Centrelink’s flawed system of debt recovery has proved a debacle for the government and a tortuous struggle for those wrongly accused of owing money. By Mike Seccombe.

Centrelink’s debt-recovery disaster

When the first emails came in December, Dr Lauren Bliss took them to be spam.

Although they purported to be from Centrelink, there was no subject heading and no body to the emails, only an attachment marked “general”. She ignored them, as well she might, given she was not on any government benefit. She had last, briefly, been on unemployment benefits six years earlier. 

Two days before new year, though, she opened a text message that said: “We have completed our review of your employment income. Please sign in to your Centrelink online account via myGov to view the outcome.”

When she did that, she learned she was deemed to owe the government almost $4000 and had just 28 days to pay. She had become one of some 200,000 Australians since July identified by the Turnbull government’s strict new automated debt-recovery system. Payment demands continue to go out at a rate of about 20,000 a week. 

To be precise, Bliss’s alleged debt was $3919.28. And we should be precise, for Dr Bliss certainly is. She immediately began documenting every detail of her involvement in what she holds to be an attempt at extortion by the Turnbull government.

Thus we can say she learnt at 6.02pm on December 30 that the computerised data-matching system at Centrelink had raised a debt against her. She began composing her first letter of complaint just two minutes later.

Since then she has totted up all the hours she has spent finding the relevant information and talking to people at Centrelink. She has written a swingeing letter of complaint to the relevant ministers, Alan Tudge (human services) and Christian Porter (social services), and sent copies to all other ministers – with an attached spreadsheet of the hours she has spent proving Centrelink wrong. She has written also to the head of Centrelink, Hank Jongen; offered her story to the shadow human services minister, Linda Burney; taken her case to her local Labor MP and to welfare rights lawyers. She has recorded every conversation with Centrelink staff.

As of Tuesday, when she had the most recent of three negotiations with Centrelink compliance officers, her debt had still not been written off, although it had been substantially reduced. It’s been like a Dutch auction. From the original $3919 it was cut to $965.74 , then to $800.41. It now stands at $485.12.

Her fight isn’t over yet. She still thinks Centrelink has calculated wrongly. It’s not about the money, though, so much as the principle. It infuriates her that on the basis of a dodgy computer algorithm a debt was raised against her after six years. It infuriates her she never got a letter, even though Centrelink had her address. It infuriates her that Centrelink did not – as school teachers say – show their working. It infuriates her, too, that only by dint of her persistence did she find out what the problem was.

“I’ve had to do all the work myself, trying to figure out what they’d done … [They] shifted the dates I was paid for work to incorporate pay received when I was not on Newstart and retrospectively average it out across the period I was receiving Newstart.” 

It’s a complicated issue. So complicated that the transcript of her most recent negotiation with the compliance officer runs to almost 3000 words of argument and counterargument over arcane details.

“I’m an academic, I’m highly educated, I’m organised and can deal with that level of conversation,” she says. “But for someone who doesn’t have English as a first language, or maybe isn’t as educated, I can’t imagine how they would navigate the system.”

1 . Navigating the system

Even people like Bliss have trouble. Dr Janet Hammill, to name one.

Hammill co-ordinates the Collaboration for Alcohol Related Developmental Disorders Research Network within the Perinatal Research Group at the University of Queensland. She is a specialist in foetal alcohol syndrome and was a Queensland finalist for 2017 Australian of the Year.

She is 76 and does her work on a voluntary basis, while living on the age pension. The last other income she received was a $26,000 research grant between July 2011 and April 2012, which she reported to Centrelink at the time.

Four years later, she learnt the automated debt-recovery system had deemed she owed $7600 and would cut her pension if she could not prove herself innocent.

A couple of weeks ago she told Guardian Australia the story of her struggles with Centrelink’s overloaded phone system and confusing online system.

“You feel so helpless. I mean for heaven’s sakes, you can look through my CV and see that I’m not helpless,” Hammill said. “But this puts you into another category of disempowerment. I can just imagine somebody who is not computer literate or is just managing to get by day to day. It’s just been so terribly frustrating.”

When we contacted her this week Hammill was still frustrated, not only with her own continuing battle with Centrelink but on behalf of many others who contacted her as a result of the publicity.

“I’m fortunate. I can be outspoken and people listen. I can get out and say how I feel about it. But there must be so many others who just have to pay it,” she says. “There are so many stories from people who are just not being cared for.”

Like Bliss, Hammill sees the government’s massive effort to get money out of welfare recipients as an attempt to balance its budget on the backs of the hardest-up in society.

“What about all the high-income earners who avoid paying any tax,” she says. “Why are they not being pursued?”

Hammill’s problems are likely to soon be over: she has become prominent enough, through her complaints to the media and her local Liberal MP, Trevor Evans, to become a political problem As a result, her complaint has now been – in the terminology of Centrelink – escalated.

2 . Escalating the problem

And once you get escalated, Centrelink suddenly becomes most helpful, as the member for the Tasmanian seat of Denison, Andrew Wilkie, and his staff can attest.

Over recent weeks Wilkie’s office has assisted in escalating lots of people who believe they have been wrongly assessed as owing the government money.

Here’s how it works. Parliamentarians have access to a special email address within the Department of Human Services, which runs Centrelink. When one of Wilkie’s constituents presents with a problem – and there have been scores of them since the government’s debt-recovery binge began in November – his office simply sends off a message. Invariably, the prompt reply comes: “This inquiry has been escalated. We will work with the customer to resolve.”

From that point, the person is spared the worry of wrestling with the user-unfriendly online system or the endless round robin of phone calls, or both. Things move quickly.

It is sometimes just a matter of hours, Wilkie and his staff told The Saturday Paper, before the next email comes from bureaucracy saying it has all been fixed.

When Wilkie’s people get back to the complainants – and they have spoken to most but not all of them – every one has had their debt waived or greatly reduced.

“We’ve had people with many thousands in alleged debts suddenly waived, with no explanation of how that is happening,” says the Wilkie staffer who deals with such matters. “We just get an email saying they have spoken to the customer and the matter has been resolved. It makes it impossible to understand the process.”

But the success rate of these appeals against the alleged debts “speaks for itself”, Wilkie says.

He continues: “The more times we see Centrelink rolling over straight away, the more it shows the policy is flawed – that Centrelink officers don’t have any confidence in it, that the numbers aren’t defensible.” 

Linda Burney makes the same point.

“It’s very troubling that once an individual either goes to the media or to an electorate office, their case is escalated and somehow the problem magically disappears,” she says. “The big question is what that means for the many, many thousands of people who know they don’t have a debt or don’t understand but have entered into repayment plans without any clarification.”

Good question. The reality is that many if not most welfare recipients are in that position because their lives have become difficult. Faced with a bill from the government for a many-years-old alleged debt, given no explanation of the circumstances in which it was accrued or any help in identifying the problem, how many can marshal the time, the arguments and the documentation – and the confidence – necessary to prove their innocence?

We may get the answer to that big question and the many subsidiary ones about the scheme in due course – the federal ombudsman’s office has begun an investigation and a senate inquiry is expected to be initiated when parliament resumes next month, with the support of Labor, the Greens, Wilkie and the Nick Xenophon Team.

3 . Insisting all’s well

In the meantime, Tudge and Porter continue to insist the system is working just as intended, which is unarguably true if the metric by which success is judged as revenue for the government.

By other measures, though, this is not the case. The government itself has admitted that in about 20 per cent of cases people accused of a debt are able to prove an error in the calculation. Other estimates place the error rate much higher, up to 90 per cent. That is not to say that 90 per cent of people owe nothing, but that they owe less than the amount assessed. There is sound basis for such suspicion.

But first, a little context about how it came to this, starting with data matching.

The practice of data matching – crosschecking the records of welfare payments by Centrelink against those of the Tax Office and other agencies, a prudent safeguard against accidental overpayment or deliberate fraud – long predated the current debacle.

Before the new system came in, about 20,000 welfare recipients a year – that is, about the same number the government is now targeting every week – were identified this way as having received benefits to which they were not entitled. That does not mean these people were engaged in deliberate fraud, of course. Overwhelmingly, they were not. Indeed, in the most recent year under the old system, according to data supplied to The Saturday Paper by the Australian Council of Social Service (ACOSS), there was an error in 37 per cent of cases and these were overturned on appeal.

And that was back in the days when humans in the compliance section of Centrelink personally investigated cases, speaking to the recipients and to employers before proceeding to raise a debt.

Promising to crack down on welfare is a hardy perennial of conservative politics, just as promising to crack down on high-end tax evasion is on the progressive side of politics. And true to historical form, the government ramped up the issue before last year’s election.

A joint press release from Social Services Minister Porter and his junior, Human Services Minister Tudge, on the eve of last year’s budget, gives a taste.

“There are an estimated 270,000 former recipients of social security and family assistance payments who owe more than $870 million to the government and are not making any effort to repay it,” Porter was quoted as saying.

“One per cent of Australia’s population has received money they are not entitled to and owe a debt to the other 99 per cent of Australians; a debt that in too many instances they are making no effort to pay back.

“It is disturbing that individuals have in some cases deliberately cheated taxpayers out of hundreds of thousands of dollars and virtually nothing has been done to recover the debt.”

The release announced new legislation that would remove the time limit on debt recovery, impose an interest charge on debts, and prevent social security debtors from leaving the country.

The most important detail was not mentioned in that release: that to facilitate Centrelink’s increased compliance and debt-recovery activity, the human element was removed from the process. And that is the root of the current debacle: the automated system is inadequate.

4 . ‘Fuzzy data matching’

Several whistleblowers have reported a number of technical problems to Wilkie, other parliamentarians and GetUp! One notable flaw was the fact the “fuzzy matching” of the computer algorithm regularly duplicated the earned income of welfare recipients. That is, where an employer’s name was recorded differently on Tax Office and Centrelink systems, the computer identified one job as two. Likewise, if an employer changed its name, even though the employer’s ABN remained the same, income would be doubled.

Even more concerning was the allegation by the GetUp! whistleblower, who identified himself only as a Centrelink compliance officer, that the problems were well known to Centrelink staff and management, but officers were instructed not to correct errors that came to their attention.

Certainly, it appears the new system makes it hard for clients. There have been numerous cases where the first a person knew of their alleged indebtedness was when a debt collector contacted them, because over the intervening years they had moved house and so received no notification. The private debt collectors seemed to have no trouble finding people even when Centrelink couldn’t.

Until recently, the letters that did get through to people included no phone contact number. Leaked internal memos make it clear the intent was to push complainants to the agency’s online portal, limiting their opportunity to put a case.

Stories are legion of people attempting dozens of times to call and failing to get through, or sitting on hold for hours.

According to the government’s figures, it takes just 10 minutes to be served in person or 12 minutes on the phone, but ACOSS and the union representing Centrelink staff say such figures should be treated with scepticism. They refer only to the average time until initial contact, most often with a staff member who cannot actually help.

In the past, when a Centrelink client disputed a debt, they were not required to begin paying back anything until the appeal process was complete. Now, they are required to begin repayment regardless. One is guilty until one can prove innocence.

5 . Centrelink staff cuts

Over the past five years, 5000 staff have been cut from Centrelink, and its workforce is increasingly casualised. There has been no increase in the number of compliance officers – who are the only ones who can help – even though the agency’s compliance activities have just increased fiftyfold.

Not surprisingly, the stress on Centrelink staff has increased as they try to deal with a flood of angry customers. This week the union released an open letter on behalf of Centrelink staff, imploring customers not to blame them.

It says in part: “We know that the automated debt notices are unfair, unjust and callous. We acknowledge that in a great many cases, they are not your debts. 

“Despite our combined hundreds of years’ experience in welfare systems, the Department is still not listening.”

But it is. And responding. Only a couple of weeks ago, in response to leaks about the inadequacies of the new debt-recovery system, a memo went out to all staff from senior management at the department, darkly warning that leakers would not be covered by whistleblower legislation.

“The Public Interest Disclosure Act 2013 (PID Act) provides protections for disclosures made in limited circumstances,” it said. Those did not include leaks to “eternal” parties.

Only after an “internal disclosure” had been made and investigated could a staff member go public. Those who leaked could be held in breach of the public service code of conduct and face criminal charges.

Catch 22. Staff cannot reveal unacknowledged flaws in the system unless the powers that be are prepared to acknowledge and investigate the flaws in the system.

6 . Flaws ‘were known’

The government and its senior bureaucrats insist the system is working fine. Others, including political opponents, ACOSS, multiple whistleblowers’ accounts and welfare rights lawyers disagree. So does the former head of the government’s Digital Transformation Office, Paul Shetler, who was hand-picked by Malcolm Turnbull to lead the task of making the government’s tech systems more functional and user-friendly.

Shetler quit in disgust at the end of November. A couple of weeks ago he went on ABC Radio and savaged Centrelink’s new digital system. He said he had no doubt senior management knew of its flaws, but were not acting to fix things. No company in the private sector could get away with what it was doing, he said.

“If that company, if it was operating in any sort of a free market, would go out of business, and if it didn’t go out of business, it would be shut down by regulators for fraud,” Shetler said.

To date, though, the government has shown little sign of acknowledging any problem, let alone abandoning the system, despite the accumulating evidence. Tudge and Porter have continued, indeed intensified, their rhetoric about welfare cheats.

But public opinion continues to move against the government. This week’s Essential poll shows that even over the so-called silly season, where people pay little attention to politics, and governments usually recover some ground, this government went backwards. The government is trailing the opposition by eight points, 54–46, two-party preferred. That’s two points worse than where they were a week before Christmas.

There were only two issues of political significance over the holiday period: the Centrelink debacle and the latest scandal over the abuse of entitlements by government ministers.

As Linda Burney notes, the juxtaposition could hardly have been more unfortunate.

“It’s one rule for them and another rule for everyone else – that’s the perception,” she says.

“The government made a crass political decision to pursue welfare recipients because they didn’t think the community would care. And the community does care. They know this is unfair and they do care.”

If government strategists think it looks bad now, they should wait a bit. We still have the ombudsman and senate inquiries to come.

Worse than that, though, the welfare blitz has concentrated to date on people of working age, those on unemployment and disability and student benefits. The next planned step in the debt-recovery crackdown involves a demographic for whom there is historically greater sympathy: age pensioners.

It’s very dangerous to paint granny as a fraudster. Even worse to do so fraudulently.

This article was first published in the print edition of The Saturday Paper on January 28, 2017 as "Daze of reckoning".

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Mike Seccombe is The Saturday Paper’s national correspondent.

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