’s compliance risk identification, assessment and recommendation process

Note a: During 2022–23 and 2023–24, the report was an Intelligence Assessment Report (IAR). On 20 November 2024, Education advised the ANAO that its practice is to use ‘Referral Reports’ for bulk referrals, rather than Intelligence Assessment Reports. Referral reports provide a short overview of the matter being referred, risk indicators, compliance history, and the coordination team’s recommendation of whether, given the information provided, the matter should be accepted for investigation. The use of referral reports for bulk referrals is evident in FIOC papers starting in September 2024, although neither of the investigation teams’ policies refer to this process.

Source: ANAO analysis of Education documents.

2.49 Education has established a Fraud and Corruption Risk Assessment (FCRA). Two deficiencies in Education’s FCRA were identified:

• risk identification, analysis, and evaluation was not supported by engagement with Services Australia over shared risks; and
• risk treatment information was incomplete:
  • information about the purpose, implementation status, and timeframes of risk treatments was not included.
  • teams were identified as risk owners, contrary to the guidance provided in the template, which indicates risk owners should be ‘the SRO [Senior Responsible Officer] or other senior officer’ — a revised version of the FCRA was produced during the audit to address this issue.

Services Australia

2.50 Services Australia’s CCS risk management plan is updated annually. Child Care Subsidy Risk Management Plan 2024-25 risk 4 covers CCS compliance matters. This risk is owned by the National Manager (NM) Families and Child Care Branch. The risk management plan covers risk causes, consequences, and controls relevant to mitigating the risk of fraud and non-compliance in the CCS. The plan relies predominantly on prevention, especially system rules and controls (16 of 18 controls are at least partly preventative), and detection through data matching.

2.51 Services Australia’s risk management plan guidance for 2024–25 notes that reviews of plans should include ‘assessing emerging risks … for inclusion in the RMP [risk management plan] and updating risk decision statements and risk assessments if emerging risks are significant’. On 27 September 2024 Services Australia advised the ANAO that the data reported to Education is used in the continuous monitoring of and development of risk management plans (paragraph 2.42).

2.52 Services Australia has not established a FCRA for CCS, collaborated with Education in the development of its CCS FCRA, or included CCS in its entity-wide FCRA.

Is the compliance approach regularly reviewed, and where appropriate, updated?

Performance measurement and monitoring

2.53 Education measures the effectiveness of the Integrity Strategy against:

• the program’s overall payment accuracy rate target of over 90 per cent, which was set in 2018 based on a reduction from 95 per cent due to ‘changes to integrity resourcing and management systems’ and the replacement of existing programs with the CCS;
• an internal goal of 95 per cent payment accuracy — this was achieved in 2022–23 and 2023–24 (Table 1.4), but no basis for this has been documented; and
• a savings target of $448.3 million by the end of 2026–27, which reflects the combined savings agreed in CCS compliance-related October 2022 Budget and 2023–24 Budget measures.

Payment accuracy

2.54 Payment accuracy is estimated, using the Random Sample Parent Check (RSPC).³⁸ The RSPC compares attendance data from providers with survey responses from families about their children’s attendance. It measures three reasons for a payment being made incorrectly:

• all sessions reported by the provider were not attended;
• some sessions reported by the provider were not attended; and
• the family was not asked to make a co-contribution (i.e. pay a ‘gap fee’).

2.55 The contracted survey provider³⁹, which has been engaged until 30 June 2026, reports quarterly and annually to Education on estimated payment accuracy rates by service type (Figure 2.4) and reasons for incorrectness (Figure 2.5). Education reports overall payment accuracy against the target of over 90 per cent in its annual report. (See Appendix 2 for additional reporting introduced during the course of this audit.)

Figure 2.4: CCS payment accuracy by service type^a, 2018–19 to 2023–24

Note a: In Home Care service type is not captured by the RSPC.

Source: ANAO based on Education documents.

Figure 2.5: CCS, reasons for payment inaccuracy, 2020–21 to 2023–24

Source: ANAO based on Education documents.

Savings

2.56 The savings target of $448.3 million by the end of 2026–27 is based on the compliance-related October 2022 Budget and 2023–24 Budget process, which were costed based on activity in the following areas:

• the Electronic Funds Transfer (EFT) audit program;
• fraud investigations;
• compliance operations with states and territories; and
• early intervention compliance campaigns.

2.57 The measure costings have been assured by the RSPC supplier. Education reports progress against the two budget measures via:

• senior executive briefing provided for Senate Estimates;
• budget commitment tracking reports provided to the Minister for Early Childhood Education since August 2024; and
• advice to government against budget measures, which provides progress against the savings target from 25 October 2022 to 15 January 2024, and shows savings targets being exceeded.

2.58 Education reporting on the budget measures that form the basis for the Integrity Strategy savings target shows estimated savings from 25 October 2022 to 30 June 2024 were $242.8 million against a target of $121.5 million. Total savings from all three integrity-related budget measures to December 2024 (Table 1.5) were $318.2 million against a target of $187.4 million.

Limitations

2.59 Under the Integrity Strategy, the effectiveness of teams’ execution of their work is measured according to Team Performance Frameworks. Although Education evaluates some of its compliance activities (namely communication campaigns and training, see paragraphs 3.14 and 3.16), only one intervention has been measured and progress reported against payment accuracy targets and program savings (case study 1). Regular evaluations of interventions, using RSPC data, is planned but as of March 2025 has not been implemented. Initial intervention evaluations and resulting adjustments for each team are due to be completed in 2025. As such, it is not possible to effectively measure the impact of compliance activities undertaken under the Integrity Strategy, or understand the relative contributions of different types of compliance activities. (See Appendix 2 for progress during the course of this audit.)

2.60 Education’s reporting does not draw a direct link between the savings attributed to budget measures, and improvements in payment accuracy as recorded by the RSPC, or the relative contributions of different activities to payment accuracy rates.

2.61 RSPC data is not used to direct compliance activity at a provider or service level. Service level non-compliance detection is discussed at paragraphs 2.37 to 2.46, and using RSPC data in enforcement is discussed at paragraphs 3.69 to 3.73. Education advised the ANAO on 1 August 2024 that using the RSPC to target individual cases for compliance action would undermine the integrity of RSPC itself, by potentially causing changes to the way people respond to the survey.

Arrangements to review and update the Integrity Strategy

2.64 Education does not include strategy review arrangements in its Integrity Strategy. The current strategy was endorsed by the FIGB in August 2023, and published on 26 August 2024, replacing the previous strategy, which had been published in 2019. On 31 July 2024, Education advised the ANAO the development of the 2024 strategy was not informed by a review or evaluation of the previous strategy.

2.65 Under the Integrity Strategy, changes to compliance activities are set out in Integrity Response Plans (IRP), which describe the goals, scope, required resources, deliverables, measures of success, roles and responsibilities, and implementation schedules for actions across different operational teams in response to ‘high value’ integrity risks. ⁴⁰ As of December 2024, one IRP has been developed, the Integrity Response Plan for Initial CCS Risk Indicators 2023–24. This IRP provided targets for compliance activities, including the number of EFT provider audits and investigations to be undertaken.

2.66 Changes to administrative arrangements to implement the Integrity Strategy are specified in Change Action Charters, which describe the activities and owners of change to be implemented under the Integrity Strategy. The FIGB receives progress reports and tracks progress against the Change Action Charters.

2.67 The introduction of specific and publicised compliance priorities is an agreed action under the Integrity Strategy. These are expected to be developed by 30 June 2025. Education advised the ANAO on 1 May 2025 that the publication of these will ‘likely occur after June 2025’.

3.1 Under the Child Care Subsidy Financial Integrity Strategy 2023–2027 (Integrity Strategy), CCS compliance activities are based on a compliance pyramid (Figure 2.2), which provides for the following:

• where there is low risk of non-compliance and/or fraud, Education aims to make ongoing compliance easy and achievable by promoting voluntary compliance;
• where there is a risk of unintentional non-compliance, Education aims to provide information to support compliance;
• where there is opportunistic non-compliance, Education aims to correct behaviours; and
• where there is wilful non-compliance and fraud, Education aims to use the full force of the law to enforce compliance.⁴¹

Is the management of prevention activities effective?

3.2 Regulators have responsibilities under both the Department of Finance Resource Management Guide 128, Regulator Management Guide (RMG 128) and Commonwealth Fraud and Corruption Framework to prevent non-compliance and fraud, including via program design and communication with stakeholders.⁴² Effective prevention activities support individuals and child care providers to understand and comply with their CCS obligations.

Program design

3.3 CCS program settings are documented in:

• The FAL, which includes application and ongoing eligibility requirements for families, providers and services.⁴³ Education maintains a proposed integrity legislation amendment register, which allows all relevant teams to suggest changes to the FAL, ‘to increase financial integrity in the Child Care Subsidy’. Changes must be supported by the FIGB to be taken forward. Potential legislative amendments are included in Integrity Response Plans.
• ‘First principles’ documents agreed between Education and Services Australia, which set out how the FAL should be interpreted and given effect by Services Australia, for example in claims processing. These are regularly updated in accordance with protocols under the Services Schedule.
• Internal entity policies and processes which give effect to Government policy.

3.4 Since July 2022, Education has introduced program design changes to the CCS to better enable compliance, and close loopholes being exploited by non-compliant providers (Appendix 4).⁴⁴ Case study 1 details Education’s process to develop and implement one of these changes, the Electronic Funds Transfer (EFT) requirements for child care fees introduced as part of the Cheaper Child Care package.

Note a: This figure is not comparable to savings figures presented elsewhere in this report (paragraphs 2.56 to 2.58) because it represents a saving against a projected loss, whereas savings presented elsewhere represent estimated actual year on year reductions in expenditure.

Program access

3.5 Services Australia is responsible for approving family applications to access CCS.⁴⁵ Table 3.1 shows total application numbers and approval rates, and application and approval rates for CCS and ACCS separately.

Table 3.1: CCS and ACCS applications, 2022–23 to 2023–24

Source: ANAO based on Services Australia documents.

3.6 The CCS application and approval process (Appendix 3) requires families to:

• report income and activity details to meet CCS entitlement criteria;
• provide proof of birth for each child included in the application; and
• verify enrolment details provided by the child care provider.

3.7 Application details are reviewed by Services Australia. Services Australia, through data-sharing arrangements with other government agencies, verifies identity or eligibility documents if provided, such as passport, tax file number and immunisation records via the Australian Immunisation Registry. Services Australia advised the ANAO on 24 October 2024 that if applications appear incomplete or irregular, officers will contact the applicant to seek further information.

3.8 Education is responsible for assessing and approving CCS applications from child care providers.⁴⁶ Since July 2023, as a result of the Joined Up Approvals project, National Law and FAL applications for new providers and services are made through the Australian Children’s Education and Care Quality Authority’s (ACECQA) National Quality Agenda IT System (NQA ITS). To be approved, providers must have approval to operate under National Law⁴⁷, meet eligibility rules set out in the FAL, and operate at least one service that meets the service eligibility requirements. There are two types of application: new provider applications, and applications to add a service to an existing provider. Applications and outcomes for 2022–23 and 2023–24 are outlined in Table 3.2.

Table 3.2: CCS provider and service applications received, 2022–23 and 2023–24

Note a: ‘Total applications’ refers to the total number of applications received by Education in the period.

Note b: The approval rate does not include applications that were under assessment as at 23 September 2024. Where applications have not been approved, reasons were invalid (no valid information was submitted), lapsed (an application with 53 calendar days of inactivity), withdrawn by the applicant or refused applications.

Note c: The ANAO observed one Family Day Care application status was incorrect in the data provided by Education.

Note d: As at September 2024, one application was withdrawn and two were under validation.

Note e: There were no In Home Care service applications in 2023–24.

Note f: Not applicable.

Source: ANAO analysis of Education documentation.

3.9 The ANAO examined 26 approved CCS applications for Centre Based Care (CBC), Outside of School Hours Care (OSHC) and Family Day Care (FDC) from 2022–23 and 2023–24.⁴⁸ ANAO findings are summarised in Table 3.3.

Table 3.3: ANAO assessment of Education’s management of provider and service CCS applications received, 2022–23 and 2023–24

Key: ◆ Fully meets criteria ▲ Partly meets criteria ■ Does not meet criteria.

Note a: Section 194(b) of the A New Tax System (Family Assistance) (Administration) Act 1999.

Note b: ibid., Part 8, Division 1, section 194D.

Note c: A WWCC, also known as Working With Vulnerable People checks in the Australian Capital Territory and Tasmania, are administered by state and territory based legislation, regulations and pre-screening requirements. WWCC are not transferable between states and territories. See: Australian National Character Check, Working with Children Checks in Australia [Internet], ANCC, 2024, available from https://www.australiannationalcharactercheck.com.au/working-with-children-checks [accessed 22 November 2024].

Note d: Child Care Subsidy Secretary’s Rules 2017, paragraph 7(a)(vi).

Note e: Prior to Education’s use of NQA ITS for Provider Approvals, it would use Content Manager as its record management system. Education advised the ANAO on 16 December 2024 that the Provider Approvals team would ‘store the documents that related to the assessment of the application in NQA ITS and store the email correspondence as well as the final Notice of Approval in Content Manager’ until early 2024. There was no clear reference that the email correspondence, including Notice of Approval was saved into Content Manager for five applications.

Source: ANAO based on Education documents.

3.10 Training and guidance documentation is provided for staff processing applications. The following deficiencies were identified in relation to this training and guidance:

• Education advised the ANAO on 4 September 2024 that all new staff undertaking provider approvals are required to undertake relevant training, however ‘no formal register [of training completions] is kept’.
• Education does not have separate quality assurance process for its provider approvals.
• Education does not provide guidance to staff to manage conflicts of interest in the application process (paragraph 2.10).
• Services Australia has limited oversight of the completion of mandatory training for officers processing CCS applications. On 10 October 2024, Services Australia advised the ANAO that CCS related ‘skill tags’ are allocated once mandatory training is completed. Once a skill tag has been allocated, an officer may (but does not necessarily) undertake the relevant work.

Information provision

3.11 RMG 128 emphasises meaningful, timely, and accessible communication and stakeholder engagement.⁴⁹ The Integrity Strategy aims to make ongoing compliance easy and achievable through provider guidance and sector communications, and frontline sector advice.

Provider guidance and sector communications

3.12 Both Education and Services Australia encourage compliance by providing information about program eligibility and compliance requirements via their websites and communicating with providers, services and families about program changes. For example, in 2023 and 2024:

• Education communications focussed on provider and service obligations, changes to the implementation or requirements of CCS that may impact services, and promoting voluntary compliance; and
• Services Australia communications focussed on advising families about their ongoing obligations, including how to prepare for and what may occur at tax time, and changes to legislation that may impact families’ eligibility for CCS services.

3.13 Both entities also communicate the consequences of non-compliance:

• Education’s website includes information about how CCS is regulated, including information about the Integrity Strategy and the Enforcement Action Register.⁵⁰ Relevant information is also included on its application forms, supporting documents, and notice of approval.
• Services Australia informs families of their obligations to provide and maintain accurate information and the consequences of non-compliance in its application form. The form also states ‘[a]ny incorrect information will cause delays. Also, if any information you give us is intentionally false or misleading, then your payments may stop.’

3.14 ANAO assessment of the communication activities relevant to CCS during this period and selected guidance and information products are summarised in Table 3.4. Both entities evaluated their campaigns, and found:

• access and engagement targets were met;
• increased understanding was either not measured (Education) or not achieved (Services Australia); and
• the Child Care Subsidy Changes campaign was certified as compliant with the Australian Government Guidelines on Information and Advertising Campaigns by Commonwealth entities (Guidelines) by the Secretary.

3.15 Only Services Australia recorded lessons learned from campaigns for future implementation.

Table 3.4: ANAO assessment of entity communication activities, 1 July 2023 to 30 December 2024

Key: ◆ Fully meets criteria ▲ Partly meets criteria ■ Does not meet criteria.

Note a: In its high-level communication plan, Education’s observations of the sector included ‘research shows that a significant proportion of our audience have a language other than English’, and that ‘unintentional non-compliance can be improved by providing non-English translations of key materials’. As of 20 January 2025, Education has translated four out of nine videos of its compliance video series into 11 languages. See The Department of Education, Compliance video series [Internet], Education, 2025, available from https://www.education.gov.au/early-childhood/providers/compliance-and-enforcement/video-series [accessed 17 February 2025].

Note b: The information provided is clearly written with visual aids, such as short informational videos. Videos have the option of closed caption in English and can be automatically translated to other languages. The headlining webpage, Child Care Subsidy, has the option for translation, the explanatory webpage pages (for example, ‘How much you can get [of CCS]’) do not.

Source: ANAO analysis of Education and Services Australia documentation, based on Department of Finance, Resource Management Guide 128 Principle 3: Collaboration and engagement [Internet], Finance, 2023, available from https://www.finance.gov.au/government/managing-commonwealth-resources/regulator-performance-rmg-128/principle-3-collaboration-and-engagement [accessed 4 November 2024]; and Government of South Australia Department of Premier and Cabinet, Fact Sheet: High quality communication strategy [Internet], Government of South Australia, available from https://www.dpc.sa.gov.au/responsibilities/community-engagement/documents/bt-fact-sheet-high-quality-communication-strategy.pdf [accessed 4 November 2024].

3.16 Education also provides training for providers and services via Get Early Child Care Knowledge Online (GECCKO) learning modules. An evaluation of GECCKO, undertaken in September 2023, found 90 per cent of users said the courses met or exceeded their expectations, with average course ratings of 4.56 out of 5. The evaluation cited requests for additional languages and accessibility tools (for example, voice over), pointing to further work needed on the accessibility of courses.

Sector advice

3.17 Education provides support for child care providers and services through its call centre telephone line and email ‘Provider Helpdesk’, see Table 3.5.

Table 3.5: Contacts with Education’s Provider Helpdesk, 2022–23 and 2023–24

Note a: The call centre telephone line is measured by average wait time, and email cases are measured by the median resolution time.

Note b: Education advised the ANAO on 14 February 2025 that the reduction in wait and resolution time was due to an additional two staff in 2023–24.

Note c: Education advised the ANAO on 4 December 2024 that the numbers reflect email cases created and do not reflect number of emails sent and received within a single case.

Source: ANAO analysis from Education documentation.

3.18 Services Australia answers inquiries from individuals about CCS via its Families and Parents Centrelink call centre telephone line. Services Australia advised the ANAO on 5 December 2024 that it is ‘unable to accurately separate CCS caller experiences from other Family and Parenting caller experiences’, see Table 3.6.

Table 3.6: Contacts with Services Australia’s Families and Parents call centre line in 2022–23 and 2023–24

Source: ANAO analysis of Services Australia documentation.

3.19 Between January 2022 and January 2024, Education also contacted selected providers and services to remind them of their obligations under the FAL. In 2022–23 and 2023–24, letters were sent to providers about four issues. Three issues related to providers identified as in breach of their obligations, and are discussed in paragraph 3.38. One campaign targeted providers without known non-compliance issues. This campaign focused on FDC providers in August 2023, it referred to ‘articles in the media about a recent operation’ related to an ‘alleged Family Day Care fraud of a Western Australian Provider’. Letters reminded providers about their obligations and encouraged compliance.

Capability building and sector engagement

3.20 In March 2024, after ongoing consultation since 2022, Education began a project to improve compliance capability in the FDC sector, which has the lowest payment accuracy rate. Called the ‘Family Day Care Capability Trial’, this work aims to ‘inform potential systemic fixes to the current [FDC] model to improve integrity’ and to increase capacity of participating educators, focussing on regional areas with limited supply of early childhood education and care. The Family Day Care Capability Trial is funded for three years from 11 March 2024 to 30 June 2026.

3.21 Ongoing consultation with representatives of the early childhood education and care sector, is maintained via the Early Childhood Education and Care Reference Group (ECECRG), which is chaired by Education’s Deputy Secretary, Early Childhood and Youth. Membership is representative of care types, jurisdictions, for-profit, not-for-profit, and government providers, as well as Indigenous, rural and remote, and vulnerable and disadvantaged cohorts.

Is the management of monitoring and investigation activities effective?

3.22 Monitoring of families by Services Australia, and providers by Education, is a proactive way of assessing and influencing compliance. It is critical to understanding the extent and nature of non-compliance within the CCS. It also provides an incentive for providers, services, and families to comply with their regulatory obligations.

3.23 In instances where monitoring detects potential non-compliance, Education is responsible for determining if an investigation should be conducted to collect information or evidence to inform a course of action, which may be preventative, disruptive, or prosecutorial.⁵¹

Monitoring

Families

3.24 Services Australia applies two monitoring mechanisms to families receiving CCS:

• Throughout the year, Single Touch Payroll (STP) data from the Australian Taxation Office (ATO) is used to monitor the income of Family Tax Benefit (FTB) recipients.⁵²
• After the end of each financial year, Services Australia compares the amount of CCS paid to families (based on initial income estimates by the family, see paragraph 1.6), with the amount the family should have received, based on financial year income. The reconciliation process is summarised in Figure 3.1.

Figure 3.1: Simplified CCS reconciliation process

Note a: Services Australia will rebalance CCS if change in circumstances, including new income details, is received.

Source: ANAO based on Education and Services Australia documents.

3.25 Services Australia uses Pre-Issue Income Data (PIID) from the ATO (that is, data taken from a claimant’s lodged tax return before a notice of assessment has been issued) in the reconciliation process. If new income details are received, Services Australia will recalculate the reconciliation outcome (referred to as ‘rebalancing’). On 7 May 2025, Services Australia advised the ANAO that fewer than one per cent of reconciliations are rebalanced. A New Tax System (Family Assistance) (Administration) Act 1999 provides that where a person is required to submit a tax return, CCS reconciliation conditions are met only if the Commissioner of Taxation has made an assessment of the taxable income of the CCS claimant(s).⁵³ The use of PIID for CCS reconciliations is not consistent with the FAL.⁵⁴

3.26 Table 3.7 shows most families met the reconciliation deadline requirements, with 0.82 per cent of families not meeting second deadline requirements in 2021–22 as at October 2024. The most common outcome from reconciliation is for the family to have an outstanding CCS amount repaid to them. Services Australia withholds 5 per cent of a person’s CCS (unless the person chooses to vary this amount) to reduce the likelihood of overpayment.

Table 3.7: Services Australia reported CCS reconciliation outcomes, 2021–22^a to 2023–24, as at October 2024^b

Note a: Although this audit focused on 2022–23 and 2023–24, reconciliation outcomes back to 2021–22 were analysed to capture outcomes from the multi-year first deadline and second deadline processes referred to in Figure 3.1.

Note b: Figures are taken as of October 2024, and may not match other data, as reconciliation outcomes are subject to ongoing revision.

Note c: Percentages are of the yearly total.

Note d: N/A indicates the 2nd deadline has not yet arisen for the financial year.

Source: ANAO analysis of Services Australia data.

3.27 CCS recipients or third parties can provide tip-offs about non-compliant or fraudulent CCS recipients to Services Australia. Services Australia cannot identify the number of tip-offs that relate to CCS, as there is no CCS-specific category in the Services Australia tip-off data. Where relevant information is identified during tipoff analysis, Services Australia refers CCS tip-offs to the Department of Education. Services Australia identified one such example from September 2024 of possible child care provider fraud lodged with Services Australia.

Providers and services

3.31 In 2022–2023 and 2023–2024, Education applied four monitoring and detection mechanisms (Table 3.8) to detect possible non-compliance among providers and services:

• Intelligence analytics using weekly ‘session reports’ of all sessions of care, which the Secretary’s rules require providers to submit with information about dates, times, and whether the child attended.⁵⁵ Education uses session reports to monitor service risk against risk indicators, and prioritise services for further compliance action (paragraph 2.38 to 2.39).⁵⁶
• Tip-offs, complaints, and fraud referrals.
• Checking of selected providers’ compliance with electronic payment of gap fee requirements (referred to as provider audits by Education and EFT providers audits in this report), which check compliance with electronic collection of gap fee requirements based on provider records (case study 1).
• Compliance checks across the sector (Table 3.8 and case study 2).

Table 3.8: Monitoring and detection mechanisms used by Education, 2022–23 to 2023–24

Note a: 70 EFT provider audits conducted in the first quarter of 2024–25 are included in Figure 3.3 and Table 3.9. These are not included here as they are outside the relevant financial years.

Note b: Includes 6 referrals based on Intelligence reports, and 99 bulk referrals based on risk indicators, which were referred as part of Education’s testing of detection capabilities.

Note c: The decline in Intelligence Analytics from 2022–23 to 2023–24 reflects no ‘bulk referrals’ (which are based on analysis of session reports using risk indicators, rather than individual analysis of a provider or service’s risk profile) identified for 2023–24. Bulk referrals continued to be used in 2024–25.

Source: ANAO based on Education data.

3.32 In 2022–23 and 2023–24, intelligence analytics, complaints and tip-offs and fraud referrals collectively led to 120 referrals for investigation, and 76 referrals for other compliance checking, including EFT provider audits, and 223 decisions to take no further action (Figure 3.2).

Figure 3.2: Outcomes^a of intelligence analytics, tip-offs, complaints, and referrals^b, 2022–23 to 2023–24

Note a: Items still open or with no agreed referral outcome have been excluded from this figure. As such, the totals do not match those in Table 3.8.

‘Other compliance checking’ is made up of sending letters reminding providers and services of their obligations, or letters identifying specific areas of non-compliance to be addressed, or conducting an EFT provider audit, or re-audit.

Note b: Number of referrals for investigation or other action do not equate to number of investigations, audits, or other checks undertaken, as investigations may not be accepted, and more than one referral can be processed for a single matter.

Source: ANAO analysis based on Education data.

3.33 Between October 2023, when Education’s EFT provider audit function commenced, and October 2024, Education conducted 348 EFT provider audits against an annual target of 500 under the Integrity Strategy. Providers with low to high risk⁵⁷ ratings were selected, based on risk ratings against indicators hypothesised to indicate potential issues with gap fees.

3.34 Non-compliance was identified in 207 of the audits conducted (59.5 per cent of all EFT provider audits) (Figure 3.3). Of those providers identified as non-compliant, 13 (6.3 per cent) were non-compliant with gap fee requirements only, 26 (12.6 per cent) were non-compliant with gap fee and other requirements, and 168 (81.2 per cent) were non-compliant with other requirements only.⁵⁸ From these audits, as of January 2025, Education:

• issued 20 infringements notices;
• imposed conditions three times⁵⁹;
• referred two matters for fraud investigation; and
• decided to conduct 48 re-audits, all of which have been conducted or scheduled for early 2025.

3.35 Although non-compliance was observed at all risk levels (Figure 3.3), the current selection approach is not consistent with the risk based approach outlined in the Integrity Strategy. Under the Integrity Strategy, EFT provider audits should be conducted to correct non-compliance and address exploitative and opportunistic behaviours, at the correction level of the compliance pyramid, which applies to medium to high risk providers. The team responsible for EFT provider audits is also identified in the Integrity Strategy as providing guidance, early intervention, and public reporting and media exposure of enforcement action (but not conducting audits) at the other levels of the compliance pyramid. On 1 May 2025, Education advised the ANAO that:

the department’s experience shows the educative focus of provider audits has been highly valued by the sector, and non-compliance has still been detected in lower risk providers … Ensuring a case mix across high medium and low risk providers also reinforces the message that all providers need to ensure full compliance because they may be subject to an audit, helping to maximise sector wide behaviour change.

Figure 3.3: EFT provider audits and outcomes^a by risk rating^b, October 2023 to October 2024

Note a: One audit no longer required/not actioned has been omitted from this figure as no risk rating was recorded.

Note b: On 14 February 2025, Education advised that the ‘extreme’ risk rating was in use until approximately September 2024. It has now been replaced with ‘high’. Extreme and high risk ratings have been combined by the ANAO for this figure.

Source: ANAO analysis based on Education data.

3.36 ANAO analysis of 35 EFT provider audits (Table 3.9) found the department’s management of EFT provider audits complied with policy guidance except for:

• quality assurance, which involved only delegate approval of process documents and outcomes;
• documentation, some of which had been omitted in the switch from one information management system to another; and
• documenting approval for audits not proceeding.

Table 3.9: ANAO assessment of EFT provider audits, October 2023 to October 2024

Key: 

● No deficiencies identified

◕ Minor deficiencies identified

◑ Criteria not met in at least half of items tested

◔ Criteria not met in at least one quarter of items tested, and absent in some items

◯ Criteria not met

N/A Audits did not proceed far enough for Education to take action required for the ANAO to accurately assess adherence to departmental processes.

Note a: Assessment relates only to documentation and authorisation of audit processes up to the point the decision was taken not to proceed with the audit.

Source: ANAO analysis of Education documents.

3.37 In 2022–23 and 2023–24, checking compliance with the FAL was undertaken in three cases outside the EFT provider audit process:

• Family Day Care and In Home Care educator WWCC reporting (services with registered educators without a current WWCC were identified and contacted);
• provider fee reporting (case study 2); and
• late session reporting (providers requesting to submit, update or withdraw session reports outside the allowed 14 days during the previous year were identified and contacted).

3.38 Together, these compliance checks resulted in 12 infringement notices being issued.

Note a: Australian Children’s Education & Care Quality Authority, StartingBlocks.gov.au [Internet], ACECQA, available from https://www.startingblocks.gov.au/ [accessed 15 January 2025].

Note b: Education issued four infringements on 31 August 2023 where it identified providers that had no record of reported fees on StartingBlocks.gov.au prior to the commencement of the letters campaign.

Gaps in monitoring and detection

3.39 Table 3.10 summarises the coverage of Education’s monitoring and detection activities, as outlined in paragraphs 3.31 to 3.38. These focus on incorrect reporting/claiming, consistent with the Integrity Strategy objective to improve payment accuracy. Education does not have assurance that providers and services meet certain other requirements for ongoing approval after initial approval has been granted.⁶⁰ These include:

• some conditions for continued approval, such as fit and proper person requirements and provider governance requirements; and
• some requirements to notify Education of certain matters, such as advertised fee arrangements, staff changes, and if the provider enters into administration, liquidation or bankruptcy — while Education has developed reports to monitor reporting of many of these items, incorrect or missing reporting cannot be detected via these.

3.40 Education advised the ANAO on 28 April 2025 that its approach to assurance over requirements for ongoing approval after initial approval is risk based. A provider declaration of compliance with the FAL is to come into effect from 1 July 2025. The accuracy of the information in the declaration will not be directly tested by Education. Education further advised the ANAO, it ‘is intended to be used as a non-burdensome method to establish non-compliance history, enable an opportunity for education, and inform more involved compliance activities such as audits and compliance investigations.’

Table 3.10: ANAO assessment of monitoring and detection to identify provider non-compliance with the FAL

Key: ◆ Good coverage. ▲ Partial coverage. ■ Low coverage.

Note a: ‘Other conditions for continued approval’ refer to conditions for continued approval not captured by session reporting and Secretary notification requirements, such as the requirement for large providers to be financially viable and be likely to remain so.

Source: ANAO based on Education information.

3.41 Education has identified gaps in relation to monitoring families, or the interface between families and providers, where Education has no line of sight to Services Australia’s risk management, such as:

• monitoring of compliance with non-employment activity requirements such as study or job search;
• detection of income concealment, such as cash-in-hand work and certain tax avoidance schemes; and
• detection of collusion between parents and providers.

3.42 As of April 2025, no actions are underway to address these gaps.

Investigations

3.43 The Australian Government Investigations Standards 2022 (AGIS) establish requirements for Australian Government investigations, including record keeping, performance measures, investigator qualifications, work with other agencies (including foreign agencies), information sharing, ethical conduct, and media management.

3.44 All CCS investigations are led by Education, which conducts administrative and criminal investigations, as well as joint investigations with state and territory regulators under the Joint Compliance Monitoring Program (JCMP). Services Australia provides support for investigations via its digital forensics capabilities, which are engaged by Education’s criminal investigators team to assist with major fraud operations. In 2022–23 and 2023–24, Education requested digital forensics assistance six times for five investigations, comprising four requests in 2022–23, and two requests in 2023–24.

3.45 In 2022–23 and 2023–24, Education reports having undertaken a total of 193 administrative investigations, and 13 criminal investigations (Table 3.11).

Table 3.11: Education-led investigations completed^a, 2022–23 to 2023–24^b

Note a: The number of investigations completed in a year does not equate to the number of investigations commenced in that same year.

Note b: There may be some duplication between administrative and criminal investigation counts in this table, due to referrals between functions.

Note c: Education’s reported number of administrative investigations includes all activity coded as such in the Child Care Intelligence System (CCIS). This includes activity that does not meet the definition of an investigation under the AGIS, such as a single phone call to establish the validity of a request to modify a session report.

Note d: Non-Joint Compliance Monitoring Program (JCMP) investigations are those not formally under the JCMP program. They may still involve collaboration with state and territory regulators.

Note e: A total of 54 investigations have been removed from this data (53 in 2022–23, and 1 in 2023–24). These were recorded as investigations by Education, but do not meet the AGIS description of investigation as ‘gather[ing] information across a broad spectrum to assist entities to determine a course of action, which may also be preventative and/ or disruptive action instead of prosecutorial’. ANAO and Education examination of records associated with these activities (paragraph 3.60) showed they involved amending session reports in response to provider advice.

Source: ANAO based on Education data.

3.46 The top reasons for initiating investigations are summarised in Figure 3.4. The data driven approach set out in Education’s Integrity Detection Framework (paragraphs 2.37 to 2.41), which intends to rely on analytics to drive compliance actions, is not evident in these reasons. On 1 May 2025, Education advised the ANAO that this is due to teams entering analytics-based referrals into CCIS under the ‘internal referral’, ‘compliance monitoring’ or ‘other’ codes.

Figure 3.4: Top five reasons^a for initiating Education-led investigations^b, 2022–23 to 2023–24

Note a: Internal referral category includes items described in Education systems as ‘internal referral’, ‘intelligence analytics referral’, ‘fraud referral’, ‘referral from market strategy’, and ‘fee reporting’.
The ‘other’ category is used by Education staff to indicate where a reason has been manually entered into the notes field. Notes do not always contain a clear reason. Where they do, the investigations have predominantly been initiated as part of joint compliance action with states and territories (the Joint Compliance Monitoring Program, discussed at paragraphs 3.55 to 3.57).

Note b: A total of 54 investigations, which were prompted by requests to amend session reports, have been removed from this data (53 in 2022–23, and 1 in 2023–24). These were recorded as investigations by Education, but do not meet the AGIS description of investigation as ‘gather[ing] information across a broad spectrum to assist entities to determine a course of action, which may also be preventative and/ or disruptive action instead of prosecutorial’. ANAO and Education examination of records associated with these activities (paragraph 3.60) showed they involved amending session reports in response to provider advice.

Source: ANAO based on Education data.

Administrative investigations

3.47 Administrative investigations aim to determine correct entitlements by answering questions of payment qualification, payability or rate. Investigators can use coercive information gathering powers outlined within the FAL to answer these questions. The standard of proof for decisions made under administrative law is ‘on the balance of probabilities’.

3.48 During 2022–23 and 2023–24, Education prioritised and conducted administrative investigations according to its Case Categorisation and Prioritisation Model (CCPM),⁶¹ Investigation Policy, the Compliance Operations Team Child Care Subsidy Compliance Policy, and Compliance Plan 2023–24. Under these arrangements, the Compliance Operations Team Compliance Management Committee (COTCMC) prioritises and assigns cases, supported by a coordination unit, which:

• assesses whether referred issues are owned by Education under the FAL;
• considers risks, including the potential impact of the alleged contravention on child protection and payment accuracy; and
• considers resourcing, including what would be required to deliver an effective response, and whether using the department’s resources in this way is in the public interest.

3.49 Once a referral is accepted, investigators are required to:

• undertake detailed planning of investigations, including establishing the possible sources and methods of investigation to be used, and how key risks will be managed;
• record all compliance activity, a running timeline of the investigation, and critical decisions, in an appropriate record keeping system; and
• manage case closure, including gaining supervisor approval for a case closure report.

Criminal investigations

3.50 Criminal investigations gather evidence to show that criminality is reasonably suspected of having occurred, with the intention of referring a brief of evidence to the Commonwealth Director of Public Prosecutions (CDPP) to consider prosecution action. The standard of proof is higher than administrative law, i.e. beyond reasonable doubt. Investigators undertaking criminal investigations can use coercive information gathering powers outlined within the FAL, as well as surveillance and search warrants to answer these questions.⁶²

3.51 Education’s criminal investigations are conducted according to the (May 2021) Fraud Investigations and Tactical Operations Investigations Manual (Investigations Manual). The Investigations Manual requires an initial Case Assessment Report (CAR) to be developed if the referral is within the relevant team’s remit. The CAR provides a basis for consideration of the risk and prioritisation of the prospective case.

3.52 Following acceptance of a case, the investigator is required to prepare an investigation plan, undertake regular reporting, record decisions critical to the direction of the investigation, finalise the case through a Case Closure Report, and engage, where relevant, in a Quality Assurance Review.

3.53 Education-led criminal investigations rely on engagement with:

• the Australian Federal Police (AFP) to issue and execute search warrants; and
• Services Australia’s digital forensics capability, to process digital evidence.

3.54 Operation Velo (case study 3) illustrates how this engagement can operate.

The Joint Compliance Monitoring Program

3.55 Education’s collaboration with state and territory regulators to investigate potential breaches of the FAL and National Law is in the process of being formalised via the Joint Monitoring Compliance Program (JCMP). Originally established in January 2022 as a pilot project between Education and the Victorian and New South Wales State Regulatory Authorities, the JCMP provides for:

• sharing of information, data and intelligence;
• joint site visits, including across numerous sites simultaneously;
• Multi-Disciplinary Team (MDT) Investigation; and
• targeted call campaigns to validate information in conjunction with visits.

3.56 In 2022–23 and 2023–24, Education undertook 47 JCMP investigations with state and territory regulatory authorities.

3.57 According to Education’s analysis, the pilot (which concluded in June 2023) resulted in 15 provider cancellations, and approximately $41.4 million in annual savings. As of April 2025, arrangements are in place to continue the JCMP with New South Wales, Victoria, Queensland, South Australia and Northern Territory regulatory authorities.

Effectiveness of Education’s management of investigations

3.58 ANAO assessment of 10 administrative and eight criminal investigations (Table 3.12) found:

• five investigations had all authorisation steps completed in accordance with the relevant policy (i.e. internal agreement from the relevant team or delegate) for the commencement of an investigation;
• seven investigations met all quality assurance and review requirements;
• three investigations were supported by complete documentation;
• all administrative and six criminal investigations were missing at least one requirement under departmental policies and processes — in general adherence was higher in larger criminal investigations involving engagement with Services Australia and/or the AFP;
• administrative investigations were all supported by appropriate legislative authorisation; and
• in 47 instances during 2022–23 financial year Education’s fraud investigators compelled banks to provide information under section 220A of the Administration Act, on the basis of an authorisation made by a former Minister for Education — this was addressed via the provision of additional guidance in March 2025.⁶³

3.59 Consistent with the AGIS, Education’s Investigations Policy requires both administrative and criminal investigators to have either a Certificate IV Government (Investigations) (foundational), Diploma in Government (Investigations) (supervisory), or equivalent. As of 30 June 2024, these requirements were met by:

• 30 out of 43 Education investigators responsible for administrative investigations; and
• 20 out of 21 Education investigators responsible for criminal investigations.

Table 3.12: ANAO assessment of investigations, 2022–23 to 2023–24

Key: 

● No deficiencies identified

◕ Minor deficiencies identified

◑ Criteria not met in at least half of items tested

◔ Criteria not met in at one quarter of items tested, and absent in some items

◯ Criteria not met.

Source: ANAO analysis of Education documents.

3.60 Documentation deficiencies identified in paragraph 3.58 and Table 3.12 most commonly related to Education’s electronic investigation management system (EIMS), referred to as the Child Care Intelligence System (CCIS), which has been in place since 2008 and is being considered for replacement.⁶⁴ The AGIS recommends that entities should have an EIMS to record, collate and manage investigations, and interface or synchronise with other relevant systems to ensure integrity and continuity of information and evidence collection.⁶⁵ The ANAO observed:

• CCIS is used to record fraud and compliance matters from the point of tip-off through to resolution, as well as for reporting on operational outcomes of activities.
• Investigations in CCIS usually include some missing or incorrectly saved documents, or incomplete data fields.
• Activity categorisation in CCIS contains errors. For example, fifteen items identified as administrative investigations were initially selected for ANAO testing, but found not to meet the definition of an investigation under the AGIS.
• CCIS is not integrated with other relevant systems. Information is duplicated or supplemented by records in a shared drive, Content Manager, SharePoint, and Education’s Civil Penalty Management System. Network drives are not able to manage information to meet Australian Government information management standards.⁶⁶
• Consultation with CCIS users in 2022 showed a range of reported issues, including slow system access, delayed updates, information fields not being completed as required, and data extracts from CCIS not being used in analytics.

Is the management of enforcement effective?

Use of enforcement powers

3.63 Effective enforcement activities, based on fair and impartial decision-making, are required to ensure serious CCS fraud and non-compliance has consistent and proportionate consequences. Under the FAL, Education may issue infringement notices, seek civil penalty orders, vary, suspend, or cancel approval, and pursue criminal prosecution, and is required to manage debts to recover CCS overpayments.⁶⁷ These powers (with the exception of issuing debt notices) are not delegated to Services Australia.

3.64 RMG 128 states that a ‘risk based approach allows a regulator to properly assess the risks of non-compliance and respond in a proportionate way to the harm being managed’. Education’s Integrity Strategy aims to achieve an approach that is risk based and uses ‘the spectrum of proportionate regulatory tools in the Child Care Financial Integrity compliance pyramid’. It states that the ‘full force of the law’ should be directed against those providers and services engaged in wilful non-compliance and fraud. It has not established an overarching enforcement strategy or policy.⁶⁸

3.65 Table 3.13 provides an overview of Education’s use of its enforcement powers under the FAL in 2022–23 and 2023–24. During this period, Education:

• raised 11 compliance-related debts, all of which were recovered, totalling $59,648 (0.9 per cent) out of $6.4 million debts raised;
• withdrew 41 of 113 infringement notices issued (42.2 per cent of the total $1.1 million fines issued); and
• recovered $15,294 out of $249,734 fraud losses reported. Since 2018–19, when the CCS commenced, Education has reported $13.0 million fraud losses and $116,707 recovered.

3.66 The Financial Integrity Governance Board (FIGB), which has responsibility for strategic oversight of CCS compliance activities (paragraphs 2.8 to 2.10), has not recorded consideration of its strategic approach to enforcement decisions, such as whether the overall volume of infringement notices waived is in line with its risk tolerances under the Integrity Strategy, in 2023–24. The two matters that were considered by the FIGB with possible direct relevance to enforcement (persons with management or control breaches and child swapping breaches) were discussed and decided in terms of detection, communications, and a ‘light touch compliance action approach taking into account the teams’ capacity’.

Table 3.13: Enforcement of service and provider compliance with the FAL^a, 2022–23 to 2023–24^b

Note a: Actions available to Education omitted from the table as they have not been used: civil penalty orders, other sanctions, and actions to recover unpaid debt.

Note b: In each case, the best available data source has been relied on to produce the counts in this table. The ANAO has identified discrepancies between sources (for example, infringements recorded in the Civil Penalty Management System that have not been recorded in CCIS) and data quality issues, especially in CCIS.

Note c: On 9 December 2024, Education advised the ANAO that the increase in debt notices issued from 2022–23 to 2023–24 was due to increased resourcing.

Note d: Recovery rates for other debt types are lower. As of 31 March 2025, of the $6.4 million of debts raised from 2022–23 to 2023–24, $4.1 million (64.1 per cent) has been repaid, and $857,740 (13.4 per cent) has been written off or waived. Where a provider closes and is a deregistered company, Education writes off any outstanding debt, as there is no legal entity to recover the debt from. This does not include payment offsetting resulting from compliance action, which can occur without raising a debt.

Note e: Losses recovered via court Reparation Orders under the Crimes Act 1914, section 21B.

Source: ANAO based on Education documents.

Management of enforcement actions

3.67 The ANAO assessment of Education’s management of 14 infringement notices, 28 sanctions (comprising conditions, suspensions and cancellations) and 11 debts, is summarised in Table 3.14.

• Most enforcement decisions were taken in accordance with the FAL, and authorised by the appropriate delegate.
• Education is unable to assess whether enforcement action is proportional to the risk being addressed, as staff are not required to document justification of the relevant compliance action with reference to the seriousness of the contravention, risks posed by the contravention, or any other relevant matters set out in the Child Care Subsidy Minister’s Rules 2017.⁶⁹
• Enforcement actions were not subject to quality review beyond delegate approval, except for infringement notices and debts.
• Enforcement actions were documented according to Education policy, except for some omissions of key documents from CCIS.

3.68 Additionally, Education does not provide guidance to staff to manage conflicts of interest in the enforcement process (or the application or investigation process, paragraphs 2.10 and 3.10).

Table 3.14: ANAO assessment of management of provider enforcement actions^a, 2022–23 to 2023–24

Key: 

● No deficiencies identified

◕ Minor deficiencies identified

◑ Criteria not met in at least half of items tested

◔ Criteria not met in at one quarter of items tested, and absent in some items

◯ Criteria not met

N/A The relevant test does not apply to this type of enforcement action.

Note a: Actions that are not a departmental response to non-compliance are not included in this table. These are: suspending approval on the request of the provider (section 197AA of A New Tax System (Family Assistance) (Administration) Act 1999); and cancelling approval on the request of the provider (section 197C of A New Tax System (Family Assistance) (Administration) Act 1999).

Note b: Conditions can also be imposed at the application stage; these are not considered here.

Note c: Proportionality has not been considered for debts raised, as there is an obligation to recover Commonwealth debts.

Source: ANAO analysis of Education documents and Family Assistance Law, especially New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act), available from: https://www.legislation.gov.au/C2004A00491/latest/text.

Gaps in enforcement

Debt management

3.69 From 2022–23 to 2023–24, Education identified but did not investigate 970 potential overpayments with a total value of $106,375. Potential overpayment amounts range between $1.20 and $731.25, with 558 of these (totalling $98,729) being at or above $50.⁷⁰ Random Sample Parent Check (RSPC) information provided to Education for the purposes of payment accuracy monitoring (paragraphs 2.53 to 2.61) includes the full details of providers and accurate and inaccurate payments for all parents surveyed. CCIS includes an option for RSPC follow-up, but this is not utilised. On 20 November 2024, Education advised the ANAO that an RSPC record was last created in CCIS on 2 July 2019, and last updated on 11 May 2021.

3.70 Under the FAL, a person incurs a debt if they are paid an amount to which they were not entitled, or that is more than the amount of assistance that should have been paid.⁷¹ Education is required to pursue the recovery of each debt, unless:

1. the Secretary considers that it is not economical to pursue recovery of the debt; or
2. the Secretary is satisfied that the debt is not legally recoverable; or
3. the debt has been written off as authorised by an Act.⁷²

3.71 An assessment is not completed where a possible overpayment is identified using the RSPC. On 28 April 2025, Education advised the ANAO that it ‘is satisfied that it has appropriate processes in place that deal with the RSPC responses’.

Interjurisdictional engagement

3.72 Under the FAL, Education is required to suspend or cancel CCS approval if National Law approval is suspended or cancelled.⁷³ The date of effect is to be the same day as the National Law suspension or cancellation.⁷⁴ Education’s process to action these cancellations and suspensions is inefficient. Monitoring National Law approvals and cancellations relies on notifications from the state and territory SRAs, and data extracted by Education from Services Australia. Once identified, an Education officer must process the suspension or cancellation to remove the provider’s access to CCS. In February 2025, Education was ‘catching up’ with required cancellations where it had not received notification from the provider’s SRA. Data extracted from Services Australia for this purpose was noted as potentially incorrect due to a ‘known current [system] issue’.

Accountability and review

3.75 Regulators should foster public trust, continuous improvement, and fair, impartial, and consistent decision-making by holding themselves to account for decisions through internal and external accountability and review processes.⁷⁵

3.76 A formal review of a CCS decision made under the FAL can be initiated by the person affected by the decision (an individual CCS recipient, or a CCS provider or service) or the Education Secretary.⁷⁶ Education’s Internal Review Team manages requests for internal review via the Guide to Child Care Internal Reviews. The Authorised Review Officers (AROs) act independently from the original decision-maker to consider the merits of the original decision, and make an independent, fresh decision. From 2022–23 to 2023–24, AROs received 79 requests for reviews of decisions in 2022–23 and 2023–24 (Table 3.15). ANAO assessment of nine reviews found no deficiencies in the management of Education’s internal review process.

Table 3.15: Education reviews of decisions under the A New Tax System (Family Assistance) (Administration) Act 1999^a, 2022–23 to 2023–24

Note a: Part 5, Division 1 of the A New Tax System (Family Assistance) (Administration) Act 1999 provides for internal review of CCS decisions made under the Administration Act, under sections 105 and 109A.

Note b: Total includes six requests for review that were withdrawn, two requests made after the statutory timeframe in section 109DA of the Administration Act and one review remains pending.

Note c: Total includes two requests for review that were withdrawn and one request made after the statutory timeframe in section 109DA of the Administration Act.

Source: ANAO based on Education documents.

3.77 A decision to issue an infringement notice is made under the Regulatory Powers Act and cannot be reviewed under the Administration Act.⁷⁷ Instead, it is open to the recipient to request a withdrawal of the infringement notice.⁷⁸ ANAO assessment of a selection of withdrawal requests and responses found no deficiencies in the documentation or delegate approval of withdrawal decisions according to Education policy. Documentation included an assessment of the risks associated with withdrawing the notice in two of the five instances tested.

3.78 External review and complaint mechanisms are available via the Administrative Review Tribunal (ART, formerly Administrative Appeals Tribunal) and Commonwealth Ombudsman. Complaints and appeals received in 2022–23 and 2023–24 related predominantly to Services Australia’s handling of CCS claims, reconciliations, and debts. During this time, Education recorded seven ART appeals of its regulatory decisions, five of which related to refusal of approval. As of March 2025, six of these matters were still in progress, and in one case the applicant had withdrawn.

Appendix 1 Entity responses

Department of Education

Services Australia

Appendix 2 Improvements observed by the ANAO

1. The existence of independent external audit, and the accompanying potential for scrutiny improves performance. Improvements in administrative and management practices usually occur: in anticipation of ANAO audit activity; during an audit engagement; as interim findings are made; and/or after the audit has been completed and formal findings are communicated.

2. The Joint Committee of Public Accounts and Audit (JCPAA) has encouraged the ANAO to consider ways in which the ANAO could capture and describe some of these impacts. The ANAO’s corporate plan states that the ANAO’s annual performance statements will provide a narrative that will consider, amongst other matters, analysis of key improvements made by entities during a performance audit process based on information included in tabled performance audit reports.

3. Performance audits involve close engagement between the ANAO and the audited entity as well as other stakeholders involved in the program or activity being audited. Throughout the audit engagement, the ANAO outlines to the entity the preliminary audit findings, conclusions and potential audit recommendations. This ensures that final recommendations are appropriately targeted and encourages entities to take early remedial action on any identified matters during the course of an audit. Remedial actions entities may take during the audit include:

• strengthening governance arrangements;
• introducing or revising policies, strategies, guidelines or administrative processes; and
• initiating reviews or investigations.

4. In this context, the below actions were observed by the ANAO during the course of the audit. It is not clear whether these actions and/or the timing of these actions were planned in response to proposed or actual audit activity. The ANAO has not sought to obtain assurance over the source of these actions or whether they have been appropriately implemented.

• Work to review and update protocols under the Statement of Intent between Education and Services Australia, to address the two agencies joint role in CCS compliance (paragraphs 2.3 to 2.20). Protocols under consideration are a Communications and media protocol, New work and Changed Business protocol, Shared Risk protocol, and Joint Data protocol.
• Revised governance arrangements, which include Services Australia, including a Joint Child Care Subsidy Program Board, at the SES Band 2 level (paragraphs 2.8 to 2.10).
• Meetings to discuss and manage shared risks, including through the development of a shared risk management plan and protocols, commenced in September 2024 (paragraphs 2.13 to 2.18).
• A review of Education’s Integrity Strategy to develop a program-level approach to CCS non-compliance (paragraphs 2.32 to 2.49).
• Education’s Fraud and Corruption Risk Assessment was updated to properly identify risk owners (paragraph 2.49).
• Education commenced the evaluation of intervention measurements in September 2024; this includes the introduction of the ‘new and mature services’ strata via the Random Sample Parent Check (RSPC). Education advised the ANAO on 10 December 2024 that this will provide measurement of one of the medium-term outcomes for Provider Approvals (from the Performance Framework) of ‘Payment accuracy of recent provider entrants v older entrants’ (paragraphs 2.55 to2.59.
• New arrangements within Education to oversee mandatory training requirements within teams (paragraph 3.10).
• A review of, and early actions to address, data associated with compliance activities within Education’s Child Care Intelligence System (CCIS), and work to replace CCIS with an Integrity Management Solution that would provide case management workflow to create, modify, and track audits, compliance and investigation activities (as well as other functionality) (paragraphs 3.58 and 3.60).
• Additional guidance for Education staff on record keeping (paragraph 3.60).
• A move to change shared network drives to read only from August 2025 (paragraph 3.60).

Appendix 3 Child Care Subsidy approval and payment process

Note: This figure does not capture ACCS applications and approvals.

Note a: Care arrangements can be entered into before or after the CCS application is lodged.

Source: ANAO based on Education and Services Australia documents.

Appendix 4 Key program changes, 2022–23 to 2024–25

Source: ANAO analysis of Education documents.

Appendix 5 Entity responsibilities under the Program Delivery Services Schedule for Child Care Subsidy Program

Note: Information relating to the Department of Education, Skills and Employment from original documents has been summarised as relating to the Department of Education, the current party to the agreement.

Source: ANAO based on Education and Services Australia documents.