Government recovers over $41 million worth of false claims after ‘rorting’ of Job Services Australia scheme

By Linton Besser, Ali Russell and Mario Christodoulou

Updated

The Federal Government has clawed back more than $41 million worth of false claims by private employment agencies in just the past three years.

The agencies are contracted by the Government under a privatised welfare-to-work program called Job Services Australia (JSA), a sprawling $1.3 billion-a-year scheme designed to get the unemployed into work.

A Four Corners investigation has found rorting of the scheme is rampant. Forgery, manipulation of records and the lodgement of inflated claims for fees are widespread.

One former agency employee said he had seen “thousands” of jobseeker records doctored by his agency to support suspect claims against the taxpayer.

Hundreds of thousands of dollars, if not millions of dollars, have been recouped at times by the department.

Rupert Taylor-Price

The managing director of a private employment agency told Four Corners: “There are incentives to be involved in sharp practices from a financial and performance perspective.”

“We had to do the same thing [because] everyone was doing it,” the source said.

“The Government does not want to expose the whole industry.”

Three years ago a top-level inquiry into just one type of fee found spectacular rates of failure, forcing cancellation of that particular fee and prompting industry-wide ructions.

Ominously, the inquiry noted that just 40 per cent of the claims it examined could be confirmed by documentary evidence, or by the testimony of jobseekers and their employers.

The Abbott administration has made some changes to the scheme that take effect mid-way through this year.

But critics say these changes will do little, if anything, to stop widespread gaming of the contract.

In a statement, Jobs Australia said: “A significant portion of the recoveries [were] volunteered by providers who [needed] to rectify minor administrative mistakes.”

But added that “while there [were] legitimate concerns about some aspects of the policies”, more than a quarter of job seekers found a job and exited JSA within three months.

“This is despite the fact that the system is incredibly complex, with a confusing payment model and thousands of pages of rules that must be interpreted and applied by the individual staff who work day in, day out, with people who are unemployed,” the statement said.

The not-for-profit organisation said the new employment services contract would reduce the scope for incorrect claims by simplifying payments.

“With rising unemployment, Jobs Australia believes there needs to be a more flexible arrangement that is firmly focused on getting people back into work – but also with strong checks and balances.”

Only one in 10 enjoy ‘better chance of gaining employment’

The ABC has learned that fraud investigators attached to the Department of Employment have launched probes into many of the major agencies contracted to the program since its inception in 1998.

For-profit companies, including the market leader, Max Employment, have been investigated for particular allegations, as well as well-loved Australian charities including the Salvation Army.

There are a variety of means by which the contract is exploited.

The ABC is not suggesting that any particular agency is engaged in the full range of rorts, or other means by which the contract can be optimised.

But despite a long parade of whistleblowers detailing allegations of the misappropriation of taxpayer funds by some agencies, and highly questionable practices by others, the government has declined to detail instances where it has ever sanctioned any single agency operating under the scheme.

But what the department does is only reclaim those from the failures it finds. So even if you are going to put in claims that have a failure rate, you’re still going to have a lot of them not found and keep the money … there’s still an incentive to make the claim.

Rupert Taylor-Price

In one case to be examined on Four Corners, investigators were forced to shelve their inquiries when they discovered a departmental official had explicitly told the agency that it could still collect fees for services the Government knew had never been delivered.

Rupert Taylor-Price, whose company provides software to Job Services Australia providers, says the scheme is being routinely “optimised” to the detriment of jobseekers.

“Hundreds of thousands of dollars, if not millions of dollars, have been recouped at times by the department,” Mr Taylor-Price said.

“But what the department does is only reclaim those from the failures it finds.

“So even if you are going to put in claims that have a failure rate, you’re still going to have a lot of them not found and keep the money … there’s still an incentive to make the claim.”

He says he believes only one in 10 participants in the program enjoy “a better chance of gaining employment”.

The program was created 17 years ago, when the Howard government effectively privatised the Commonwealth Employment Service (CES).

The new policy created a pseudo-marketplace of jobseekers who were forced under Centrelink’s rules to attend private agencies, which would be paid to find them work.

Since then, more than $18 billion has been spent on the welfare to work program – first labelled Job Network, and now known as Job Services Australia.

It has been a cheaper scheme than the CES, but critics say it has also been far less helpful at assisting long-term unemployed people back into work.

‘You can’t make people search for jobs that aren’t there’

Academics and experts have repeatedly pointed out the glaring paradox at the heart of the program: how can these agencies have any impact on the unemployed when the number of jobless far outstrip the number of job vacancies?

“[The welfare to work program] patently hasn’t worked,” said Professor Bill Mitchell, director of Newcastle University’s Centre of Full Employment and Equity.

“It’s an impossible task … there’s not enough jobs to go around. You can’t make people search for jobs that aren’t there, and that’s the dilemma of the whole system.

“We’ve had a demand-side constraint – not enough jobs – and all this vigorous energy and money being poured into a supply-side initiative as if that’s the problem.”

Periodically, the jobs program has been mired in scandal. A major Productivity Commission inquiry in 2002 made adverse findings about the program, including that the long-term unemployed were being “parked”.

Just three years after Job Network was launched, one prominent job agency was accused of shovelling thousands of people into phoney jobs.

In what has become a pattern, a subsequent inquiry cleared the agency of fraud but demanded the repayment of thousands of dollars.

Insiders have told Four Corners that department managers have been reluctant to tighten up the program’s governing contract to prevent blatant rip-offs.

“It’s absolutely vulnerable to exploitation,” said a former senior departmental investigator.

He said he had significant doubts about the will of successive governments to root out the fraud perpetrated against the contract.

“The department was more interested in getting its money back [than sanctioning agencies] … it’s very politically-driven,” the former investigator said.

The Department of Employment provided figures to Four Corners which showed that millions of dollars are routinely recouped from agencies, as a result of audits, self-identification by agencies and other “program assurance activities”.

In 2011–2012, $8.34 million was recovered.

The figure spiked to $23.81 million the following year after the inquiry into one particular type of fee.

And last year, another $9.12 million was reclaimed.

A department spokesman said typical repayments by agencies amounted to “less than 1 per cent of the amount paid each year”, and said it had “robust systems” to detect inappropriate claims for fees.

He would not answer a series of specific questions about past or current investigations conducted by the department.

“In cases of suspected fraud, matters are referred to agencies such as the Australian Federal Police and Commonwealth Director of Public Prosecutions,” the spokesman said.

“Since 2006 the Department has made 38 referrals to the appropriate authorities.”

Do you know more? Email besser.linton@abc.net.au

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