Introduction

1.1 Wage subsidies are a discretionary financial incentive to encourage employers to hire eligible job seekers by contributing to the initial costs of hiring a new employee. Wage subsidies can help overcome employers’ reluctance to hire certain groups by compensating employers for real or perceived lower levels of productivity², can increase employment opportunities for disadvantaged job seekers, and lower their reliance on income support. Wage subsidies also contribute to the broader employment program objectives to promote stronger workforce participation and help job seekers move from welfare to work.³

1.2 Wage subsidies in various forms have formed part of Australian Government employment programs since 1976.⁴ The current wage subsidies were introduced progressively, beginning with the introduction of the Restart wage subsidy in 2014–15, and the implementation of the jobactive employment program in 2015–16. Figure 1.1 provides a timeline of the introduction of the employment programs associated with wage subsidies.

Figure 1.1: Timeline of employment programs

Note: Program names are set out in full in Table 1.1, with the exception of NEST that is the New Employment Services Trial, and NESM that is the New Employment Services Model.

Source: ANAO analysis.

1.3 In 2020–21 and 2021–22 the Department of Education, Skills and Employment (DESE) administered wage subsidies under a number of employment programs that includes the programs set out in Table 1.1⁵:

Table 1.1: Employment programs that offer wage subsidies

Source: DESE Employment Programs.

Wage subsidy types and eligibility

1.4 A range of wage subsidies are available to eligible employers hiring eligible job seekers/participants.⁶ In 2020–21, the wage subsidy payment amount depended on which employment services cohort a participant was categorised under. The employment services cohorts are targeted at specific groups of job seekers, as set out in Table 1.2.

Table 1.2: Wage subsidy cohort types, employment program and eligibility 2020–21

Note a: Mutual obligation requirements are tasks or activities that job seekers must undertake in order to receive income support through JobSeeker, Youth Allowance, Parenting Payment or Special Benefit.

Note b: The DES program is administered by the Department of Social Services, and CDP is administered by the National Indigenous Australians Agency.

Note c: Prior to 1 July 2021, only ParentsNext Intensive stream participants were eligible for wage subsidies. From 1 July 2021, the two streams of ParentsNext (Intensive and Targeted) were combined and all ParentsNext participants became eligible for wage subsidies if they met the relevant eligibility criteria.

Note d: A Youth Bonus Wage Subsidy of up to $6,500 could be paid for a participant in Stream A (the most job-ready participants). A subsidy of up to $10,000 could be paid for a participant in Stream B (some barriers to employment) or Stream C (multiple and complex barriers to employment), a Transition to Work participant in receipt of an income support payment, or a participant in ParentsNext.

Source: ANAO analysis.

1.5 As shown in Table 1.2, in 2020–21 wage subsidies provided a higher level of funding support to job seekers identified by DESE as having greater barriers to employment. In the 2021–22 DESE Portfolio Budget Statements, employment services programs were delivered under the outcome to foster a productive and competitive labour market through policies and programs that assist job seekers into work and meet employer needs.⁷

1.6 Under policy changes announced in the 2021–22 Budget, the jobactive, TtW and ParentsNext program cohorts are able to access a wage subsidy of up to $10,000 from 1 July 2021.⁸ The aim is to increase the incentives for employers to hire disadvantaged job seekers, streamline the administration of wage subsidies and simplify arrangements for employers.

Administration of wage subsidies

1.7 To receive a wage subsidy in 2020–21, an eligible employer must offer an employment placement⁹ to a job seeker who has been a participant in one of the employment programs in Table 1.1 above. The placement must average at least 20 hours of work per week over a 26-week wage subsidy period, with an expectation that the employment will extend beyond the 26-week period; and can be casual, part-time or full-time. The wage subsidy paid to the employer cannot be more than 100 per cent of the participant’s wage. Based on the July 2021 national minimum wage rate of $20.33 per hour¹⁰, the wage for an average of at least 20 hours of work per week over a 26-week wage subsidy period is $406.66 per week, and $10,571.60 in the 26-week period.

1.8 Employment services providers¹¹ are not required to offer a wage subsidy even if all eligibility criteria are satisfied. Whether a subsidy is offered depends on the needs and preferences of the participant and the employer, and whether the provider considers that a wage subsidy would be an effective incentive.

1.9 The employer enters into a wage subsidy head agreement with an employment services provider, with a schedule agreement attached for each participant being offered a wage subsidised placement. The provider then makes instalment payments to the employer at agreed intervals (fortnightly, monthly, quarterly, or at the end of the wage subsidy period for the total amount), after the employer has provided documentary evidence that the participant was employed in line with the wage subsidy agreement conditions and the claim does not exceed 100 per cent of the participant’s wages.

1.10 Providers manage the administration (including payment) of wage subsidies using the Employment Services System (ESSWeb), DESE’s system for managing employment programs. Providers make wage subsidy payments to employers from the provider’s funds and then claim reimbursement from DESE after making wage subsidy payments to employers.

1.11 Any employer is eligible to receive a wage subsidy if they are a legal entity with a valid ABN unless they:

• have been suspended or excluded from receiving wage subsidies;
• are the provider’s own organisation; or
• are an Australian, state or territory government entity.

1.12 An employer cannot receive a wage subsidy for a participant who has previously been employed by that employer, if they are a family member of the employer, or if they displace an existing employee, and a participant can only attract one wage subsidy at any given time.

1.13 DESE’s Incentives and Investments Branch is responsible for wage subsidies operational policy, supported by the Assurance Coordination Branch, the Economics and Employment Services Reporting Branch, and the Employment Research and Evaluation Branch that are respectively responsible for compliance, performance reporting and evaluation. Account and contract managers in DESE’s state and territory offices are responsible for liaising with employment services providers, including in respect of wage subsidies.

1.14 From April 2020, job seekers were referred to Online Employment Services (OES), an online employment services webpage introduced in response to the increase in demand for employment services resulting from the COVID-19 pandemic, and can seek additional support from the Digital Services Contact Centre (DSCC). The OES and DSCC, in some form, will continue to operate under the New Employment Services Model (NESM) when it is introduced on 1 July 2022.

Changes to wage subsidies from 1 July 2022

1.15 Following the NEST that commenced from 1 July 2019 in Adelaide South in South Australia, and the Mid North Coast in New South Wales, NESM is being developed and is due to commence on 1 July 2022.

1.16 In the NESM, wage subsidies will only be available to participants who have been registered with an Enhanced Services¹² provider for six months. Indigenous job seekers in Enhanced Services (and job seekers who have been in Digital Services for 12 months or more who have moved to Enhanced Services) will have immediate access to a wage subsidy upon commencement in Enhanced Services. The aim is to target wage subsidies to the most disadvantaged job seeker cohort. Additionally, the minimum average hours a participant needs to work will be reduced from 20 hours per week to 15 hours per week, and the duration of the wage subsidy placement will be negotiable between providers and employers to allow the maximum amount offered to be up to $10,000, and the length of the wage subsidy agreement to vary.

Wage subsidies use and expenditure

1.17 Figure 1.2 sets out the number of DESE administered employment program annual placements made with a wage subsidy since 2014–15, broken down by program.

Figure 1.2: Wage subsidy placements by year and program

Source: DESE wage subsidy program dashboard.

Rationale for undertaking the audit

1.18 Job seekers who have been unemployed for a long time generally experience greater difficulty finding subsequent work, as their paid work prospects decline.¹³ This audit is an opportunity to examine the effectiveness of the administration of wage subsidies, and the extent to which DESE monitored and evaluated if wage subsidies improved employment opportunities for employment program participants, by assisting job seekers into work and meeting employer needs. This audit also has the potential to inform any changes to wage subsidies that could be considered as part of the DESE’s reforms to employment programs, currently in the development and piloting phase and due for implementation in July 2022.

Audit approach

Audit objective and criteria

1.19 The objective of the audit was to assess the effectiveness of DESE’s arrangements in administering wage subsidies linked to employment programs.

1.20 To form a conclusion against the audit objective, the following criteria were applied:

• Are wage subsidies assessed, processed and paid in accordance with program requirements and contractual obligations?
• Is the application and use of wage subsidies effectively monitored, evaluated and reported to ensure policy objectives are being achieved?

1.21 The focus of the audit was on wage subsidies available in 2020–21 and 2021–22, across the employment programs and associated cohorts set out in Table 1.1 and Table 1.2. The administration of wage subsidies for all employment programs were not examined under the audit sub-criteria as the associated eligibility criteria, wage subsidy payment amounts, and the required length of employment were largely consistent across the employment programs and cohorts, regardless of which cohort or program the wage subsidy is applied under.

1.22 The performance of the employment programs that wage subsidies are attached to — jobactive, Youth Job PaTH, Transition to Work, Disability Employment Services, ParentsNext and the Community Development Programme — is not in scope for the audit.

Audit methodology

1.23 The audit involved:

• reviewing the policies, procedural guidelines and processes used to administer wage subsidies across employment programs;
• analysing service provider performance information and any participant outcome information relating to wage subsidies;
• reviewing system controls;
• reviewing compliance and assurance activities;
• examining documentation provided for the budget process; and
• discussions with key staff.

1.24 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $295,000.

1.25 The team members for this audit were Renina Boyd, Evan Lee, Sonya Carter and Peta Martyn.

2.1 Effective administration of wage subsidies ensures that the correct amounts of wage subsidy funding are paid to eligible employers only, and the use of wage subsidies helps to contribute to improved employment outcomes for disadvantaged employment program participants. To determine whether wage subsidies are assessed, processed and paid in accordance with contractual obligations and program guidelines, the ANAO examined:

• contractual frameworks and program guidelines;
• the IT system and supporting processes; and
• the compliance program.

Has DESE established appropriate contractual frameworks and guidance to support the correct administration of wage subsidies?

2.2 Developing clear and comprehensive program guidelines that are consistent with the policy objectives assists in accurate administration of the program and quality decision-making. Guidelines should be reviewed regularly to ensure they address program implementation and delivery issues, remain relevant, and reflect feedback from users of the guidance. Clear alignment between policy, guidance, contractual frameworks and administrative systems, facilitates compliance with policy and process requirements.

Wage Subsidies Guideline

2.3 The principal guideline relating to the administration of wage subsidies is the Managing Wage Subsidies Guideline. The structure of the Guideline is set out in Table 2.1 below.

Table 2.1: Structure of the Managing Wage Subsidies Guideline

Source: ANAO analysis of Managing Wage Subsidies Guideline, version 5.0, May 2021.

2.4 The most recent version of the Guideline, version 5.0, was published on 27 May 2021 and came into effect on 1 July 2021. The Guideline can be accessed by providers on the online Provider Portal, a key channel of communication with employment services providers. The Guideline is also available on DESE’s website.

2.5 The Guideline is clear in setting out the wage subsidy requirements. It is logically structured and provides assistance to providers. For instance, ‘system steps’ are highlighted throughout the Guideline to provide end-to-end guidance on using DESE’s IT system, the Employment Services System (ESSWeb), to manage wage subsidies. A sample wage subsidy agreement and schedule are available on the provider portal for providers to use as a reference.

2.6 The Guideline has been regularly updated since its introduction in January 2017, with 10 versions over a four and a half year period. Changes to the Guideline relate to policy changes, or to clarify requirements and improve readability. A version history of the Guideline is set out in Table 2.2.

Table 2.2: Version history of Managing Wage Subsidies Guideline

Note a: Version 4.0 of the Guidelines was published after it came into force. DESE advised that clearance and publication of Version 4.0 was managed in tandem with the clearance for the Managing Wage Subsidies for the Online Employment Services Trial (OEST) Employer Guideline, due to the similarity in content of both documents. The finalisation of the OEST Guideline was delayed, resulting in delayed publication of version 4.0 of the Guidelines.

Note b: The kickstart payment was introduced in January 2017 to provide an additional incentive for employers, allowing up to 40 per cent of the total wage subsidy to be paid to employers four weeks after a participant commenced in an eligible placement.

Source: ANAO analysis.

2.7 DESE communicates changes to the Guideline to providers by placing news items on the Provider Portal. DESE’s contract and account managers, who are responsible for providing support to the employment service providers in their regions, are informed of Guideline changes through emails and information from program areas through a central coordination point in the DESE National Office.

2.8 In response to the economic effects of the COVID-19 pandemic, DESE issued advice to providers on 12 and 15 May 2020 that in specific circumstances, the department would consider waiving wage subsidy requirements relating to approved leave and pre-existing employment for wage subsidy agreements that were active at the onset of COVID-19.¹⁴ COVID-19 waivers were communicated to providers on the Provider Portal.

Contractual framework

2.9 The contractual requirements between DESE and providers for the employment services programs is set out in the following documents:

• Community Development Program Head Agreement;
• Disability Employment Services Grant Agreement;
• jobactive Deed 2015–2022;
• ParentsNext Deed 2018–2024; and
• Transition to Work Deed 2016–2022.

2.10 The contractual documents set out: definitions and interpretations; requirements for financial matters; performance; information management and deed administration; requirements for service delivery; and payments to providers.

2.11 Wage subsidy requirements are not specified in detail in the contractual documents as they refer providers to the Managing Wage Subsidy Guideline. For example, clause 89 of the jobactive Deed states that providers must ‘offer, manage, deal with enquiries and report on Wage Subsidies in accordance with any Guidelines’, and the requirements set out in the Deed are ‘Subject to any contrary provision specified in any Guidelines’. The other deeds contain similar wording except for the Community Development Program (CDP) Head Agreement that does not refer to wage subsidies.

Support for DESE staff, employment services providers and employers

Resources for departmental staff

2.12 DESE’s Incentives and Investments Branch is responsible for operational wage subsidies policy matters and the Labour Market Policy Branch is responsible for strategic wage subsidies policy. Operational responsibility for managing and supporting providers is assigned to contract managers, regional account coordinators and account managers, who are located in DESE’s state and territory offices.

2.13 Contract managers, regional account coordinators and account managers are responsible for monitoring and communicating with providers at the local level. Account managers oversee contract managers and regional account coordinators, and are responsible for communicating with providers at the organisational level. Contract and account management responsibilities are set out in DESE’s documentation. DESE contract managers, regional account coordinators and account managers can use state office handbooks or online resources on the Provider Portal to support the administration of wage subsidies. These resources include the Managing Wage Subsidies Guideline, relevant contracts and information on performance and assurance.

Resources for providers

Question Manager form

2.14 Providers can receive support from DESE through the Question Manager form in ESSWeb and through the Wage Subsidies mailbox. Question Manager is described by DESE as its preferred mechanism for lodging and resolving policy and operation questions. Providers can lodge questions through the Question Manager form to be answered by a departmental officer.

2.15 Questions and responses on Question Manager are recorded and DESE staff and providers can search through past questions to establish whether a similar question has already been asked and answered. DESE advised that for privacy reasons, a provider can only access questions asked by that provider.

2.16 Forty-three questions relating to wage subsidies were lodged and resolved in Question Manager from the introduction of the current version of Question Manager in November 2020, to 5 May 2021.

2.17 DESE aims to respond to questions lodged in Question Manager within 10 business days. Of the 43 questions that had a status of resolved and closed, 38 received responses within this timeframe (88 per cent), and 40 questions received responses which were clear and directly addressed the question. Two responses were not directly relevant to the question asked. One response gave an inaccurate explanation of program requirements.¹⁵

Wage Subsidies mailbox

2.18 When DESE staff receive queries from providers which they are unable to respond to, they can use the Wage Subsidies mailbox to escalate the matter to the Wage Subsidies Team in DESE’s Incentives and Investment Branch. DESE advised that the Wage Subsidy Team may, at its discretion, communicate directly with providers via the mailbox but the preference is to liaise with providers through DESE contract and account managers.

2.19 DESE responded via the mailbox to 203 inquiries in the six months from 1 October 2020 to 31 March 2021. From a selection of 12 responses examined by the ANAO, in all cases the Wage Subsidy Team was able to resolve queries through the mailbox.

2.20 DESE aims to respond to mailbox inquiries within 10 business days. DESE advised that more complex queries that require investigation may take longer to resolve. Of the 12 responses examined, four that were lodged in March 2021 did not have a timestamp of resolution, and for the remaining eight, six were provided within 10 business days. The two remaining queries took 19 and 42 days to resolve.

Resources for employers

2.21 Providers have the primary responsibility to provide guidance and support to employers regarding wage subsidies. DESE also provides resources for employers on its website, including a wage subsidies ‘how to guide’ that is available to employers and other members of the public. The guide explains how employers can use the jobactive website to manage a wage subsidy agreement.

Do DESE’s systems support accurate processing and management of wage subsidies?

2.22 IT systems that embed automatic validation controls and transparent processes can help to ensure effective management of payments.

Wage subsidy process

2.23 The key steps in processing a wage subsidy are set out below and the full process is depicted at Appendix 3:

• provider determines that a wage subsidy is suitable for the eligible participant and eligible employer;
• provider establishes a wage subsidy agreement and schedule with the employer (within 84 days of the employment placement commencing) and negotiates a payment schedule;
• employer provides payroll evidence and invoices to the provider to receive wage subsidy payments, and as per the payment schedule, provider pays employer;
• provider claims reimbursement of wage subsidy payments from DESE (within 56 days of the end of the wage subsidy period); and
• DESE reimburses the provider for the amount paid to the employer.

System for administering wage subsidies

2.24 ESSWeb is the IT system used by DESE to administer employment programs, including wage subsidies.

2.25 ESSWeb went live on 1 July 2015, following the introduction of the Restart program on 1 July 2014 and in preparation for the introduction of jobactive. Employment service providers access ESSWeb through the Employment and Community Services Network (ECSN), a departmental portal which provides access to other applications such as the DESE internet page, provider portal, performance dashboard and learning centre.

2.26 To create a wage subsidy schedule agreement in ESSWeb, a provider must match an eligible participant to an eligible vacancy with an employer. A wage subsidy schedule agreement must then be attached by the provider to a head agreement with the employer. Providers cannot attach a wage subsidy schedule agreement in ESSWeb without first confirming that they have signed the head agreement with the employer, which can be completed electronically in ESSWeb, or completed offline and then recorded in ESSWeb.

2.27 ESSWeb automatically assesses eligibility and determines other requirements such as the agreement end date. If ESSWeb assesses that eligibility criteria are not met, the provider may request a manual override from DESE.¹⁶

2.28 After making payments to employers, providers claim reimbursement from DESE through ESSWeb which has system controls that prevent providers claiming reimbursement unless a valid wage subsidy agreement exists. ESSWeb system controls also disallow any claim for reimbursement in excess of the remaining balance of the wage subsidy. Other key controls include data matching to ensure providers meet the criteria for each claim. Job Seeker Identification numbers, employment vacancy identifiers and referral identifiers are automatically matched by ESSWeb, and ABNs are validated with Australian Taxation Office records.

2.29 A key requirement of the Managing Wage Subsidy Guideline is that the employer and provider are to keep records of the payslip and wage subsidy payment remittance respectively. In ESSWeb it is optional to upload documentary evidence, with providers required to retain the evidence offline. Adherence to this requirement is checked in the RRS and other assurance activities (discussed from paragraph 2.57 below), or requests for providers to supply copies to DESE.

2.30 If any of the records in the sample of transactions examined in the RRS do not have documentary evidence of payment remittance attached, DESE follows up with the provider to request that it be made available within one working day. Where documentary evidence cannot be provided, DESE takes steps to recover the payment.

2.31 The option of uploading documentary evidence in ESSWeb raises the risk of fraud or poor practice of not retaining the required documentary evidence. In RRS cycle 16 (discussed further from paragraph 2.64) from the 316 transactions examined, 11 transactions (three per cent) were found to have insufficient or no evidence to support payment to the employer by the provider. DESE advised that the high compliance rates found through RRS indicate there is limited evidence to support the introduction of a mandatory documentary evidence requirement for providers.

2.32 When claims for reimbursement are made on ESSWeb, this then updates HUB (DESE’s SAP financial system) in real time. HUB processes payments each morning and batch updates ESS each night. ESSWeb to HUB reconciliations are performed automatically once a month.

2.33 There are minimal manual interventions required in standard ESSWeb wage subsidy processing, which lowers the risk of error. However, DESE account managers can make manual adjustments in exceptional circumstances, for example, special claims where a provider submits a wage subsidy reimbursement over the 56 day time limit, or to apply a workaround while a new policy and accompanying process is being embedded. If exceptional circumstances are deemed to have occurred, a DESE officer will process these claims in ESSWeb. DESE advised that special claims represent less than one per cent of total wage subsidy transactions, representing 2,787 (around one per cent) from a total of 321,578 claims from 2019 to 2021.

Is there an effective program of compliance, based on risk?

2.34 A compliance strategy should be linked to the entity’s risk management and fraud control frameworks and be used to support and guide the conduct and allocation of resources, and outcomes from the assurance activities should be adequately monitored and reported.¹⁷

Assurance planning

2.35 The Public Governance, Performance and Accountability Act 2013 (PGPA Act) requires Commonwealth entities to establish and maintain an appropriate system of risk oversight and management.¹⁸ The assurance and compliance activities for employment programs are informed at a high level by DESE’s enterprise risk, fraud and assurance frameworks as shown in Figure 2.1.

Figure 2.1: DESE assurance operating environment

Source: DESE Assurance Strategy and Framework.

DESE Assurance Strategy and Assurance Framework

2.36 The DESE Assurance Strategy and Assurance Framework supports the department’s activities across the education, training and employment streams. It describes the purpose of assurance and outlines how assurance activities should be assigned and undertaken across the department. The strategy provides the principles and guidance that underpin the assurance activities, and the Framework operationalises the strategy by setting out a range of assurance activities. The DESE Assurance Strategy and Framework was updated in February 2021 and replaced the previous program-specific Employment Services Assurance Strategy 2018 and the Employment Services Assurance Framework 2019.

2.37 The strategy provides the overarching guidance to enable DESE to deliver assurance activities at an operational level, and describes how it interacts with DESE’s other governance frameworks including the Risk Management Framework and Strategy (discussed further from paragraph 2.48 below).

2.38 The strategy provides guidance on DESE’s risk-based approach to assurance and its purpose is to assure the department that its activities (policies and programs) are operating effectively. The assurance planning model includes four phases:

• Phase 1: Information gathering and analysis;
• Phase 2: Risk identification and control analysis;
• Phase 3: Plan assurance activities; and
• Phase 4: Monitoring and reporting.

2.39 The Framework outlines the assurance environment, the purpose of assurance, and the design and delivery of assurance activities, as well as the three lines of defence: business and support control processes and systems; management assurance; and independent assurance.

2.40 Assurance planning is how DESE develops program assurance plans for employment services programs.¹⁹ The process involves the following:

• Assurance Coordination Branch generates the assurance planning workbook and sends it to the program area for input;
• assurance activity recommendations are prepared for consultation with the program area;
• an assurance plan is prepared for approval by the program area SES Band 1 and Assurance Coordination Branch SES Band 1, and noted by the Program Integrity Sub-Committee for Employment Services (PISCES);
• the final plan is published on the DESE provider portal; and
• assurance activities are undertaken by the program area or Assurance Coordination Branch.

2.41 The DESE Assurance Strategy and Framework states that assurance activities should align with the program area’s risk plan and be reviewed annually unless DESE determines otherwise.

Wage subsidies assurance planning

2.42 The most recent assurance planning process for wage subsidies commenced in 2020 and was documented in the 2020–21 Assurance Planning Workbook and the 2020–21 Assurance Plan: Wage Subsidies. The assurance planning process was then deferred in 2020 due to the COVID-19 impacts and the 2020–21 Workbook and Plan was not endorsed by PISCES. However, DESE advised that with the deferral of assurance planning, program areas were notified that they were covered by their 2019–20 assurance plans, which were noted by PISCES, until the recommencement of planning in 2020–21.

Assurance Planning Workbook for wage subsidies

2.43 The draft 2020–21 Workbook was prepared as part of the partially completed assurance planning process described at paragraph 2.42 above. The draft Workbook sets out: program information such as wage subsidies budget; eligibility and roles and responsibilities; wage subsidies risk profile; previous assurance activities undertaken and any outstanding recommendations; and assurance activities for 2020–21 including the underlying risk assessment and rationale to support them.

2.44 The content of the draft 2020–21 Workbook is not materially different from that of the 2019–20 Workbook except that it: discusses the 2019–20 bushfires and the COVID-19 pandemic; contains greater detail on IT systems; and identifies actions against recommendations arising from the earlier review of assurance activities. The purpose of the 2020–21 Workbook is to inform the Assurance Plan, discussed below.

Assurance Plan: Wage Subsidies

2.45 The draft 2020–21 Assurance Plan: Wage Subsidies is a two-page document which provides an overview of 2020–21 program assurance activities for wage subsidies, covering:

• wage subsidy risks from the Incentives and Investment Branch Risk Plan (discussed further from paragraph 2.53 below) and emerging assurance risks;
• the assurance approach for wage subsidies, including assurance drivers (such as payment recovery, policy development);
• ongoing monitoring activities for 2020–21; and
• assurance activities for 2020–21.

2.46 The previously approved 2019–20 Assurance Plan: Wage Subsidies was prepared using a template from the former Employment Services Assurance Framework. As the 2020–21 Assurance Plan was not endorsed by PISCES, the Incentives and Investments Branch continued to operate under the 2019–20 Plan. The draft 2020–21 Assurance Plan differs from the 2019–20 Plan in that it no longer provides targets for the level of compliance, and it combines both recommended improvements and scheduled activities into one section.

2.47 The assurance activities that were undertaken in accordance with the 2019–20 and 2020–21 Assurance Plans are set out in Table 2.3 below.

Table 2.3: Wage subsidies assurance activities

Note a: The two areas of the Quality Assurance Framework which have direct relevance to wage subsidies are: providers have various strategies in place to promote a wide range of employment opportunities; and claims processes used by providers are systematic and align with the guidelines.

Source: ANAO analysis.

Risk planning and management

2.48 DESE’s Risk Management Framework and Policy, last updated in 2020, consists of two parts: the Risk Management Framework and the Risk Management Policy.

2.49 The Framework describes DESE’s approach to risk management, types of risks, roles and responsibilities relating to risk management, the elements which comprise the Framework, risk reporting, review requirements and lists the performance indicators relevant to evaluating the effectiveness of the Framework.

2.50 The Risk Management Policy sets out DESE’s Risk Management Process and provides the risk matrix, risk appetite and tolerance; a mandate that Risk Management Plans be approved annually and reviewed semi-annually at the division level; and discusses shared risk. It also discusses a number of specific risks such as staff fatigue, climate risk, and foreign influence and foreign interference.

2.51 The Risk Management Guidelines, a corporate document dating from 2020, provides non-binding guidance on the application of the Risk Management Framework and Policy. It defines risk and risk management and the elements of DESE’s Risk Management Process: establishing context; identifying risks; analysing risks; evaluating risks; and treating risks.

Incentives and Investments Branch Risk Plan

2.52 Wage subsidy-related risks are included in the Incentives and Investments Branch Risk Plan (updated in 2020) and in the Employment Services Payment Integrity Risk Plan (updated 2021).

2.53 The Incentives and Investments Branch risk plan identifies 11 risk events, six of which are relevant to wage subsidies:

• programs are not delivered in accordance with guidelines;
• budget allocation is exceeded and/or budget is not managed in an ethical, effective or efficient wage;
• fraudulent use of Commonwealth resources under programs managed by the Branch;
• personal information is not handled in accordance with the Privacy Act 1988 or the Australian Privacy Principles;
• procurement activities (including contracts, consultancies and any expenditure of Commonwealth monies) are inadequate to meet desired outcomes; and
• development of new policy proposal does not meet the standards outlined in the Department of Finance requirements/or is not successful.

Payment Integrity Risk Plan

2.54 The Payment Integrity Risk Plan, administered by DESE’s Assurance Coordination Branch, outlines risks relating to payments made under DESE’s employment services programs and sets out the associated risk treatments.

2.55 There is one risk related to wage subsidies in the Payment Integrity Risk Plan: ‘Risk R00740 – Entity incorrectly or inappropriately claims payments – Wage Subsidies’, which has a risk rating of ‘medium’. The Plan identifies 11 possible causes for the risk event and five treatments. The treatments include assurance activities such as the RRS, use of data analytics, targeted assurance and administrative reviews (discussed further from paragraph 2.56 below).

Assurance and compliance activities

2.56 Under the assurance plan, DESE conducts assurance and compliance activities to ensure that the administration of wage subsidies by employment services providers is compliant with the program requirements. The 2019–20 Wage Subsidies Assurance Workbook identifies the following assurance activities for wage subsidies:

• the RRS;
• data monitoring;
• targeted assurance activities;
• Employment Services Risk Alerts and detailed/administrative reviews; and
• Employment Services Tip-Off Line, complaints and Ombudsman inquiries.

Rolling Random Sample (RRS)

2.57 The RRS is an assurance activity for payments made as part of DESE’s employment programs, including wage subsidy payments. The RRS is a post-payment check where the accuracy of payment processing and the adequacy of documentary evidence supplied by providers are examined.

2.58 The RRS is conducted three times (or ‘cycles’) each year – September to March; March to June; and July to September. Cycles are conducted over two weeks by assessors drawn from staff from DESE’s national office and state and territory offices.

2.59 Assessors assure wage subsidy payments through the RRS by assessing a sample of provider claims for the reimbursement of wage subsidy payments and examining documentary evidence for each sampled claim to assess whether it meets program requirements. A sub-sample of assessments is then quality assured by separate quality assurance assessors.

RRS sampling methodology

2.60 DESE provided the ANAO with a document that was prepared for the audit describing the RRS sampling methodology. DESE advised that it uses a stratified random sampling methodology and aims to sample enough claims through the RRS to estimate the level of compliance to an accuracy of ±10 per cent with 95 per cent confidence level, and the sample size is calculated using a standard formula for random sampling.²⁰ However, DESE was unable to provide evidence that the RRS methodology was documented or endorsed. DESE further advised that the internal reporting to governance groups and management on the RSS results was incorrect in respect to the value of claims related to the payments examined, and the subsequent amount identified for recovery. This was due to the sampling methodology and reporting approach applied, and that some values were extracted from an incorrect source. DESE intended to correct the reporting from Cycle 18, including updating prior cycle results.

2.61 Considering that clearly describing the method of measurement and assessment of compliance increases the transparency and confidence in the robustness of assurance activities, DESE should document and seek endorsement of the methodology for the RRS. The ANAO’s performance audit of Jobactive — integrity of payments to employment service providers further examines whether DESE has effectively implemented its framework to manage and monitor payments to employment service providers.

2.62 Nevertheless, DESE’s methodology has been periodically informed by statistical methodology advice from an actuarial firm. For example, DESE sought actuarial advice for Cycle 16 of the RRS in 2019–20, because the period covered by the cycle was interrupted by COVID-19 and DESE had to vary its methodology. The sample for Cycle 16 was expanded to include claims between September 2019 and September 2020, excluding the period of 20 March 2020 to 31 July 2020. A payment integrity assurance activity covering the COVID-19 period between March and July 2020 was conducted in Cycle 17, with the sample size also based on advice from an actuarial firm.

RRS assessment and quality assurance process

2.63 RRS wage subsidy assessors use a workbook in Microsoft Excel to assess provider claims for the reimbursement of wage subsidy payments. The workbook is populated with the details of a wage subsidy placement, which are then checked against information and evidence provided by employers through the jobactive website and by providers in ESSWeb. Evidence reviewed includes wage subsidy head agreements, evidence of wages paid and hours worked (such as payslips), and evidence of the payment of a wage subsidy to the employer. If an assessor requires additional evidence to complete the assessment, DESE will email the provider to ask that the additional evidence be uploaded within one day.

2.64 DESE advised that the outcome of an assessment is calculated automatically by a formula in the workbook and depends on which deficiencies, if any, have been identified. The outcomes of all finalised assessments are automatically uploaded into the Wage Subsidies Risk Management (WSRM) application, discussed further from paragraph 2.71.

RRS outcomes and recoveries

2.65 Table 2.4 sets out the assessment outcomes for wage subsidy claims sampled by the RRS since July 2017. In each cycle, requirements were assessed to have been fully or mostly satisfied for around 90 per cent of payments. While there is no compliance target for wage subsidies, DESE advised that the overall compliance target for the RRS was 95 per cent.²¹

2.66 Table 2.5 below sets out the total recoveries made as a result of the RRS as advised by DESE. Total recoveries average around one and a half per cent of the total claim amount assessed over the nine cycles. Recoveries are lower than the percentage of claims which were found in the RSS to have partially met or did not meet requirements (as set out in Table 2.4), as some RRS findings do not result in a recovery or can result in a partial recovery. For example, a finding that the amount paid to the employer is less than what the employer was eligible for, or a wage subsidy head agreement was provided but was not signed by the provider, do not result in recoveries. Where a finding is that the amount claimed is greater than the amount paid to the employer, this will result in a recovery.

Table 2.5: Wage subsidy financial recoveries from the RRS

Note a: The period from March to July 2020, which was impacted by the COVID-19 pandemic, was included in Cycle 17.

Source: DESE RRS results cycles 9–17.

2.67 Table 2.5 shows that the wage subsidy recoveries increased in Cycle 15. DESE advised this occurred due to the introduction of TtW and ParentsNext in the sampled wage subsidy claims that were assessed in this cycle for the first time. The assurance activity demonstrated that these employment program providers did not fully understand the requirements for administering wage subsidies under these programs. The higher non-compliance was mainly due to these providers claiming reimbursement from DESE before the employer was paid. DESE further advised that where providers made this error, the Cycle 15 results were used to educate providers on appropriate claiming practices for wage subsidies and no recoveries were actioned. DESE actioned recoveries for deficiencies associated with the incorrect calculation of the eligible wage subsidy payment or the supply of insufficient or inappropriate documentary evidence and this resulted in higher than usual recovery amounts for Cycle 15.

2.68 In addition to financial recoveries, DESE provides written feedback to providers with claims that were assessed as part of the RRS. The feedback sets out the overall results for wage subsidy claims assessed in the relevant RRS cycle, a list of the most common deficiencies, and learnings for providers. The level of compliance has not improved as a result of this activity. The RRS is also used to inform DESE’s approach to targeted assurance activities, although the assurance planning process seeks to anticipate risks before they arise and are detected by the RRS.

Quality assurance of RRS cycles

2.69 DESE quality assures RRS assessments by re-performing a sample of five per cent of randomly selected assessments. In addition, all assessments that identify a deficiency are quality assured and assessments performed by new assessors are targeted for additional quality assurance.

Table 2.6: Quality assurance of the wage subsidy payments in the RRS

Note: ‘No change’ means the original assessment was upheld, ‘result sustained’ means the original assessment was upheld but the QA assessor may have made minor corrections that did not change the original assessment outcome, and ‘result amended’ means the original assessment was modified as a result of the QA.

Source: DESE RRS quality assurance results.

2.70 Table 2.6 sets out the quality assurance results for cycles nine to 17 as advised by DESE. The percentage of results amended ranges over the cycles from 4.5 to 23.8 per cent of all quality assurance wage subsidy cases completed.

2.71 Quality assurance results are used to inform feedback to assessors and are tracked through the WSRM application (discussed below). DESE also advised that RRS assessors, including quality assurance assessors, meet daily during the cycle to discuss any issues arising out of quality assurance that need to be addressed by assessors.

Data monitoring

2.72 DESE uses a business intelligence and data analytics tool which brings together data from a range of sources across DESE. The dedicated WSRM application displays a monthly updated dashboard of wage subsidies-related risk indicators.

2.73 The WSRM application provides a centralised snapshot of the total number of wage subsidy agreements that have been risk-flagged, and the number of agreements and employers or providers associated with each risk. The app also identifies individual wage subsidy agreements that have been risk-flagged. Users can explore the characteristics of risk-flagged agreements and the associated employers, providers and participants.

2.74 In 2019, an internal audit reviewed the wage subsidies data analytics by examining wage subsidies risk management plans, assessing if the WSRM application supports the identification and analysis of wage subsidies risks, and verifying the accuracy of WSRM application reporting. Prior to the internal audit, DESE monitored 17 risk indicators and 19 sub-indicators. The internal audit tested a subset of the indicators representing 13 risk indicators and 13 sub-indicators and found that one indicator and seven sub-indicators were unsatisfactory, and that three indicators and two sub-indicators required improvement, and should be reviewed by the wage subsidies team. The three internal audit recommendations were addressed in April 2020 and closed in May 2020.

2.75 In May 2020 DESE made the following additional changes to the WSRM application:

• the application was ‘redefined into three discrete sections’: risk alerts which might need to be immediately reviewed and actioned²², risk indicators to be used for ‘broader program management’, and contextual information which DESE assessed to provide useful information about program operations but did not in themselves indicate any actual risk;
• one indicator was maintained;
• two sub-indicators became indicators;
• two indicators and two sub-indicators relating to kickstart were removed due to the cessation of kickstart;
• two indicators and four sub-indicators were removed because DESE advised there was no evidence those risks were occurring.
• one indicator and five sub-indicators were reclassified as risk alerts; and
• three indicators and six sub-indicators were reclassified as contextual indicators.²³

2.76 DESE advised that the WSRM application is not used to proactively identify risks and is primarily a research tool that complements other assurance activities. DESE should clarify in the Wage Subsidies Assurance Workbook when it is next updated that the WSRM application is used as a research tool and is not a discrete assurance activity and therefore cannot be relied upon as such in program assurance.

Targeted assurance activities

2.77 Targeted assurance activities are identified in DESE’s Assurance Planning Workbook for wage subsidies and involve detailed investigation of identified or suspected non-compliance. Remedial actions resulting from a targeted assurance activity may include provider feedback, restricting the number of wage subsidies an employer can access and the recovery of reimbursements via an offset against a provider’s future payments.

2.78 DESE’s 2019–20 Assurance Plan for wage subsidies contained five assurance activities scheduled in the period. One activity related to kickstart payments which were ceased in 2019 and was therefore not included in the ANAO’s analysis. DESE advised that one planned assurance activity relating to misuse of leave was removed by DESE from the assurance schedule due to a very low incidence of misuse identified in a labour hire assurance activity undertaken in 2019 (discussed in the second bullet point below). Of the three other activities:

• one investigated the use of the Disability Employment Services Restart wage subsidy. The activity found that 92 per cent of the 197 claims assessed satisfied or mostly satisfied requirements. Fifteen payments were identified for recovery totalling $40,692;
• the second investigated wage subsidy use by eight labour hire companies that were possibly ‘churning’ job seekers. The activity found that 89 per cent of the 342 agreements examined were assessed as compliant, and $33,899 was identified for financial recovery; and
• the third investigated wage subsidy special and general claims²⁴ since the introduction of Restart in 2014–15. The investigation found that the level of compliance was high, four out of the total of 567 claims were identified as overpayments, and $10,000 was identified for recovery.

2.79 Following the assurance activity relating to labour hire companies, providers who were subject to the assurance activity received a results letter from DESE which sets out the provider’s individual results and more general learnings that applied across jobactive providers.

Employment Services Risk Alerts and Administrative Reviews

2.80 DESE staff can raise an Employment Services Risk Alert (ESRA) if they identify a risk event which indicates that a provider, employer, activity host organisation or individual is using or delivering employment services improperly. Staff are expected to raise an ESRA if a risk event meets one or more of the criteria below:

• requires coordination, or has impact across multiple areas of DESE;
• requires departmental action, such as suspensions or exclusions, to eliminate, mitigate or isolate the threat or future threat to DESE;
• is an emerging risk that has the potential for major or severe consequences to DESE;
• has been categorised as an extreme or high risk against DESE’s risk matrix; or
• is significant enough to warrant maintaining a record of the entity of concern for future departmental action.

2.81 Once an ESRA is raised, the program area or account manager will determine whether to commence an administrative review into the issue or allegation. An administrative review must be conducted in accordance with the principles of procedural fairness. The person(s) conducting the review must determine whether the issue or allegation is substantiated on the basis of the evidence and make a recommendation to the decision maker as to how to respond to the risk event. Possible recommendations include monitoring the relevant entity, suspending or excluding the entity from accessing wage subsidies, or taking no action. The decision maker must be an SES officer.

2.82 The Employment Services Risk Oversight and Monitoring Committee (ESROM) is responsible for overseeing ESRAs and administrative reviews. ESROM reports to PISCES and to the Deputy Secretary Employment.

2.83 Seventeen ESRAs have been raised in relation to wage subsidies since 2018. As at 18 January 2021, there were eight open ESRA cases relating to wage subsidies. Of these cases, six related to compliance (primarily around low sustainable employment outcomes for participants) and two related to fraud and compliance. Between 18 January 2021 and 13 July 2021, ESROM agreed to close seven wage subsidy cases because the matters were resolved. As at 13 July 2021, there was one open wage subsidy ESRA relating to compliance.

Complaints, Ombudsman inquiries and tip-offs

2.84 Members of the public, including employers and participants, can contact DESE in relation to employment services through the National Customer Service Line (NCSL). Contacts received via the NCSL include, but are not limited to, complaints.

2.85 If a complaint alleges serious non-compliance with program guidelines, the NCSL must immediately refer the issue to the appropriate account manager or account coordinator. If a complaint relates to an issue which is local to a particular site or area, the NCSL should investigate the issue in the first instance before referring it to the account coordinator for further action. Otherwise, the NCSL manages the complaint and the account manager or account coordinator is informed for noting only. If an issue is escalated to and actioned by an account manager or account coordinator, they must report in writing to the NCSL within 10 working days.

2.86 All contacts relating to employment services, including via the NCSL, are recorded in the Employment Services Feedback System. In 2019–20, there were 234 complaints relating to wage subsidies. Of these complaints, 232 complaints were received by DESE, one by the Commonwealth Ombudsman and one by the Minister for Employment. Ombudsman complaints are also managed through the DESE Litigation and Legal Coordination Team and the Jobseeker Feedback Team. An additional four Ombudsman cases were opened from 1 July 2019 to 30 June 2020, of which one remains open as at 30 June 2020. Complaints were primarily made by employers against providers, because they missed the 84 day deadline to enter a Wage Subsidy Agreement.

2.87 DESE also operates the Employment Services tip-off line (tip-off Line), which allows current and former employees of providers to confidentially report fraud or other inappropriate practices, whether actual or suspected. Allegations received through the tip-off line must be investigated in an administrative review. DESE advised that from 1 July 2018 to 2 August 2021, there were 90 employment services tip-offs with 144 allegations made, and of these 18 were substantiated or partially substantiated with two relating to wage subsidies that were resolved through an administrative review. The first tip-off was made in 2019, in which the complainant made two allegations of which one was found to be substantiated and the other unsubstantiated. The second tip-off was made in 2021, in which the complainant made five allegations of which one was partially substantiated, one unsubstantiated, two were referred to other agencies, and one could not be further reviewed due to insufficient evidence.

Managing non-compliance

2.88 Provider non-compliance is primarily managed through the jobactive Performance Framework and the Breach Management Framework.

2.89 The Performance Framework describes the Compliance Indicator, which measures each jobactive provider’s compliance with requirements in delivering employment services. The Compliance Indicator scores can range from zero and 100 and are calculated based on the outcome of assurance activities completed in the 18 months leading up to the date of calculation.

2.90 The Compliance Indicator is used by DESE to evaluate providers’ compliance performance and to compare providers at organisation, state and employment region levels, as well as over time. Compliance Indicator scores do not in themselves lead to recoveries, but are used to inform future program assurance activities.

2.91 The Compliance Indicator also contributed to providers’ star ratings until they were ceased in December 2020. Star ratings were used by DESE to inform its performance review, business review and reallocation processes and made publicly available so as to inform participant and employer choice. Star ratings are discussed further at paragraph 3.13.

2.92 The Breach Management Framework outlines how to identify and record a breach, assess risk, determine remedial actions and monitor compliance. Funds can be recovered from targeted assurance activities including the RRS using the Breach Management Framework. DESE advised in 2018–19 there was one breach raised in relation to wage subsidies under the Breach Management Framework, and no breaches raised in 2019–20.

3.1 The use of wage subsidies should be monitored on an ongoing basis to ensure that they are contributing to the intended policy objective of promoting stronger workforce participation and helping job seekers move from welfare to work.

3.2 To examine whether the application and use of wage subsidies is effectively monitored, reported, evaluated and funded, the ANAO assessed the wage subsidy:

• performance measures and reporting;
• evaluation arrangements; and
• funding arrangements.

Are there sound performance measures and reporting to monitor wage subsidy performance?

3.3 To assist an entity in determining whether program objectives are being met, sound performance measures should be developed along with regular monitoring and reporting arrangements.²⁵

Measuring the performance of wage subsidies

3.4 The objective of wage subsidies (as a discretionary financial incentive) is to encourage employers to hire eligible participants, primarily by contributing to the initial costs of hiring a new employee. DESE has a responsibility to demonstrate that wage subsidies are effective in achieving the objective of improving employment outcomes for eligible participants.

3.5 DESE measures the utilisation rate of wage subsidies, as outlined in Table 3.1. This shows the number of job placements that were eligible to attract a wage subsidy and the actual wage subsidy placements that occurred from the eligible group. The relative uptake of wage subsidies could be used as an internal measure to monitor the use of this program which aims to help more participants move from welfare to work.

Table 3.1: Utilisation rates of wage subsidies

Source: DESE documentation.

3.6 DESE’s key performance measure for wage subsidies is the outcome rate where a participant remains employed for 26 weeks and exits income support. The extent that wage subsidies assisted participants into sustainable employment can be measured by comparing the outcome rate for participants in receipt of wage subsidy to those participants that were not. The Senate Education and Employment References Committee February 2019 inquiry report Jobactive: failing those it is intended to serve considered submissions from providers that supported the use of wage subsidies:

Evidence proves that one of the single, most effective ways to improve employment outcomes is wage subsidies—certainly in our experience. Our experience at Joblink Plus shows that, with a wage subsidy, 72 per cent of placed jobseekers achieve a 26-week outcome—in answer to your question. Without a wage subsidy, that conversion rate reduces to 66 per cent. That is significant across the whole of the program.²⁶

3.7 The comparative outcome rate was measured and reported in DESE’s draft Evaluation of jobactive Final Report and included in the briefing packs for DESE officials’ appearances at Senate Estimates including for October 2020 and March 2021. The comparative 26 week outcome measure was developed for the jobactive evaluation (discussed from paragraph 3.33). While a wage subsidies outcome rate — the percentage of eligible wage subsidy placements that were still employed at their placement at either 12 or 26 weeks — is included in DESE dashboard reports (see paragraph 3.23), there was no evidence that a comparative outcome performance measure was in place prior to the evaluation, and no intention to continue to report this performance measure on an ongoing basis outside of the evaluation.

3.8 Table 3.2 shows the relative outcome of those participants remaining in an employment placement at 26 weeks with a wage subsidy, and those without.

Table 3.2: 26-week outcome rates for participants eligible to receive a wage subsidy (per cent)

Note: As discussed in Table 1.2, the streams refer to the most job-ready participants (Stream A) to those with the most complex barriers to employment (Stream C).

Source: Draft evaluation of jobactive final report.

3.9 These results indicate that a wage subsidy improves the 26-week outcome rate across all streams by at least 45 per cent. For a Stream C participant, the use of a wage subsidy almost doubles the 26-week outcome, and is more than double for an Indigenous Stream C participant, showing that there is an improvement in employment outcomes as participants disadvantage increases.

3.10 The draft Evaluation of jobactive Final Report also outlines wage subsidy outcomes by participant cohort, as set out in Table 3.3.

Table 3.3: Percentage difference that wage subsidies made to whether a participant achieved an outcome, by participant cohort (percentage points)

Note a: The Job Seeker Classification Instrument (JSCI) is a questionnaire used in the employment program to identify an individual’s risk of becoming long-term unemployed. It examines barriers to employment to work out an individual’s level of labour market disadvantage.

Source: Draft evaluation of jobactive final report

3.11 Table 3.3 shows that the evaluation also reports on two other wage subsidy related performance measures. The first is leaving income support within 12 months of commencing a job.²⁷ Across all participant cohorts that were placed in a position supported by a wage subsidy, around five to 13 per cent (averaging eight per cent) were more likely to leave income support within 12 months, compared to participants that were not in receipt of a wage subsidy. The second is leaving income support at 12 months after commencing a placement.²⁸ Across all participant cohorts that were placed in a position supported by a wage subsidy, around four to nine per cent (averaging six per cent) were more likely to be off income support at 12 months, compared to participants that were not in receipt of a wage subsidy. As with the 26 week outcomes, there was evidence of greater impact on employment outcomes as disadvantage increases, such as for Stream C participants. However, the DESE evaluation did not explore the causal factors for why wage subsidies increase the 26 week outcome rate.

Corporate Plan performance measures

3.12 There are no specific performance measures for wage subsidies in DESE Portfolio Budget Statements, Corporate Plan or Annual Report. Instead, the performance of wage subsidies contributes to the broader jobactive outcomes outlined in Appendix 4. DESE advised that it is unable to determine the extent to which wage subsidies contributes to the overall program outcomes.

Provider performance star ratings

3.13 Provider star ratings were an external-facing indicator which provided the public with information on the performance of providers to inform participant and employer choice. The star rating system also informed DESE’s provider performance review and reallocation processes, as outlined in the jobactive Performance Framework Guideline.²⁹

3.14 The star ratings are based on employment providers’ outcomes on six performance measures which are related to achieving participant 12 and 26 week employment outcomes, and are standardised and weighted by participant stream. Provider compliance results (discussed earlier from paragraph 2.88) can also affect the star ratings.

3.15 Wage subsidies contribute to four of the six provider performance measures (26 Week Outcomes – All Participants; 26 Week Outcomes – Indigenous Participants; 26 Week Outcomes – Time to Placement; and 12 Week Outcomes). However, DESE advised the contribution that wage subsidies make to the overall results of these jobactive provider performance measures cannot be determined. This is similar to other programs under jobactive, where any job placements achieved contribute towards these four performance measures.

3.16 The jobactive star rating system was suspended indefinitely from December 2020 as one of the key components used to calculate the rating, the state final demand trend series³⁰, was no longer being published by the Australian Bureau of Statistics due to volatile economic conditions resulting from COVID-19. DESE advised that providers have since used other sources of information to assess their performance, such as the six performance measures that contributed to the star ratings. However, since this system has been inactive, there has been and will continue to be no way for participants and employers to compare the performance of providers until the New Employment Services Model is introduced in July 2022.

Governance and reporting

Governance committees

3.17 The governance arrangements that DESE has in place for the ongoing management and monitoring of employment programs, including wage subsidies, are at Appendix 5.

3.18 Wage subsidies are not regularly discussed at the employment program committees, and are instead raised on an ‘as needed’ basis. Wage subsidy related papers were provided to the Employment Steering Committee (ESC) and the Employment Branch Manager Committee (EBMC) in 2019 on: data analytics and wage subsidy expected value analysis; kickstart and amending the pre-employment definition; the operation of wage subsidies under the New Employment Services Trial; targeting and simplifying wage subsidies; and evaluation of wage subsidies. Wage subsidies specific items discussed at PISCES in 2021 related to risk alerts (discussed at paragraph 2.80), kickstart as a targeted assurance outcome, and a fraud investigation. No wage subsidy specific papers have been provided to the committees since 2019.

3.19 DESE advised that wage subsidies have been discussed in governance committees more broadly as part of changes under the New Employment Services Model and the Labour Market and Employment Policy Update, but this level of detail is not included in the minutes. There is no regular review or discussion of wage subsidy performance through these committees.

Reporting

3.20 Reporting for wage subsidies is through the employment program dashboards. DESE has provided program dashboards to the Minister’s Office monthly since the commencement of jobactive in 2015 and dashboards were also previously provided under the Restart program. These dashboards include an overarching key employment facts dashboard³¹ and a key program highlights narrative.

3.21 The key program highlights narrative provides a summary of each of the dashboards. For wage subsidies, the key program highlights describes each category of wage subsidies, provides a narrative on the placements to date, increases in placements for the month, achievement of 12 week and 26 week outcome and cost for each of the wage subsidy cohorts.

3.22 The wage subsidies program dashboards primarily report on placements in the program since July 2014. Placements are broken down by cohort: Restart, Youth (including Youth Bonus), Long Term Unemployed and Indigenous, and Parents. The dashboards report on completed, active, and terminated placements in each cohort, and on placement by demographic, such as gender, age, disability, and ex-offender status. Also included are variation on placement figures since the last month and cumulative totals. Budget and expenditure for wage subsidies are also outlined. Graphs describing placements by year, demographic, wage subsidy type and agreement status are also provided in the dashboards.

3.23 The dashboards contain some performance-related information, although this information relates to outputs only. Cumulative 12 and 26 week employment outcomes over the life of the program are shown, as are variations since the previous month. The dashboards also present outcome conversion rates, which are the percentage of eligible wage subsidy placements that remained employed in their placement at either 12 or 26 weeks for each category of participant. DESE is able to measure the comparative outcome rate (discussed at paragraph 3.6 and 3.7), but this information is not included in the program dashboards.

3.24 The dashboards are not presented to the ESC or EBMC for review or information, but they are available on the DESE intranet and provided to DESE’s Employment and Workforce Group executive via email. DESE advised that the dashboards are used by departmental staff for briefings and during Senate Estimates.

3.25 The amount of information presented in the wage subsidies dashboard is dense and primarily descriptive in nature. There has been minimal substantive change in the content of the dashboards over time. It comprises a large table of figures and numerous graphs on one page. Some of the other employment services dashboards included in the pack emphasise key data such as outcomes with infographics, or present key risks and highlights of the program. Other dashboards include program performance measures that demonstrate their effectiveness. The implementation of the New Employment Services Model (NESM) provides an opportunity for DESE to revise and simplify its wage subsidies program dashboard to emphasise the key performance and financial information.

3.26 As discussed in paragraph 1.15, the NESM that will be introduced in July 2022, will target wage subsidies at the least job-ready participants. In order to monitor if this approach is effective in improving employment outcomes for more disadvantaged job seekers, DESE should set relevant measures and targets for monitoring the effectiveness of the performance for wage subsidies in promoting stronger workforce participation and helping job seekers move from welfare to work.

Are suitable evaluation arrangements in place?

3.29 Entities should develop an evaluation strategy during the design and implementation phase of a program so that baseline performance measures can be established to provide useful information on program performance on an ongoing basis, and to also ensure that an appropriate evaluation is conducted at the required point in time.

Evaluation strategy for jobactive

3.30 DESE’s evaluation strategy for jobactive was developed when the jobactive program was designed in 2014-15. The Evaluation Strategy for jobactive set out DESE’s strategy and was published in 2016.

3.31 DESE’s evaluation strategy aims to ‘determine how effectively and efficiently jobactive meets its aims’. DESE does not have a separate approach for evaluating wage subsidies specifically but the evaluation strategy for jobactive identifies that the Employment Fund³² and wage subsidies are among the ‘core programme elements of jobactive which will be evaluated in detail’.

3.32 The evaluation strategy sets out DESE’s analytical approach and data sources. It acknowledges the limitations of the chosen approach and the risks which could arise during the evaluation.

jobactive evaluation

3.33 DESE planned for the evaluation of jobactive to complete three reports: an Interim Report³³ by December 2016; a Meeting Employer Needs Report by March 2018; and a Final Report by July 2019. The Meeting Employer Needs Report was presented to the Employment Services Committee³⁴ in July 2019³⁵, the Interim Report was published in January 2020, and the Final Report had not been finalised as at September 2021. DESE advised the reason for the delay was due to policy changes to jobactive during the course of the evaluation process that required revisions to the evaluation approach. An additional report, Wage subsidies in jobactive, was completed in March 2019, noting this report was not required under the evaluation strategy but was intended to contribute to the evaluation.

3.34 The Meeting Employer Needs Report focusses on employer attitudes and perceptions of jobactive in the first two years of the contract. Key findings in relation to wage subsidies include:

• there was a high awareness of wage subsidies among employers, but awareness was not universal and could be improved;
• employers regarded wage subsidies as an incentive, but not a strong incentive, to engage a participant;
• employers considered that wage subsidies imposed a reasonable administrative burden but reported issues associated with meeting documentary evidence requirements; and
• kickstart payments³⁶ were regarded by providers as being a ‘useful tool for securing employment’ in some circumstances, but fewer than half (45 per cent) of employers who had received a kickstart payment reported that it was an important factor in their decision to hire a participant and providers expressed concern that employment outcomes achieved through kickstart payments were not sustainable.

3.35 The key findings of DESE’s March 2019 research report, Wage subsidies in jobactive, are set out below:

• there were a number of operational factors which increased the administrative burden associated with wage subsidies, including documentary evidence requirements, difficulties in assisting employers with online agreements, ambiguity of the guidelines surrounding attendance and leave, and the perceived lack of flexibility around the management of wage subsidies;
• providers often offered subsidies after a placement had been secured, suggesting that the policy intent behind subsidies — encouraging the employment of eligible participants — was not being met;
• the requirement that participants work for an average of at least 20 hours per week is less than most participants’ annual activity requirement and is generally insufficient to reduce participants’ income support rate to zero;
• kickstart sometimes encouraged employers to employ a participant but did not necessarily lead to ongoing employment outcomes; and
• over half of employers (59 per cent) were unaware of kickstart and fewer than half (45 per cent) who had received a kickstart payment reported that it was an important factor in their decision to employ a participant.

3.36 The Wage subsidies in jobactive report also sets out a number of recommendations to address the above findings:

• wage subsidy policy could be better aligned with other labour market policies such as mutual obligation requirements, the effect of income support status on outcome payments and evidentiary requirements;
• wage subsidy requirements could be more flexible to allow tailored and targeted delivery of wage subsidies, and should facilitate administrative efficiencies;
• the IT system could be improved to assist providers to manage subsidies and to reduce administrative burden;
• providers could be provided with greater exposure to how employers interact with the jobactive website so that they can provide technical support to employers;
• departmental communications could better align across the communication channels and IT systems used by DESE;
• DESE could consider whether providers offering wage subsidies by default or after a placement is secured meets the policy intent behind wage subsidies, and whether wage subsidies are appropriately targeted; and
• the use of wage subsidies by labour hire companies could be further investigated.

3.37 The draft Evaluation of jobactive Final Report findings in relation to wage subsidies were:

• some providers offered subsidies by default instead of targeting the most disadvantaged participants, for whom wage subsidies have a greater effect on employment outcomes;
• the 2018 Employer Wage Subsidy Survey (discussed further at paragraph 3.43) showed that 56 per cent of employers would have hired the participant anyway³⁷;
• although wage subsidies improved employment outcomes, wage subsidy requirements were not necessarily aligned with other employment program requirements (for instance, wage subsidy agreements require an average of 20 work hours per week, which is less than the annual activity requirement for some participants subject to mutual obligation requirements); and
• feedback from providers indicated they found administrative requirements for wage subsidies burdensome, although they accepted that administrative processes had been streamlined since the introduction of jobactive, whereas employers were more satisfied with administrative requirements.³⁸

jobactive wage subsidy surveys

3.38 DESE’s Evaluation, Research and Evidence Branch surveyed providers and employers for the jobactive evaluation.

Provider surveys

3.39 DESE conducted provider surveys in 2016, 2017 and 2019. These surveys sought providers’ views on jobactive generally, and some questions were directly relevant to wage subsidies. These questions related to: whether providers used wage subsidies to facilitate placements and to support employers; provider awareness of wage subsidies; and the administrative burden and the effectiveness of wage subsidies.

3.40 For each survey, DESE advised that around a thousand provider sites³⁹ were invited to respond. Response rates ranged from 84 per cent (870 site responses in 2019), to 92 per cent (985 site responses in 2017).

3.41 Key findings from the provider surveys included:

• almost all providers surveyed often or always informed employers about wage subsidies (97 per cent in 2016, and 98 per cent in 2017);
• 90 per cent of providers surveyed in 2019 offered employers access to wage subsidies before and after matching a participant to a vacancy;
• providers surveyed in 2016 considered that the Restart wage subsidy:
  • made employers more likely to hire a mature age participant (57 per cent agreed or strongly agreed);
  • helped mature age participants overcome employment barriers (59 per cent agreed or strongly agreed); conversely around a quarter of providers considered (32 per cent agreed or strongly agreed) that employers would hire mature age participants irrespective of whether a subsidy was offered;
  • involved a high administrative workload for providers (27 per cent agreed or strongly agreed), and a high administrative workload for employers (41 per cent agreed or strongly agreed); and
• providers surveyed in 2017 considered that the Youth Bonus Wage Subsidy;
  • was known by job seekers and employers (providers agreed or strongly agreed for 48 per cent of employers, and 44 per cent for participants);
  • was valued as a tool to help secure employment outcomes for young people by case managers and employment consultants (86 percent of agreed or strongly agreed); and
  • involved a high administrative workload for providers (24 per cent agreed or strongly agreed).

3.42 DESE conducted wage subsidy fieldwork in 2018 that involved in-person and telephone interviews with staff from ten jobactive providers. A summary of feedback from jobactive staff consulted through this process was largely consistent with the Wage subsidies in jobactive research discussed earlier at paragraph 3.35.

Employer surveys

3.43 DESE conducted employer surveys in 2017 and 2018 to solicit employers’ views about their experiences of jobactive. While the 2017 survey sought employers’ views on jobactive generally, the 2018 survey related to wage subsidies specifically. Questions asked in 2018 related, among other things, to awareness and use of wage subsidies, administrative requirements, employment outcomes, and willingness to use wage subsidies in future.

3.44 Invitations to respond to the 2018 survey were sent to 20,331 employers. Of these, 2,110 (10.4 per cent) completed the survey and 495 (2.4 per cent) partially completed the survey.

3.45 Key findings from the 2018 employer survey included:

• a majority of employers who received wage subsidies considered that their subsidised employee was suitable in most respects⁴⁰, with the exception that only 46 per cent believed that the participant had the appropriate qualifications;
• 31 per cent of employers used the wage subsidy to tailor employment conditions;
• 57 per cent of employers found out about wage subsidies through their employment service provider, and 62 per cent found out after they had already decided to employ the participant (in some cases, after the participant had already started work);
• 63 per cent of businesses considered that employing the participant was extremely or somewhat easy and seven per cent considered that it was extremely or somewhat difficult;
• on average, employers spent 11 hours on the process of receiving and signing the head agreement and payment schedules and 5 hours on providing evidence to receive wage subsidy payments;
• 76 per cent of employers still employed the participant at the time of the survey; and
• approximately three-quarters of employers who had used wage subsidies were willing to use wage subsidies again, and a further tenth reported a conditional willingness to use wage subsidies again.

Youth Jobs PaTH evaluation report

3.46 Participants in the Youth Jobs PaTH (PaTH) program⁴¹ may attract the Youth Bonus Wage Subsidy. As PaTH is a separate program from jobactive (although jobactive and Transition to Work (TtW) participants are eligible to participate in PaTH), PaTH was not covered by the evaluation strategy for jobactive and was separately evaluated.

3.47 In 2017, DESE commissioned the Social Research Centre, a subsidiary of the Australian National University, to conduct an evaluation of PaTH. The Youth Jobs PaTH Evaluation Report was published in 2020. Chapter 6 of the report discusses the Youth Bonus Wage Subsidy (Youth Bonus). Key findings included:

• relative to the eligible caseload, PaTH participants in a wage subsidised placement were less likely to be female, disabled, Indigenous, a parent, or lacking a stable residence⁴²;
• there was a high level of awareness of Youth Bonus among providers (99 per cent for jobactive providers and 100 per cent for TtW providers) and a variable level of awareness among participants (45 per cent of jobactive participants and 72 per cent of TtW participants) and employers (49 per cent of jobactive respondents and 69 per cent of TtW respondents);
• 86 per cent of jobactive respondents and 91 per cent of TtW provider respondents reported that case managers and employment consultants regarded Youth Bonus as useful in helping participants into employment;
• 73 per cent of employers responding to the 2018 PaTH Host Business Survey reported that Youth Bonus influenced their decision to hire a participant and 93 per cent agreed that wage subsidies were a useful incentive to hire;
• most young people valued wage subsidies as an incentive for employers to consider employing a young person; and
• 25 per cent of jobactive providers and 37 per cent of TtW providers expressed concerns about the administration burden of managing wage subsidies, 88 per cent of employers considered that the administrative burden was reasonable.

Reporting of evaluation findings

3.48 On 21 May 2019 EBMC reviewed the findings of the wage subsidy fieldwork (see paragraph 3.42 for discussion of the fieldwork) and discussed the administration of wage subsidies, providers’ use of subsidies, kickstart, the quality and retention of subsidised participants, employer satisfaction with subsidies, labour hire companies’ use of subsidies and the interaction between subsidies and other aspects of jobactive. On 4 July 2019, EBMC reported the findings to ESC, which endorsed the decision to brief the Secretary, however as at September 2021 this had yet to occur.

Policy changes influenced by evaluation findings

3.49 There is some evidence that evaluation findings are taken into account when changes to wage subsidy policy are considered. For example, in April 2019 a paper was submitted to ESC that recommended the removal of kickstart on the grounds that DESE’s evaluators had found kickstart did not significantly contribute to ongoing employment outcomes (as set out in paragraphs 3.34 and 3.35 above), that kickstart was associated with a high level of non-compliance, and that the departmental resources required to assure compliance with kickstart requirements were excessive.

3.50 In June 2019, ESC endorsed the recommendation to remove kickstart, effective October 2019. DESE advised that as kickstart was considered a ‘micro policy’, the decision to remove it was made on the authority of the Deputy Secretary Employment in consultation with the Department of the Prime Minister and Cabinet, and the Department of Finance.

Changes to wage subsidies in the 2021–22 Budget

3.51 The Australian Government announced in the 2021–22 Budget that NESM will replace jobactive from July 2022. TtW will continue to operate as the specialist youth employment service under NESM, and ParentsNext will continue to operate under a separate contract.

3.52 Changes to wage subsidies policy were announced in the 2021–22 Budget. Changes under jobactive commenced in July 2021, and changes as part of the rollout of NESM will commence in July 2022. Some of these changes were informed by DESE’s draft evaluation of jobactive. Table 3.4 sets out ANAO analysis of key changes to wage subsidies and any related findings from the draft evaluation and recommendations made in the Wage subsidies in jobactive report, suggesting that there is some relationship between evaluation findings and related recommendations and changes made to wage subsidy policy.

Table 3.4: Proposed changes to wage subsidies and related evaluation findings

Note a: Under NESM, the Job Seeker Classification Instrument, currently used to allocate participants to streams within jobactive, will continue to be used to determine participants’ servicing needs. The most job-ready participants will self-manage their job search online with support from the Digital Services Contact Centre managed by DESE. Participants facing the highest barriers to employment will receive Enhanced Services through employment services providers.

Source: ANAO analysis

3.53 DESE’s 2021–22 funding proposal recommending these policy changes made reference to the jobactive evaluation, noting that the evaluation evidence supported targeting wage subsidies to participants who faced the greatest barriers to employment.

Does the design of the funding arrangements for wage subsidies support the achievement of program objectives?

3.54 Funding arrangements should be appropriate and align with the intended objectives of a program. In addition, budget decisions need to be informed by a sound evidence base to ensure that funds are allocated appropriately and can meet demand.

3.55 The jobactive program is funded through an annual appropriation. The jobactive appropriation funds the providers outcome payments⁴³, and other jobactive program components including wage subsidies. Wage subsidies have been categorised into three funding pools by DESE for administrative purposes:

• demand-driven pool — funds Youth Bonus wage subsidies only;
• capped wage subsidy pool — funded most wage subsidies from 1 January 2017 to 1 January 2019, and has since been used to fund wage subsidies for ParentsNext, TtW, DES and CDP participants; and
• Employment Fund — funds a range of eligible purchase that can be made to support a job seeker, ranging from accredited training, relocation assistance, to wage subsidies.

3.56 Table 3.5 sets out the funding pool budgets and the wage subsidy expenditure from the three pools. Due to the design of the Employment Fund (see paragraph 3.65), the budget line in this instance is for all eligible purchases, and not only wage subsidies. DESE advised that funding re-allocation occurs between the funding pools within the jobactive appropriation, where overspend can be absorbed by underspends.

Table 3.5: Budget and expenditure for wage subsidy funding pools ($m)

Note a: DESE budget figures reflect estimates leading into the relevant financial period, and do not include any subsequent adjustments.

Source: DESE documentation

Demand-driven pool

3.57 In the 2016–17 Budget, the Australian Government announced Youth Jobs PaTH as part of the Youth Employment Package and committed $762.6 million over four years. PaTH aims to improve young people’s employability skills and provide them with practical work experience. The Youth Bonus Wage Subsidy was introduced as part of the PaTH package.

3.58 The Youth Bonus Wage Subsidy is demand-driven and the level of associated expenditure is therefore determined by the number of participants and the degree of disadvantage experienced by young people at risk of unemployment. Providers access the demand-driven Youth Bonus Wage Subsidy pool on a reimbursement basis.

3.59 In order to ensure that there is sufficient funding for the Youth Bonus Wage Subsidy to cover the level of demand, DESE and the Department of Finance review actual expenditure on the subsidies and adjust expenditure estimates for the Mid-Year Economic and Fiscal Outlook, prior to the Expenditure Review Committee consideration of budget proposals, and at the Budget.

Capped wage subsidy pool

3.60 From 1 January 2017 to 1 January 2019, wage subsidies (other than the Youth Bonus wage subsidy) were funded from the Capped wage subsidy pool (Capped Pool).

3.61 A DESE November 2017 briefing outlined that the Capped Pool had a fixed budget of $218.6 million for the period 2017–18 to 2020–21. Wage subsidy expenditure exceeded expectations due to a range of policy changes implemented in January 2017, including:

• the introduction of kickstart;
• reducing the wage subsidy period from 12 months to six months;
• allowing employers to average the 20 hours of work per week requirement over the 26 week age subsidy period; and
• enabling employers to back-date agreements up to 84 days after the start of an employment placement and submitting reimbursement claims up to 56 days after the agreement ends.

3.62 In November 2017, DESE alerted the Minister for Employment to the risk that the high take-up of wage subsidies could prematurely exhaust funding for the Capped Pool, which could have resulted in limited availability of wage subsidies. To alleviate financial pressure on the Capped Pool, jobactive providers were directed to seek reimbursement for wage subsidies (other than for the Youth Bonus Wage Subsidy) from the Employment Fund instead of the Capped Pool for placements beginning from 1 January 2019.^, DESE’s decision to move the reimbursement of wage subsidies to the Employment Fund was also partly informed by evaluation evidence which indicated that providers were not offering subsidies in a targeted manner (see paragraph 3.37 for discussion of relevant evaluation findings).

3.63 ParentsNext, TtW, DES and CDP providers do not have access to the Employment Fund (a pool of funds available to jobactive providers). As a result, an amount in the Capped Pool was retained from January 2019 to allow these programs to continue accessing funding for wage subsidies excluding Youth Bonus wage subsidy. The Capped Pool is expected to cease on 30 June 2022. However, DESE advised that wage subsidies will continue to be available as part of ParentsNext and TtW under other funding arrangements from 1 July 2022.

Employment Fund

3.64 As discussed in paragraph 3.62, from January 2019 jobactive providers have been required to claim wage subsidy (other than the Youth Bonus wage subsidy) reimbursement from the Employment Fund due to financial pressures on the Capped Pool.

3.65 The Employment Fund is a flexible pool of funds that jobactive providers can claim reimbursement from after providing employment program support to participants. In addition to wage subsidies, this support may include providing participants with work-related equipment, licences or training. The Employment Fund is designed to allow providers flexibility, to allocate funding support according to participant need and across different regional areas.

3.66 Under the Employment Fund, a once-only credit is made to a provider’s notional bank balance when a job seeker commences with a jobactive provider.⁴⁴ Credits are paid into the Employment Fund as a notional bank balance for a provider site (location).⁴⁵ Credits can be transferred between a provider’s site locations and when a participant transfers to another provider.

3.67 When providers create a Wage Subsidy Agreement for a participant, the total wage subsidy amount will be committed out of the provider site’s credit balance. At the end of the Wage Subsidy Agreement period, any unclaimed wage subsidy credits return to the provider’s site credit balance. Providers must claim reimbursement within 56 days from the end of wage subsidy period, and documentary evidence must be retained in order to claim any reimbursements.

3.68 Total wage subsidy expenditure from the Employment Fund is monitored monthly by the ESC and reported in the monthly wage subsidies dashboards to the Minister.

Wage subsidies under NESM

3.69 Under NESM, Enhanced Services providers will continue to be reimbursed through the Employment Fund after making wage subsidy payments to employers. Enhanced Services and TtW providers will continue to access Youth Bonus wage subsidies through separate demand-driven funding. Due to the abolition of the Capped Pool, ParentsNext providers will be reimbursed through the ParentsNext Participation Fund.⁴⁶

3.70 As set out in Table 3.6 expenditure on the Youth Bonus Wage Subsidy is projected to be lower under NESM than would have been the case if the current jobactive program was extended. This is because the most job-ready job seekers, who currently account for the majority of Youth Bonus Wage Subsidy expenditure, will not be eligible for wage subsidies under NESM.

Table 3.6: Youth Bonus Wage Subsidy budget forward estimates — NESM vs jobactive ($m)

Note a: DESE budget forward estimate figures immediately prior to the 2021–22 Budget.

Note b: DESE budget forward estimate figures immediately prior to the 2020–21 Budget.

Source: DESE information

3.71 DESE was unable to provide a forecast of overall wage subsidy expenditure under NESM as it only forecasts total Employment Fund expenditure and does not split Employment Fund expenditure into program subcategories. Forward estimates for the Employment Fund over the period 2022–23 to 2024–25 are set out in the Table 3.7.

Table 3.7: Budget forward estimates for the Employment Fund ($m)

Source: DESE information

3.72 DESE has monitored wage subsidy expenditure against budget and adjusted funding methods to better align over time with policy changes and objectives. There is some limited evidence that changes have also been informed by evaluation findings and lessons learned.

Appendix 1 Department of Education, Skills and Employment response

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 has encouraged the ANAO to consider ways in which the ANAO could capture and describe some of these impacts. The ANAO’s 2021–22 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.

• In May 2021, the Department of Education, Skills and Employment updated the Managing Wage Subsidies Guideline (version 5) to address new policy changes which took effect on 1 July 2021. The updated version also addressed some minor discrepancies that the ANAO found in the previous version.
• DESE identified that internal reporting to governance groups and management on the RSS results was incorrect. This was due to the sampling methodology and reporting approach applied, and that some values were extracted from an incorrect source. DESE intended to correct the reporting for the next cycle, including updating prior cycle results (paragraph 2.60).

Appendix 3 Department of Education, Skills and Employment wage subsidies process

Appendix 4 Department of Education, Skills and Employment Portfolio Budget Statement (PBS) and Corporate Plan performance indicators to which wage subsidies contribute

Appendix 5 Governance committees and responsibilities

Note: The joint ESC is a full meeting of all SES officers in the Employment and Workforce Group and SES officers from the Digital Solutions Division and the Foundation Skills Branch, Skills and Training Division.
From 13 September 2021 the ESC became the Workforce and Employment Steering Committee (WESC) and the EBMC became the Employment and Workforce Assistant Secretaries’ Committee (EAC). Membership and responsibilities of the committees remains the same.

Source: DESE documentation.