Senior officials from Services Australia, formerly known as the Department of Human Services (DHS), have acknowledged that 10,000 robo-debt notices were sent out earlier this year after staff error caused the system’s algorithm to unpause.

Centrelink’s controversial automated data-matching scheme, known as robo-debt, was partially brought back under human control in early 2017 after public outcry about the ethics of the automated process.

Appearing before a tense senate estimates hearing last Thursday, Annette Musolino, acting deputy secretary for Services Australia’s Integrity and Information Group, confirmed the debt restart, first revealed by The Saturday Paper a fortnight ago.

“There was an incident that occurred where a group of debts had been paused,” Musolino told estimates. “… There was a manual staff error that occurred, and some of those debt letters were released. The issue was identified within a couple of days and remediation action was taken to address that.”

Musolino confirmed the 10,000 debts – referred to by activists as “zombie debts” – belonged to a batch left over from the original iteration of the robo-debt program, which relied on an automated algorithm to identify, investigate and initiate debt-recovery action.

These debts, and those generated through the two subsequent iterations of the program, have been a magnet for controversy since the program started on July 1, 2016.

In the past two years, the department has faced a Commonwealth Ombudsman inquiry, a senate inquiry and a review by the Australian National Audit Office regarding the scheme.

The program is currently subject to yet another senate inquiry, while Services Australia is fending off separate lawsuits run by Victoria Legal Aid and Gordon Legal, challenging the legal basis of the program.

During estimates, Craig Storen, general manager of customer compliance for the department, explained the 10,000 notices sent out in April this year concerned debts raised by the earliest iteration of the robo-debt system. These debts had been set aside pending customer contact.

The original automated algorithm worked by comparing the amount an individual declared to Centrelink while receiving a social security payment against what they declared to the Australian Taxation Office.

When the officers did not manually extend the pause, the program came back to life and began sending letters.

Where there was an anomaly, the software automatically sent a letter asking for more information, which, depending on the answers given, initiated the debt-recovery process – all without human oversight.

Under the original system, a debt notice would be automatically generated if the software decided the recipient had not responded to the department after a certain period of time, though often this was because the letters had been sent to a previous address.

Storen told the committee that following the 2017 senate inquiry his department performed a review of all debts issued and separated out those thought to have never reached the intended recipient.

“We weren’t able to convince ourselves that a customer had had an interaction in every instance of these reviews. That’s why we placed them on pause,” he said. “… We made the decision that we would like to contact each customer involved. We have been working through these debts. It was an accounts payable notice that was issued [in April].”

According to Storen, the department built a dead man switch into its IT system to initiate the pause.

“The system had a debt pause built into it to April 30, 2019,” he said. “A number of officers had written themselves manual instructions to ensure that that debt pause was extended if we hadn’t got to the end of the work.”

When the officers did not manually extend the pause, the program came back to life and began sending letters.

The department discovered the error two days later and intervened, but not before debts – potentially worth $28.67 million, based on the latest figures available for the average value of a debt issued under the program – had hit the mail.

After the problem was discovered, all debt-recovery action was halted, and the department set up a dedicated internal phone line staffed by a specialist team to handle phone calls from those who had received a letter.

The department confirmed 247 calls were transferred to the helpline. During the hearing, departmental officials cited this figure as evidence the impact of the event was minimal.

“Of the 10,000 debts that were issued, approximately 9400 related to non-current customers that we had not been able to contact for at least the past 12 months,” Storen said. “So we are pretty certain that those letters [from April] did not find the customers.”

Labor senator Kimberley Kitching challenged this characterisation of the impact in a later exchange with Services Australia secretary Renée Leon about how the department handled the April 30 incident.

“Isn’t the problem with the sending, the not-pausing and the sending of the letter – not the good luck that people weren’t at the addresses you had?” Kitching asked.

Leon answered she had misunderstood the thrust of Kitching’s questions to be about “the feeling that the customers would have had when they got that letter”.

“We would love all 10,000 of those customers to contact us because that would then enable us to resolve their debt,” she said.

Storen also confirmed that while debt-recovery activity had been halted for the 10,000 debt notices sent to the public, the department continued to pursue the sums involved.

“We continue our service-recovery approach and continue working with customers to finalise the review,” he said.

A Services Australia spokesperson told The Saturday Paper the department had continued to process the debts “proactively” and had not simply relied on a “passive” process to collect inbound calls.

Questions remain about whether there have been any similar incidents in which “zombie debt” notices have been accidentally sent out, and whether the April 30 incident could explain how Townsville residents reported receiving robo-debt notices during floods earlier this year.

That episode caused yet another controversy as the government had pledged a halt to both investigative and debt-recovery activity for residents in the flood-ravaged city.

Both Social Services Minister Anne Ruston and Government Services Minister Stuart Robert were called to answer questions in parliament concerning the incident, and both denied that debt collections had officially resumed.

Greens senator Rachel Siewert asked Leon whether Services Australia had briefed the two ministers about the April incident, as it could explain how some Townsville residents received notices despite the official halt on recovery activity.

“When Minister Ruston was answering questions in the chamber about this after the election, would she have known [about the April debt release]?” asked Siewert.

Leon replied that she would have to take the question on notice.

Kitching pursued the matter further, asking whether the department had briefed the incoming ministers after the 2019 federal election.

“Not to Minister Ruston, no,” Leon said. “We provided an incoming minister briefing to the minister for Human Services, Minister Robert, but of course it doesn’t cover, ordinarily, every single issue that’s on foot in the department at that time.”

Pushed for detail, Leon said what happened in Townsville represented a separate issue to the April incident but took on notice any questions regarding what the ministers were told before they provided answers in question time.

Services Australia has 30 days to respond.

The Saturday Paper first revealed the error after being leaked an internal department email, which described an April incident wherein “a number” of notices were sent to the public.

The email had been sent to the DHS’s compliance workforce and outlined the process by which the department sought to manage the mistake.

Two attempts to obtain a full copy of the document under freedom of information law were denied by the department’s legal team, on the basis a release may reveal DHS compliance procedure, which in turn may be used by those acting in bad faith to commit fraud.

The determination is currently subject to an appeal with the Office of the Australian Information Commissioner.

DHS has long been concerned about what it considers fraudulent activity by those receiving social security benefits.

Until 2011, the department maintained targets requiring its compliance staff to refer up to 4000 cases of alleged social security fraud for prosecution each year.

These were scrapped in the wake of a High Court ruling that held simply failing to inform Centrelink about a change in circumstances could not be treated the same as an act of intentional fraud.

As a result, the number of prosecutions for alleged social security fraud dramatically declined in the short term, leaving DHS with a backlog of so-called omission cases it was not otherwise able to verify and collect upon.

The introduction of the robo-debt scheme opened an alternative avenue for pursuing these claims, influenced by the Michigan Integrated Data Automated Scheme (MiDAS).

MiDAS was introduced in the American state of Michigan in October 2013. It operated until August 2015, when the scheme was brought back under human control after public outcry.

In 2016, the state reviewed 22,427 cases generated by the program and found it had operated with an error rate of 93 per cent.

It is understood the MiDAS program is subject to several legal applications for compensation in state and federal courts.