The National Commission of Audit has recommended the Government dump a 30-year old Income Security Integrated System used by state and federal government agencies to calculate and administer $400 million in social welfare payments each day.
The recommendation comes just a week after treasurer, Joe Hockey, told Neil Mitchell of 3AW that the Centrelink system needed replacing.
It also comes two days after the Department of Human Services (DHS) – which runs Centrelink – experienced an outage that affected Centrelink and Child Support online services.
“It [the system] is written on now defunct information technology codes, is inflexible and expensive,” the commission’s report said. “The system adds significant costs for processing payments, maintaining the ICT system, producing letters and responding to appeals and reviews, and it increases the need for debt recovery.
“The current ageing system poses a significant risk to a core function of government. The commission sees little option but to make this kind of investment for such an important and complex IT infrastructure project.”
The system is complex due to a multitude of policy decisions about the structure and goals of the welfare system and ad hoc changes to payments over decades - many of them enshrined in legislation, the commission said.
The largest driver of complexity in technology and cost is the system’s magnitude, which has 34 payments and 38 add-on payment types, according to the DHS.
"The complexity of the payments architecture and interactions between payments creates customer confusion, errors and rework, and requires a highly knowledgeable workforce to provide support," the commission said.
The DHS provides more than 200 services to about 20 federal and state agencies and is responsible for the system, which manages annual payments totalling $144.9 billion.
Read more: Department of Human Services to rip out ageing child support system
The commission recommended the Government appoint a high credential business technology expert to work with the DHS and oversee the development of a payments system, as well as establish a policy process to review and simplify the structure of welfare payments while designing the new system.
It also flagged the potential to outsource the payments system but said this arrangement would be a “potentially high risk undertaking” and required careful consideration. One recommendation was that the Government develop a scoping study on options for outsourcing part or all of the system. However, the commission said it “does not support the outsourcing of assessment of entitlements”.
Australia Post has proposed to deliver several government services currently provided by DHS. Under the plan, service points for DHS would be integrated with Australia Post's retail network. This move would see 334 Centrelink service centres, 126 rehabilitation centres and 139 standalone Medicare offices amalgamated into Australia Post's network.
The Department of Human Services was given the go ahead in the 2013-14 budget to determine a replacement strategy for its Income Security Integrated System. The government expects the project to cost $1.2 billion to $1.5 billion.