Scathing assessment comes as system again put under the microscope, this time by external auditors PwC Australia

This article is more than 3 years old

This article is more than 3 years old

Victoria Legal Aid has described Centrelink’s robo-debt system as an “abject failure” which is an arguably unlawful response to the government’s self-inflicted budget problems.

The scathing assessment came as the system is again put under the microscope, this time by the external auditing firm PwC Australia, which has been engaged by the Department of Human Services.

The Senate inquiry into the automated debt recovery system continued on Tuesday in Melbourne, hearing evidence from Victoria Legal Aid and the state’s community legal centres.

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Legal Aid’s managing director, Bevan Warner, said the system should serve as a lesson of what not to do in public administration.

“In our view the initiative is an abject failure, it’s hurting people,” Warner said. “It is arguably unlawful, and even if it is lawful, it shouldn’t be. The minor improvements that have been announced do not go far enough.”

Warner said the legality of the system was questionable because the creation of the debts did not involve a critical evaluation by a Centrelink officer.

The system is expected to begin to target 783,000 people for possible debts in 2016-17, compared with 20,000 in the years earlier.

“This is an unjustified and staggering 3,900% increase,” Warner said. “The initiative was a blunt solution to a self-inflicted problem.”

Warner called on the government to release the terms of reference of the PwC audit, and involve community-sector stakeholders in the process to rebuild confidence in Centrelink’s debt recovery process.

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Earlier, the Department of Human Services was questioned about whether it had audited debts it had already raised through the error-prone process of income averaging, to make sure they were accurate.

The department’s whole of government division general manager, Marc Mowbray-d’Arbela, could not answer.

But he said the accuracy of the debts was taken at “face value” once a recipient began paying them back.

“The information we have and the discrepancy that arose from the information of the ATO has led to an interaction [with the customer], and if the customer has accepted that and started paying it back, we take that at face value,” Mowbray-d’Arbela said.



The inquiry also heard from the Melbourne-based Consumer Action Law and Western Community Legal centres. They argued that Centrelink should be bound by the same stringent guidelines that govern private external debt collectors.



Those guidelines – produced by the Australian Competition and Consumer Commission and the Australian Securities and Investment Commission – prevent undue harassment, intimidation or unscrupulous practices, and requires private debt collectors to have evidence that a debt exists before they attempt to recover money.

The guidelines now apply to the third-party debt collectors engaged by Centrelink but not Centrelink itself.

Consumer Action Law Centre’s chief executive, Gerard Brodie, called on Centrelink to voluntarily ask the ACCC/Asic to hold it to the guidelines.

Brodie said that would force the agency to provide evidence to back up its allegation that a debt existswhen it is disputed by the welfare recipient.

“We think the guidelines, as they stand, are very strong,” Brodie said. “If they applied to Centrelink as well as private enterprise, that would be a significant step forward,” he said.

Western Community Legal Centre’s chief executive, Denis Nelthorpe, said the level of legal assistance available to welfare recipients was extremely limited. Only a handful of lawyers in the country had specialised knowledge in the area,” he said.

“If you receive one of these letters, your chances of seeing someone and getting advice is somewhere between limited and non-existent,” Nelthorpe said.

On Monday Australia’s ombudsman released the results of a three-month investigation of the system.

The acting commonwealth ombudsman, Richard Glenn, found the system was capable of accurately calculating debts if provided with accurate information, and said it was reasonable to use data-matching to identify discrepancies in reported income.

But he also found a litany of flaws in the system’s design, saying it placed an often unreasonable burden on welfare recipients to provide the information needed to disprove debts.

Glenn found no modelling had been done to determine how many debts would be over-calculated. He found initial letters sent to welfare recipients failed to include crucial information, and that the online portal was unusable and confusing for some.

He recommended that the 10% debt recovery fee, which has been indiscriminately applied until recently, should be reconsidered. And he said vulnerable recipients should get better support from the department.

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The report raised concerns about the Department of Human Services’ assistance and communication with customers, the adequacy of staff training and communication to support customers using the system, its approach to complaints, and the adequacy of its project planning and governance mechanisms.



It found the flaws with the system could have largely been avoided with better planning and user testing, a slower rollout, and better communication with stakeholders.

The government has accepted the ombudsman’s eight recommendations.

The human services minister, Alan Tudge, said the report showed the approach was reasonable and proper, and that the system was accurately calculating debts on the basis of information it had at the time.