Monday 3 June 2024

Reforming remote employment: the ANAO performance audit

                                                                                     You shall mark

Many a duteous and knee-crooking knave

That, doting on his own obsequious bondage,

Wears out his time, much like his master’s ass,

For naught but provender, and when he’s old,

cashiered.

Othello, Act one, Scene one.

 

The ANAO recently released a Performance Audit on remote employment programs (link here). In my view it presents a devastating account of bureaucratic and ministerial incompetence, albeit one that spans seven years, two ministers and a change of government. Before seeking to unpack the ANAO findings, it is worthwhile providing some context for what we are dealing with.

 

The existing program, known as the Community Development Program (CDP) operates only in remote Australia, and is simultaneously a program ostensibly aimed at assisting unemployed citizens to find employment (thus an employment program) and the mechanism by which income support payments are provided (a social security program). It has around 41,000 participants of whom around 86% or 35,000 identify as Indigenous. On 1 June, The Australian reported (link here) that the Government was planning to reintroduce ‘mutual obligation’ into the scheme by requiring participants to ‘work for the dole’. These requirements fell by the wayside during Covid lockdowns and are not being strictly enforced.

 

Arguably, the job search objective is substantially misguided given the structural absence of a market economy across remote Australia (with the exception of major towns and mine sites). Attempts to enforce job search requirements have been implemented punitively in the past and led to astronomical levels of breaches which involved suspension of income support payments. At the same time, The Australian article mentioned above cited statistics indicating that in 2022-23, only 603 participants were placed in jobs lasting 26 weeks or more, that is a job placement rate of only 1.4%. Moreover, the implicit assumption that suspension of payments will incentivise compliance are based on assumptions that do not necessarily operate in Indigenous cultural settings.

 

There is in my view a strong case for undertaking a rigorous and independent policy review or evaluation aimed at unravelling the implicit assumptions that underpin the existing CDP and perhaps the future Remote Jobs and Economic Development Program (RJEDP) announced in May this year by the Prime Minister (link here). In my view there is a case for splitting CDP/RJEDP into its constituent parts, an income support program and a job creation program. Such a shift would nevertheless require some deep policy consideration to consider the best way to implement each element. IT is already apparent that the current outsourced model for CDP is not fit for purpose (see below).  It seems likely that neither the Government nor the NIAA understand these dynamics given that they have been unable after six years notice to develop a clear program logic for the new program (see ANAO para. 4.39 to 4.56).

 

The Productivity Commission Dash Board on Closing the Gap lists two targets related to employment: target 7 (link here) and target 8 (link here):

 

Target 7: By 2031, increase the proportion of Aboriginal and Torres Strait Islander youth (15-24 years) who are in employment, education or training to 67%. Nationally in 2021, 58.0% of Aboriginal and Torres Strait Islander people aged 15–24 years were fully engaged in employment, education or training (figure CtG7.1). This is an increase from 57.2% in 2016 (the baseline year).

 

However in remote and very remote regions, since 2016, there has been a regression, with the proportion dropping to 45.2% in remote regions and dropping 30.2% in very remote regions. Clearly in remote regions, for the 15 to 24 year cohort, government programs in relation to employment, education and training are failing to gain traction, and require adjustment and/or complete overhaul. For comparison the national statistic for non-Indigenous members of this cohort is 79.9%. The CtG target is 13% below current mainstream levels.

 

Target 8: By 2031, increase the proportion of Aboriginal and Torres Strait Islander people aged 25-64 who are employed to 62%. Nationally in 2021, 55.7% of Aboriginal and Torres Strait Islander people aged 25–64 years were employed (figure CtG8.1). This is an increase from 51.0% in 2016 (the baseline year).

Nationally in 2021, the proportion of Aboriginal and Torres Strait Islander people aged 25–64 years who were employed was highest in major cities (62.1%) (figure CtG8.4). The proportions declined as remoteness increased, [down to 45.5% in remote and] down to 35.0% for people living in very remote areas. Since the 2016 baseline year, the employment rate increased in all areas, except for people living in very remote areas where it decreased (less than one percentage point).

 

The national figure for non-Indigenous Australians was 77.7% in 2021, so the 2031 CtG target is itself only partial.

 

The bottom line is that under the national Agreement on Closing the Gap, Australian governments have set employment related targets well below mainstream levels for all age groups, and under current policy settings are making, at best, insignificant progress on achieving even those limited targets in remote Australia in particular. Of course it is worth remembering that the achievement of the national target is feasible without it being met in remote Australia where the deepest disadvantage occurs.

 

This background demonstrates why the effectiveness of the CDP and its replacement is crucial both to the life opportunities of tens of thousands of individuals, but also to the social capital of remote communities. The ANAO performance audit of remote employment programs is thus both timely and important as it shines a light on these issues notwithstanding that its focus is primarily on efficiency and not effectiveness.

 

The ANAO report

 

The background to the performance audit is spelt out in the Summary and Recommendations section of the ANAO report:

 

3. A 2017 Senate committee inquiry into the CDP concluded that the program should not continue in its current form due to negative impacts on participants and their communities. Since 2017, the Australian Government has signalled its intent to fundamentally reform or replace the CDP through various announcements and measures. On 13 February 2024, the Australian Government announced a new ‘Remote Jobs and Economic Development Program’, which would commence in the second half of 2024 and fund 3,000 jobs over three years.

 

Rationale for undertaking the audit

 

4. Remote employment programs aim to assist people in thin labour markets to secure employment. Since 2015 the CDP has been the primary Australian Government remote employment program. The CDP covers 75 per cent of Australia’s land mass in over 1,000 communities. In 2022–23, $384.6 million was expended on CDP payments. As at June 2023, there were approximately 41,000 people participating in the CDP, of whom approximately 86 per cent identified as Aboriginal or Torres Strait Islander.

 

5. Since 2017, successive Australian Governments have stated an intention to fundamentally reform or replace the CDP.

 

6. This audit provides the Australian Parliament with assurance on whether the NIAA has been effectively managing the transition from the CDP to a new remote employment program, including its processes to design a new program.

 

I don’t propose to undertake a comprehensive analysis of this performance report. The overarching conclusion, spelt out in para 9, was that the NIAA’s processes to design and transition to a new remote employment program, as at January 2024, were partly effective. The report goes into considerable detail regarding the history, various internal  processes, the design and implementation of a series of trials, and the surprising and in my view extraordinary absence of management oversight brought to bear throughout the transition process from 2017 to 2024. I recommend interested readers take a closer look at the meticulous ANAO analysis. At virtually every point, they find that the NIAA’s performance in the assigned tasks involved in transitioning to a new program was ‘partly effective’.

 

A major theme of this post is that the ANAO in focussing on process (efficiency or performance) it has understated the extraordinary failure of the CDP to achieve positive outcomes. Just to reinforce the illogicality and inadequacy of some of the ANAO assessments, it is worth quoting some text from para 15 of the ANAO report:

 

In 2023, the NIAA extended 63 out of 64 existing CDP provider grant agreements, despite 41 per cent having an average performance rating of ‘below requirements’ and despite failure of some providers to ‘fully meet’ unclear selection criteria. Value for money associated with each grant agreement extension, particularly for those providers with a history of underperformance, was not clearly articulated. The NIAA did not take advantage of the opportunity presented by agreement extension negotiations to address provider performance issues in agreement terms and conditions.

 

Not only do these contract extensions involve over five hundred million dollars in Commonwealth expenditures, but they fundamentally breach an essential requirement for outsourced public policy: the crucial requirement for rigorous regulation of private sector providers. Without such regulatory oversight, the rationale for outsourcing these functions falls away. Partly effective indeed! For those interested in the excruciating detail, I point you to paras 2.49 to 2.72 in the ANAO report, including what I consider to be a pathetic recommendation for remediation into the future.

 

Unfortunately, what the ANAO does not do is take the final step and make an assessment of the policy outcomes to date, and the likely policy outcome once the program is finally in operation in the second half of this year. In a previous post (link here), I discussed how this is a function of the ANAO’s limited remit and its concern not to stray into political criticism. Nevertheless, what matters to both the 41,000 CDP participants at any point in time, and to the broader community, is whether the proposed changes will produce better outcomes, not whether the processes adopted were up to scratch. Of course, good processes are important, even necessary, but they are not a guarantee of good outcomes.

 

In terms of an outcome, after seven years of procrastination, the ANAO had this to say regarding the design of the new program announced by the Prime Minister this year:

 

21. The NIAA collaborated with other government agencies in the development of draft policy advice in 2023 and 2024, however timeframes were too short to allow for effective collaboration. Design issues requiring cross-government collaboration were not resolved. In February 2024, the government announced a ‘Remote Jobs and Economic Development Program’, which would commence in the second half of 2024 and fund 3,000 jobs over three years. Advice provided to government in January 2024 about high-level features of the new program drew on some findings from consultations and trials, however, the high-level features of the new program (including the number of jobs to be created) were not supported by modelling or other evidence. At the time of its announcement, there was no program logic or evaluation framework for the newly announced program. (See paragraphs 4.39 to 4.56)

 

It is crystal clear that the pre-budget announcement was conjured for its political effect rather than developed methodically. As I previously noted (link here), the Prime Minister’s announcement of the new program was built around the proposition that the CDP was a failed program, and that the government would move to fully fund up to 3000 jobs. Yet the current state of play leaves 37,000 participants on the CDP and the new scheme supposedly being implemented in the second half of 2024. There is an extremely strong case for governments to fund real jobs across remote Australia, but 3000 is pathetically unambitious, and appears designed to create the appearance of action and reform rather than actually deliver it. According to the ANAO report, while the Government stayed silent, the NIAA website revealed that the new jobs funding was for three years only, making the renewal of the program without an evaluation plan contingent on the next government

 

My take-out after reading the ANAO’s detailed analysis was that the NIAA was effectively asleep at the wheel for long periods since 2017, that its Executive Committee and senior management were not monitoring the performance of the CDP and nor were they driving the process of designing and implementing a new remote employment program, that its Audit and Risk committee was being drip fed rather than proactively asking the hard questions, and that the NIAA Evaluation Advisory Committee were missing in action. Moreover, the complex stream of ever-changing cross agency coordination committees documented in the report clearly failed to produce a timely outcome. Of course, one might reasonably ask: where were the responsible Ministers while this fiasco was unfolding?

 

The bottom line is that there is nothing in the announcements to date which will shift the dial on the extraordinary underperformance of both the former LNP and the current Labor Governments in relation to CtG targets 7 and 8 most particularly in remote Australia.

 

Unfortunately, there is a game being played here whereby governments when not under pressure from powerful interests resort to flim flam and a song and dance routine aimed at persuading interested parties (and the commentariat interpreting for the public at large) that they are doing something; the ANAO analyse performance and identify a range of process deficiencies (but not effectiveness); the agency being scrutinised welcomes the report and promises to do better (assisted by the fact that the ANAO recommendations relate to processes only), and the media decide the issues are too complicated to warrant close reading and effective reporting. Rinse and repeat.

 

Finally, I should point out the potential for the ANAO’s core language across the breadth of its performance reporting to mislead. By using an implicit rating system of effective, partially effective, or ineffective to assess agency compliance with the relevant rules governing performance (ie efficiency or process), it subliminally signals that it is assessing outcomes (ie effectiveness). As I pointed out in a previous post, the ANAO does not assess effectiveness, and leaves that to evaluations, which are overwhelmingly undertaken by agencies and are rarely truly independent, even when outsourced to reputable major consulting firms (did anyone mention PwC ?; or the recent revelation by Greens Senator Barbara Pocock of consulting firms providing work pro-bono to agencies? (link here $)). For anyone who doubts my assessment that the Commonwealth public sector evaluation framework is not fit for purpose, I suggest they ask themselves, why is it that neither the previous nor the current Government have provided a response to the Productivity Commission’s 2020 report: Indigenous Evaluation Strategy (link here). It has been allowed to sink without trace.  

 

For what its worth, my effectiveness ratings of the various actors’ involved in reforming the delivery of remote employment services are as follows: NIAA entirely ineffective; relevant Governments and ministers: regressively ineffective. The accuracy of my assessment will only be determined in around five to seven years in the event (far from guaranteed) that an independent evaluation of the Remote Jobs and Economic Development Program is undertaken, and it has become clear whether the current regressive trends in achieving targets seven and eight of the Closing the Gap process have been reversed and the modest targets achieved. I sincerely hope that I am wrong. It is however a very poor reflection on our systems of governance oversight and policy development that we do not have access to an independent evaluation of the CDP now.

 

 

3 June 2024

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