Workforce Australia job agencies forced to return $8.5m in taxpayer funds after huge surge in faulty claims

The Workforce Australia scheme, which is under review by the Albanese government, is facing sustained criticism that the privatised system is ineffective and prone to waste and rorting. Photograph: James Ross/AAP

Australia’s outsourced job agencies have been forced to hand back more than $8.5m in government payments in one year – more than double the previous 12 months – after an apparent crackdown on faulty claims.

Under Australia’s employment services system, providers are funded with so-called “outcome payments” for placing their clients into employment or courses and they can claim reimbursements for money spent assisting jobseekers prepare for work.

The Workforce Australia scheme, which is under review by the Albanese government, is expected to cost more than $9.5bn over the next four years, amid sustained criticism that the privatised system is ineffective and prone to waste and rorting.

Data obtained by Guardian Australia shows in the past four financial years, the government has recovered $17,490,143 from employment services providers, with $8,558,253 of that recovered in 2022-23 alone.

And while a majority of recouped payments have generally been returned to the department at the job agencies’ initiative, only 18% of the funds clawed back in 2022-23 was returned proactively.

Asked why there had been an uptick over that year in funds recovered, a Department of Employment and Workplace Relations spokesperson said the recoveries vary “year to year” depending on “program monitoring activities”.

The spokesperson said the most common reason for recovery was because the provider supplied “inadequate documentary evidence” when claiming payments or had wrongfully made a claim.

They said the money was recovered after the random sampling of expenditure and more targeted investigations.

“The department has also over time invested in more sophisticated assurance and program monitoring tools,” the spokesperson said.

Separate data shows between 2020-21 and 2023-24, the department received 88,785 complaints to the hotline about job providers. While the number has trended down, complaints still account for 7.5% of all calls.

The top reasons for the complaints were for inappropriate or inadequate service, dissatisfaction with their consultant or unprofessional behaviour.

Fewer jobseekers have interacted directly with outsourced employment consultants since the Coalition introduced Workforce Australia in 2022, with many now completing their job search obligations through an online portal.

The National Employment Services Association chief executive, Kathryn Mandela, said there were “varied circumstances” that “contribute to an automated or manual claim for payment being made in error”, including administrative mistakes and system errors .

“The current employment services payment, compliance, assurance and performance systems imposed by government on providers of employment services create a significant administrative burden,” Mandela said.

“Over 50% of frontline’s staff time, is consumed with meeting government administrative requirements.”

In December, Guardian Australia reported a jobseeker’s allegations that her provider, APM, claimed it referred her into work that she got herself, which could trigger publicly funded incentive payments. In other instances, out-of-work Australians have said their providers offered them cash incentives to lie about their employment status.

Jeremy Poxon, the policy officer for the Australian Unemployed Workers Union, said they believed “providers [were] incorrectly or inappropriately claiming payments on a far larger scale than the Department’s recovery figures reflect”.

“Providers currently funnel millions of public funds through their own companies, related entities and in-house training courses and programs,” he said.

“The failed ParentsNext program is a perfect example, where providers claimed the Participation Fund to refer participants to their own courses.

“[Providers] should not be permitted to refer participants on their caseload to training programs.

“Ultimately, the government needs to stop outsourcing employment services to private entities that will always bend or break their rules to suit their business interests.”

A parliamentary review ordered by the Albanese government found in November that the full privatisation of Australia’s employment services system had failed. It called on the government to re-establish a commonwealth job agency and overhaul the mutual obligations regime. The government is yet to respond to its findings.