Prosecuting Welfare Fraud: What’s changed?

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By Dr Scarlet Wilcock, Lecturer, University of Wollongong, and Board Member of Welfare Rights Centre.*

Between 2009-10 and 2016-17, the rate of Centrelink fraud prosecutions fell by around 80 per cent as a proportion of Centrelink customers (see Table 1 below). This is remarkable considering the national dialogue continues to promote a ‘tough’ response to welfare fraud. In fact, the Department of Human Services (DHS) (which absorbed Centrelink’s functions and brand name in 2011), restated its ‘zero tolerance’ approach to fraud in its most recent Corporate Plan.

How then can we explain this swift and dramatic decline in the prosecution rate?

Certainly, the falling prosecution rate is the consequence of a range of factors. This includes the impacts of the High Court cases of Poniatowska and Keating on so-called ‘omission cases’, that is, cases where the allegation of fraud relates to a customer’s failure to inform the DHS of a change in circumstances (an omission) rather than any positive act of misrepresentation or dishonesty on the part of the recipient (an act).

In Poniatowska, the Court ruled that as there was no positive duty at law requiring Centrelink customers to inform the DHS of these matters, then a failure to fulfil this duty could not constitute fraud under the relevant Criminal Code offence provision. The Government sought to pre-empt this decision and swiftly passed a law creating such a positive obligation and making it retrospective to the year 2000. But, the retrospectivity of this provision was successfully challenged in the High Court case of Keating.

The combined effect of the Poniatowska and Keating cases was to prevent the DHS from prosecuting ‘omission cases’ where the relevant omission had occurred prior to 4 August 2011, the date on which the law was passed creating this positive legal obligation to inform the DHS of changes in their circumstances.[1] From this date onwards, such omissions constituted fraud and thus could be prosecuted. These decisions effectively reduced the potential pool of cases that could be prosecuted, at least in the short term.

At around the same time, a new requirement was introduced making the DHS responsible for the preparation of full briefs of evidence, including witness statements, for each case it wished to refer to the Commonwealth Director of Public Prosecutions (CDPP) for prosecution. Previously, all that was required from the DHS was a short form brief of evidence which was relatively quick and easy to prepare and amounted to little more than a statement of facts.  According to the DHS, this change ‘impacted the [prosecution] referral numbers as significantly as the High Court decisions’.[2]

Together, these two changes impacted on the number and types of cases that the DHS could pursue. But these changes only tell part of the story.

After conducting in-depth research on welfare fraud, including interviews with serious non-compliance staff at the DHS, it became clear that other factors were far more influential in reducing welfare fraud prosecutions over the long term. These changes suggest a more fundamental shift in the Department’s approach to prosecution strategies.

 

From ‘prosecute, prosecute, prosecute’ to targeting serious fraud

Until 2011, Centrelink compliance functions were subject to quantitative Key Performance Indicators (KPIs). For example, in 2000-01, Centrelink was required to refer 4,000 cases to the CDPP for prosecution and generate $708.8m in savings by recovering welfare overpayments.[3] To meet these organisation-wide targets, Centrelink developed KPIs for individual investigators. For example, in 2008-09, investigators employed at the Australian Public Service Work Level 4 and 5 were required to complete 96 investigators and refer at least 6 cases of suspected fraud to the CDPP.[4]

According to compliance staff interviewed for this research, these KPIs led staff to a focus on achieving targets rather than selecting the most appropriate cases for prosecution. Janice, an investigator who had been with the DHS (and its predecessors) for over 17 years, described the approach in the following terms: ‘Like I said, we used to just prosecute, prosecute, prosecute. Quite frankly, it used to be about a number, it used to be about a benchmark’.

In 2011, these quantitative targets were dispensed with. This reduced the pressure on staff to make up prosecution numbers and enabled a broader rethink of the DHS’s approach to prosecutions. What has since emerged is a more strategic approach to prosecutions focused on serious and unambiguous cases of fraud. As Henry explained:

The Directors [in the DHS] at least do know that it’s not a numbers game. It’s finding people that legitimately need to answer for their actions in front of the court rather than getting a referral to the court for the sake of achieving a number.

My research suggests that this new approach has also underpinned the emergence of a less punitive culture among compliance staff in which staff consider the appropriateness and impacts of prosecution in each case. One investigator explained the shift as follows: ‘It’s more about prevention and intervention than it is about the end result. We’re more conscious of what we’re doing, and the impacts as well’. Similarly, as Bruce explained:

I don’t believe in heavy handed approach. If someone is defrauding the Commonwealth, until we actually determine that, they’re customers. They’re not crooks … The culture has changed.

Ultimately, the removal of quantitative KPIs combined with a more strategic approach to prosecutions appears to have contributed to a sustained reduction in the welfare fraud prosecutions rate. This has occurred in spite of rather than as a result of changes at the national policy level. It serves as a small reminder that punitive welfare measures are capable of reform and challenge, even as the Government continues its campaign to ‘get tough’ on welfare non-compliance.

 

[*] The analysis and opinions expressed in this article are those of the author alone.

[1] On 4 August 2011, a new section 66A was inserted into the Social Security Administration Act 1999 (Cth) as a result of the passage of the Social Security and Other Legislation Amendment (Miscellaneous Measures) Act 2011 (Cth).

[2] Department of Human Services quoted in Prenzler, ‘Reducing Welfare Fraud’ above n 1, 578.

[3] Centrelink, Annual Report 1998-99 (1999) 29.

[4] Australian National Audit Office, Centrelink Fraud Investigations (Audit Report No 10 2010–11, 2010) 85.

 


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