In the 18 months from the start of CDP on 1 July 2015 to the end of December 2016, 245,307 financial penalties were applied to CDP participants.

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1 24 April 217 Social security penalties applied to participants in the Community Development Programme Update including data for quarter ending December 216 (including a note on what we learned from Senate Estimates) Lisa Fowkes, Research Scholar, Centre for Aboriginal Economic Policy Research, ANU Lisa.fowkes@anu.edu.au Key points There was a decline in the number of penalties applied in the December 216 from the previous quarter from 54,977 in the September 216 quarter, to 43,656 in the December quarter. The holiday period including provider close downs between 19 December and 2 January - would explain some or all of this decline. In the 18 months from the start of CDP on 1 July 215 to the end of December 216, 245,37 financial penalties were applied to CDP participants. 35,18 No Show No Pay Penalties for non-attendance at activities were applied to CDP participants in the quarter ending December 216. This exceeded the total number of such penalties applied to jobactive participants in the same quarter (28,378), even though total penalties for jobactive participants edged above total penalties for CDP participants in the quarter for the first time. 755 serious penalties for persistent non compliance were applied to CDP participants in this quarter, again a decline from the September quarter. However CDP participants accounted for 8% of these penalties, whilst accounting for less than 5% of the caseload. There appears to a of systematic bias within the Comprehensive Compliance Assessment (CCA) process, with 58% of CCAs conducted in relation to CDP clients resulting in an adverse finding, compared with 23% of other DHS clients in the December 216 quarter. Nationally, Indigenous clients were more than twice as likely as non-indigenous clients to have an adverse finding from a CCA (52% vs 25%) Background From 1 July 215 unemployed job seekers in the Community Development Programme (CDP) with a full time work capacity were required to Work for the Dole for 25 hours per week, scheduled over 5 days per week, throughout the year. This is substantially more onerous than the requirements of other jobseekers, for example those in the jobactive program. The Department of Employment releases information about penalties applied to unemployed income support recipients on a quarterly basis. This paper presents trends in the application of penalties using those reports, which now cover the period to 3 December 216 including the first 18 months of CDP and jobactive. 1

2 NUMBER OF PENALTIES In addition, at the end of the paper, there is an overview of some of the information about CDP that was released in response to questions at the last Senate Estimates hearings. Total financial penalties Chart 1 shows the total number of financial penalties applied to CDP participants (who were in RJCP prior to 1 July 215) compared with the total number of financial penalties applied to jobactive participants (formerly JSA). It does not include income support suspensions. There was a decline the number of penalties applied to CDP participants in the December 216 quarter the lowest quarterly figure for a year. Some or all of this decline can be explained by the closure of CDP providers from 19 December to 2 January and any periods of allowed leave from WfD given to jobseekers over that period. In the 18 months since the CDP began, 245,37 penalties have been applied to CDP participants. While we don t have updated information about how many individuals have been penalised, we know that, in 215/16, 2,49 individual CDP participants were penalised, 9% of whom were Indigenous 1. As expected, the number of penalties applied under the mainstream employment program has increased over time (Chart 1), so that the December 216 quarter is the first in which total CDP penalties did not exceed total penalties in jobactive. CDP participants continued to receive more penalties than those in jobactive for failing to attend Work for the Dole and for persistent noncompliance (see below). There are approximately 34, jobseekers in CDP, compared to around 76, in jobactive it is less than 1/2 th the size of the larger program. In other words, in the December 216 quarter, there was a drop in the rate at which penalties were applied to CDP participants down to approximately 2 times that applied to jobactive participants. There is a long way to go before penalties are proportionate across the two programs. Chart 1 Total financial penalties in mainstream (JSA/jobactive) vs remote (RJCP/CDP) program All financial penalties - mainstream and remote programs compared (CDP and jobactive implemented from Sept 215 quarter) JSA/jobactive total RJCP/CDP Senate Finance and Public Administration Legislation Committee, Supplementary Estimates , Answers to Questions on Notice No 126, December 216 (Sen McCarthy 2

3 Table 1 Total financial penalties under CDP & jobactive Quarter ending CDP jobactive Dec Sep Jun Mar Dec Sep Penalties applied for failing to attend Work for the Dole The CDP funding model links provider fees to Work for the Dole attendance. This means that, in order for the provider to get paid service fees for a particular jobseeker who is eligible for WfD, that person must either attend their Work for the Dole activity, provide a valid excuse for nonattendance, or the provider must recommend that a penalty be imposed and then re-engage them in Work for the Dole within 2 weeks. So, while the relevant rules (the jobseeker compliance framework) still state that providers can choose the best means of engaging jobseekers, those CDP providers who choose approaches other than breaching are themselves penalised financially. Chart 2 shows the number of penalties applied for non-attendance in Work for the Dole activities. Each of these No Show No Pay penalties means the loss of 1/1 th of fortnightly income support income which is not backpaid. In the quarter to end December 216, 35,18 penalties were applied to CDP participants, while 28,378 of these penalties were applied to their counterparts in jobactive. Again, the closedown period and any associated leave are likely to account for some or all of the decline from previous quarters. Chart 2 No show no pay penalties JSA/jobactive and RJCP/CDP compared No Show No Pay penalties - JSA/jobactive compared with RJCP/CDP ,217 4,4 41, , JSA/jobactive RJCP/CDP 3

4 Serious penalties Serious penalties can be either work related (eg refusing suitable work, causing unemployment by own actions) or as a result of persistent non compliance with mutual obligation (ie program) requirements. There has been some recent political comment on unemployed people who refuse work. Under CDP over 95% of serious penalties are for persistent non compliance with program requirements rather than refusal of work. While jobseekers that are in CDP account for 8% of all persistent non compliance penalties applied under the Social Security Act, they only account for between 1 and 2% of those that relate to work refusal 184 incidents in the last 12 months. Persistent non-compliance penalties are applied when there have been 3 minor penalties in the previous six months (or since the last serious failure ), and DHS finds that the non -compliance is deliberate. Serious penalties can mean up to 8 weeks without income support. Chart 3 shows the number of penalties for persistent non-compliance applied to CDP participants compared with the number applied to jobactive participants. As elsewhere, the number of penalties applied in the December 216 quarter declined. However the difference between the number of serious penalties applied to CDP and jobactive participants is striking. Since the start of CDP, 35,311 penalties for persistent non-compliance have been applied to CDP participants. PM&C has reported that these were applied to 12,142 individual jobseekers in CDP 2. Chart 3 Penalties for persistent non compliance compared Persistent non compliance penalties compared ,148 5, ,432 JSA/jobactive RJCP/CDP When 8 week penalties are applied, jobseekers are given the option of working off their 8 week penalty by doing a compliance activity generally 25 hours per week Work for the Dole. For most unemployed people this level of participation is significantly more than their normal obligation. 2 Senate Finance and Public Administration Legislation Committee, Supplementary Estimates , Answers to Questions on Notice No 97, April 217 (Sen McCarthy) 4

5 However for most CDP participants a compliance activity does not mean working any more than their normal required hours (ie. 25 hours per week). In response to a question in Senate Estimates, PM&C has now advised that in the financial year, 77.9% of 8 week penalties applied to CDP participants were fully waived (that is, entirely worked off ) and 22.1% were partially waived, that is, some portion of the 8 week non-payment period was served 3. PM&C reported that, in the cases where a partial waiver was applied, the average income support lost was 2.4 weeks. The fact that around 95% of 8 week penalties are fully or partially waived is significant. Still, in the first 18 months of CDP, 1,963 8 week penalties have been fully served and there were around 7,3 instances where, on average, 2.4 weeks income support was lost 4. These are substantial amounts of income support in poor communities and households, coming on top of the 29,73 single day penalties over this period applied to people in the program. It is interesting (and worrying) that the number of people serving a full 8 week penalty period has increased overall since the start of the program, just as the incidence of multiple failures has increased (Chart 4). Chart 4 Number of 8 week penalties fully served (CDP participants) week penalties fully served (CDP) Source: Senate Finance and Public Administration Legislation Committee, Supplementary Estimates , Answers to Questions on Notice No 12 April Given the recent comments of Government MPs about cracking down on unemployed people who fail to comply with their obligations, it is worth noting the disproportionate impact any hardening of penalties for serious failures would have on Indigenous people - Chart Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Quarter ending 3 Senate Finance and Public Administration Legislation Committee, Supplementary Estimates , Answers to Questions on Notice No 99, April 217 (Sen Siewart) 4 Assumes that the rate and average days lost in 215/16 continued in the second 6 months of 216 5

6 Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Chart 5 Serious failures - Indigenous vs non Indigenous - all programs from Serious penalties - Indigenous vs non Indigenous from 28 Indigenous non Indigenous The impact of CDP s implementation on Indigenous people is striking. While more onerous requirements in CDP are one reason for this gap, there is also strong evidence of systematic bias in the CCA process explored in the next section. Comprehensive Compliance Assessments (CCAs) For a serious penalty to be applied, DHS must find that non-compliance is intentional, and not the result of underlying non-vocational issues (eg mental illness, cognitive impairment, personal crisis) experienced by the jobseeker. Chart 6 shows the percentage of CCAs that result in a serious penalty being applied by DHS for CDP jobseekers compared with all jobseekers in the system. It shows that DHS has made findings of persistent non-compliance in relation to RJCP/CDP jobseekers at a higher rate throughout the period, with the gap widening in the last 9 months. Despite the well known health, disability, and circumstantial factors that might contribute to difficulties in remote jobseekers complying with program rules, DHS has been much less likely to identify these as contributing factors to non-compliance for these jobseekers than it has for their non-remote counterparts. The failure by DHS to properly identify, assess and take account of serious health, disability and other issues faced by remote Indigenous Australians was also noted in the Commonwealth Ombudsman s December 216 report: Department of Human Services : accessibility of the Disability Support Pension for remote Indigenous Australians. The reasons for the discrepancy in treatment in the CCA process which is meant to protect the most vulnerable - needs investigation. 6

7 Chart 6 Percentage of CCAs resulting in a 'persistent non compliance' finding Rate of persistent non compliance findings compared 8% 72% 71% 7% 6% 63% 58% 54% 59% 58% 5% 4% 3% 39.9% 41.9% 4.1% 4.8% 47% 3.4% 4% 46% 27.3% 26.9% 24.8% 23% 23% 2% 1% % Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 RJCP/CDPjobseekers All others While we can t break down CDP participants being found to be persistently non compliant between Indigenous and non Indigenous participants within that program, we can get nation wide figures for Indigenous vs non Indigenous identified participants. Indigenous people referred for a CCA are around twice as likely to be found to be persistently non compliant as their non Indigenous counterparts with the gap very closely aligned to the CDP vs non-cdp gap in Chart 6. Table 2 Adverse outcomes of Comprehensive Compliance Assessments by Indigenous / non-indigenous identification Indigenous Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 TOTAL Persist non comp Total CCAs Adverse findings as % 46% 4% 45% 51% 56% 53% 52% non Indigenous Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 TOTAL Persist non comp Total CCAs Adverse findings as % 27% 26% 27% 27% 25% 24% 25% While on the subject of CCAs, a significant number of CDP participants are now being penalised for failing to attend CCA appointments (which are generally done by phone). Again, worrying given the range of challenges that remote Indigenous people have in accessing DHS services. Chart 7 maps these penalties over time and against penalties for other jobseekers. 7

8 Chart 7 Penalties applied for non-attendance at CCA appointments Penalties for non attendance at CCA appointments with DHS Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 CDP all others Note: no reported total for September 215 quarter General Information provided in response to questions in Senate Estimates A number of questions were asked in relation to CDP at the most recent Estimates hearings of the Senate Finance and Public Administration Committee. Some of the information released by the Government in response to these questions is summarised below for interest. Expenditure on RJCP and CDP In Budget papers CDP expenditure is reported only as part of the Jobs, Land and Economy stream of the IAS. In response to QON225, PM&C released specific expenditure figures for CDP and the program it replaced (RJCP). Table 3 shows total cost and the amount spent on outcomes under each program, both as a raw number and as a percentage of total. It should be noted that the definition of payable outcomes under CDP is different from that which applied under RJCP, which, amongst other things, included outcome payments for educational achievement. Table 3 RJCP & CDP expenditure, including % paid for outcomes Total expenditure Outcome payments 213/4 (RJCP yr 1) $ m $7.577m (5.8% of total) 214/5 (RJCP yr 2) $26.51m $2.47m (7.8% of total) 215/6 (CDP yr 1) $268.52m $18.92m (7% of total) At $268.52m, the CDP represented just under a third of expenditure under the Jobs Land and Economy stream of the IAS in 215/16. As is evident from the figures, CDP cannot be regarded as payment for outcomes based program which is perhaps inevitable in the context of the limited labour market opportunities in many remote areas. Instead, according to the figures presented in estimates, 76% of CDP provider revenue is derived from Work for the Dole payments. As noted above, recommendation of penalties is essential to providers being able to maximise Work for the 8

9 Dole payments, so the centrality of this revenue stream is important to understanding why penalties are so high. Employment outcomes Information has been provided in relation to placements and employment outcomes. Numbers of placements are not particularly meaningful indicators because they are just that placements into employment that might last a day, a week or a year. As is clear from the figures, few people go on from a placement to a more permanent outcome. Employment outcomes are more useful as they are paid after 13 or 26 weeks of employment, however it is important to note that in many cases the jobseeker would have gotten the job anyway and many of these jobs were found by the individual themselves. The information provided in these responses, and those in relation to prior Estimates suggests that there has been some improvement in employment outcomes since the beginning of CDP 5. Unfortunately, no comparative information has been provided for RJCP, jobactive or against the Government s own forecasts of likely job outcomes for each region. Some improvement in employment outcomes would be expected in CDP over the RJCP as, under the earlier program, the Government did not specify any employment targets 6. Table 4 26 week job outcomes under CDP 26 week outcomes Per quarter (average) 215/ Sept & Dec 216 quarters The State distribution of employment outcomes was as follows: Table 5 State distribution of outcomes and caseload % of 26 week employment %of caseload in these locations outcomes NT 32.5% 39.4% WA 24.5% 27.6% Qld/NSW 35.7% 24.8% SA 7.9% 7.3% Unfortunately information about the Indigeneity of the people who achieved these outcomes was not provided, nor were regional figures provided when requested by the Committee. Protection of identity of providers and communities was given as the reason for not providing more detailed information, even though the CDP Funding Deed explicitly allows for the publication of regional performance information and information about the performance of the program might be expected to be of interest to community members. 5 Senate Finance and Public Administration Legislation Committee, Supplementary Estimates , Answers to Questions on Notice No 225, April 217 (Sen Siewart), Senate Finance and Public Administration Legislation Committee, Supplementary Estimates , Answers to Questions on Notice No 124, December 216 (Sen Siewart), 6 The RJCP Funding Deed anticipated that targets would be set, however the proposed Performance Framework that had been developed under the Labor Government was not endorsed by the incoming Government, and no other targets were set for the full 2 years of RJCP. 9

10 Information not provided QON 186 asked a series of questions about CDP. One of these related to time off. Minister Scullion has emphasised the availability of up to six weeks time off for CDP participants part of the assurance that the system is fair and work like. However in response to a question in relation to this, PM&C were unable to provide any figures as to how many people had actually been given time off. It appears possible that some people may not have had any time off, other than the Christmas closure period. Sen Dodson also asked a series of questions in relation to participation in accredited training. Completion of accredited training had been an acceptable activity under RJCP and outcome payments could be made in relation to completions. Under CDP accredited training (other than LLN) can only be an activity where it relates to a specific job or WfD activity. The inability for PM&C to produce material in relation to accredited training suggests a lack of priority placed on it, despite the recognised impact of human capital on employment outcomes and the high proportion of early school leavers in the scheme. Let me know if you have any questions/comments. Lisa Fowkes Lisa.fowkes@anu.edu.au 1