The Commonwealth Ombudsman has said the process by the Department of Human Services' (DHS) online compliance system (OCI) to send letters demanding money repayment sent in error to Centrelink customers was "reasonable and appropriate", but deemed the method used as "unfair and unreasonable".
"In our view, it is entirely reasonable and appropriate for DHS to ask customers to explain discrepancies following its data matching activities as a means of safeguarding welfare payment integrity," the report [PDF] released on Monday said.
Although calling the overall system acceptable, the Ombudsman said placing the onus on the customer to gather all required income proving evidence was unacceptable.
"In our view, this is not reasonable or fair in situations where customers have to collect evidence from several years ago, or where the customer does not have the capacity to obtain the evidence," the report said.
Given the complexity of collecting historical employment information or the possibility that the customer may not have received the initial letter, the Ombudsman commented that the 21-day timeframe given for recipients to respond was not reasonable or fair in all circumstances.
DHS has since extended the timeframe to respond to 28 days from receipt of the letter, with options to ask for an extension.
In the report, Centrelink's automated debt raising and recovery system: A report about the Department of Human Services' online compliance intervention system for debt raising and recovery, the Ombudsman said his office is also satisfied that if the customer is able to collect the income information required and enter it properly into the system, the OCI is capable of accurately calculating the debt.
Although DHS previously admitted the automated system was resulting in a 20 percent failure rate, the Ombudsman does not consider this to be an "error", rather a number reflective of the proportion of discrepancies which do not proceed to debt recovery action after the customer is contacted.
DHS announced in December it had implemented the online compliance system in July and said it was finding approximately AU$4.5 million that had gone awry each day. With this, the federal government hopes to improve the nation's Budget by AU$2.1 billion over the next four years.
The new system automatically compares the income people declare to the Australian Taxation Office against income declared to Centrelink. When it detects a disparity, Centrelink automatically issues a debt notice and that debt comes with a 10 percent recovery fee.
One large error in the Centrelink system is that it was incorrectly calculating a recipient's income, basing a recipient's fortnightly pay on their annual salary rather than taking a cumulative 26-week snapshot of what an individual was paid.
The Ombudsman focused much of his commentary and recommendations on the usability of the system by recipients, and the clarity of DHS' communications.
"We acknowledge the changes DHS has made to the OCI since its initial rollout. The changes have been positive and have improved the usability and accessibility of the system," the Ombudsman wrote. "However, we consider there are several areas where further improvements could be made, particularly before use of the OCI is expanded."
As a result, the Ombudsman made eight recommendations to the department, most of which are already being implemented, DHS later confirmed in a statement.
Before further expanding the OCI, the Ombudsman said DHS should undertake a comprehensive evaluation of the process in its current form, and give further consideration as to how to mitigate the risk of possible "over-recovery" of debts.
As the department looks to continue its paused debt recovery process, the Ombudsman has suggested it approach continued rollout in an incremental manner.
Another recommendation was that the department review the 10 percent debt recovery fee lumped on top of the welfare recipient's debt, in cases where consumers have already paid the fee. The reassessment is limited to the 10 percent fee, however, and new debts raised by Centrelink already omit the 10 percent charge.
In another recommendation, the Ombudsman has asked DHS to place its 1800 contact number at the top of the letter sent to welfare recipients demanding money, so they do not have to look for the number that was previously on the second page.
Centrelink should also be providing more clarity in its letters, such as clearly explaining the concept of averaging income, the Ombudsman said.
The fourth recommendation made by the Ombudsman asks DHS to take into account the potential cost to some customers of obtaining bank statements and other income-proving documentation. Where this cost would cause financial hardship to the person, DHS should use its powers to request the evidence directly from the financial institution itself.
The Ombudsman also responded to complaints about the department being severely under-resourced by recommending the 1800 compliance helpline number be adequately resourced and that DHS provide comprehensive training for its staff.
Under the same recommendation, the Ombudsman has suggested information capturing the gist of the phone call with welfare recipients be recorded to avoid duplication and time-wasting by all parties.
When it comes to "vulnerable" customers, such as those living with a disability, those without access to the internet, or those currently homeless, the Ombudsman has asked DHS to have staff provide further assistance by familiarising themselves with particular cases so as to not overwhelm them with a letter demanding money as the first contact from Centrelink.
"The Ombudsman's report shows that the online compliance system is reasonable in its data-matching and can accurately calculate debt owing," Minister for Human Services Alan Tudge said in response to the report.
"The unfortunate reality is that while most welfare recipients do the right thing, some deliberately defraud the system while others inadvertently fail to accurately declare their income and consequently receive an overpayment.
"We want to be fair and reasonable to welfare recipients but also fair to the taxpayer who pays for the welfare payments. The Ombudsman's report will help us to continue to achieve this."
The Australian Privacy Foundation (APF) recommended last week that DHS reform its automated debt recovery process and bring back the "human" involvement that was replaced with the new data-matching technology.
The APF suggests that relying on IT systems is fraught with issues, such as assuming that IT systems work accurately, noting that "IT systems often fail". As a result, the APF has recommended that all automatic data matching performed by DHS be checked manually to ensure there is a reasonable basis for any claim based on the data.
Although Australian Information and Privacy Commissioner Timothy Pilgrim announced earlier this year that his office has not opened an investigation into the Centrelink debacle, Pilgrim said in his submission [PDF] to the Senate Community Affairs References Committee that he intends to review the report prepared by the Ombudsman and determine from that if intervention from the Office of the Australian Information Commissioner is required.