House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, the Hon Mal Brough MP)

OUTLINE

OUTLINE

Amendments are made to the family assistance law for the purposes of a new online-based Child Care Management System (CCMS). The CCMS will standardise and simplify child care benefit administration, reduce the time required for making payments to approved child care services, reduce the administrative burden on services and improve the management of child care information relevant to the determination of individuals' child care benefit entitlement.

Amendments are also made to the absence provisions, the provisions relating to the way hours of care are calculated for child care benefit purposes, and the part-time % rate component of child care benefit.

Further amendments will introduce three new sanctions for failure of an approved child care service to comply with conditions of continued approval.

A civil penalty and infringement notice scheme is introduced in this bill. The amendments provide that the Minister may seek a civil penalty order from the Federal Court of Australia or the Federal Magistrates Court where an approved child care service contravenes a civil penalty provision. The civil penalties scheme will operate in conjunction with an infringement notice scheme. An infringement notice that is issued to an approved child care service will provide the service with the option of paying the lesser penalty set out in the notice or proceeding to a court to determine liability.

There are also amendments that relate to the information gathering powers, the location of records, and the fee charging practices of services. The amendments also enable the Secretary to write directly to the parents of children at child care services that are not complying with their obligations under the family assistance law, to suspend immediately the approval of a service in certain limited circumstances, and to establish committees for the purposes of the family assistance law.

Further amendments will reduce overpayments of child care benefit occurring because an individual who is eligible for child care benefit for a child has delayed notifying the Secretary when the child starts attending primary school, improve the recovery of debts owed by child care services operated by unincorporated bodies or associations (such as partnerships), limit the fees charged by services in certain restricted circumstances, limit the retrospective approval of a child care service, and standardise the appeal period for certain decisions affecting services.

Financial impact statement

Financial impact:

Regulation Impact Statement

1. BACKGROUND

The Child Care Benefit (CCB) program was introduced on 1 July 2000. Arrangements for administering and monitoring CCB have changed very little since that time.

1.1 CCB by fee reduction

CCB is designed to assist families with the cost of child care. Where families are accessing approved care, ^[F1] CCB can be received as a fee reduction. This means that the child care services, based on information provided (by mail) by the Family Assistance Office (FAO) about the customer, calculates an estimated value of the CCB, and reduces the fees they charge the family by that amount. The service then forwards details of these fee reductions, and of the child care used, to the FAO.

At the end of the financial year the fee reductions received by the family during the year are reconciled against their CCB entitlement (calculated based on the child care they used, their actual taxable income and taking into account a range of other circumstances). Any difference is paid to or recovered from the family.

To facilitate fee reductions for families' approved child care, services are currently required to calculate and pass on fee reductions to families. Services fund these fee reductions from an advance payment provided to them by FAO, calculated quarterly and paid in monthly instalments. After the care has been provided the service needs to provide details of the fee reductions paid to families and the child care used, also on a quarterly basis. The advances and fee reductions are acquitted, and future advances adjusted to account for inaccuracies. The usage data is used at the end of the income year to reconcile the CCB entitlements of the families.

2. PROBLEM

2.1 Current system

Child care services regularly exchange significant amounts of information with government, and this exchange is primarily conducted by mail (letters, disks and paper forms).

Child care services provide usage data on a quarterly basis. This time lag makes it difficult for the government to use the information effectively for decision making and planning. Data provided by services may be up to 6 months old when received by government. The data currently reported does not enable assessment of the supply and availability of child care places. These data delays also compound at each stage. The FAO reports expenditure information to the Department of Families, Community Services and Indigenous Affairs (FaCSIA) annually, but as a result of the advance and acquit processes, expenditure data is normally 12 to 18 months old. This further limits the Government's ability to monitor the efficiency of the program.

The child care sector is diverse, ranging from technologically enabled multi-outlet businesses to not-for-profit community based services without access to information technology more sophisticated than a telephone.

Child care is continuing as the subject of significant media and public interest. A program to modernise and improve child care processes and practices is necessary to address the issues the sector faces and to provide decision makers with access to robust information.

2.2 Impetus for change

The current arrangements for the administration of CCB by child care services clearly have significant impacts on government. Unavailable and inadequate data may result in policy decisions around child care being insufficiently informed. Decision-making, planning and budgeting may be significantly hampered by the lack of timely and accurate information, and the government's capacity to detect non-compliant or fraudulent practice is limited. The development and implementation of a child care management system seeks to provide the government with access to information which will enable better informed policy and more efficient use of child care expenditure.

There is currently a heavy reliance on manual forms of communication between child care services and FAO, such as through helpdesk inquiries, fortnightly letters from FAO to services to inform services the recent changes to customers' eligibilities and quarterly acquittal information provided on paper forms or on disks. This not only affects the efficient and effective management of the child care program by government, it also imposes significant administrative burdens on child care services.

It can also be difficult for parents seeking child care to find information on available and appropriate care, and for agencies such as Centrelink and the Job Network to facilitate access to care to enable parents to take up employment, training or study opportunities. To address this, FaCSIA has extended the function of the Child Care Access Hotline (CCAH) to improve access to information regarding the availability of child care. Child care services are required to report information on usage and availability to government on a weekly basis via telephone or the internet. These improvements to the CCAH have been in place since 3 July 2006 and better information is now becoming available to the parents and the Government. However, this information remains very basic. It is subject to potential reporting error, as services self assess usage and availability information. Parents are able to access availability information for their locality via the CCAH, but it does not address the need for ongoing management information, nor improvements required by child care services to collect and transmit information.

Currently parents also have very limited access to up to date information about their child care usage and payments.

In addition there is some misalignment in the administration of CCB across agencies. The CCB program as a whole is the responsibility of FaCSIA. The FAO deals with families, and have been set up in Medicare Australia offices, Centrelink Customer Service Centres and Tax Office Shopfronts across the country, offering a range of family assistance payments, including CCB. Centrelink provide much of the 'back of office' requirements for FAO, such as mainframe systems and answering telephone enquiries. However, responsibility for dealing with services is split across two agencies. Services are approved for CCB purposes by FaCSIA, who are also responsible for the compliance of services with legislative requirements. However, services report usage to the FAO (specifically Centrelink), who pay and acquit advances.

3. OPTIONS

Three options were considered in assessing the costs and benefits of the Child Care Management System (CCMS) project:

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continue with the status quo;

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limited action; or

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development and implementation of the CCMS.

3.1 Continue with status quo

This approach would maintain arrangements for child care services to calculate and pass fee reductions to families, continue the current advance/acquit payment and reporting cycle, and retain the current division of roles and responsibilities between FaCSIA and the FAO. Shortcomings in data availability for families and government would continue to be partially addressed through the operation of the CCAH.

FaCSIA's existing responsibilities are to:

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assess child care services' applications for the CCB providers status and administer approvals of child care services;

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manage and administer the Child Care Support Program (CCSP), including Quality Inclusion and Community Support programs;

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manage the number of allocated places for in-home care and occasional care;

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provide support to child care services through publications such as Child Care Services Handbook, Legislation Guide for Family Assistance Act, and helpdesks inquires;

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provide policy advice to Centrelink, the FAO and child care services;

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manage compliance activities in relation to approved child care services;

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manage and administer the CCAH..

The FAO's current operational responsibilities are to:

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determine CCB eligibility in accordance with CCB eligibility rules;

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process advance and acquit forms from child care services and provides advance CCB payments to child care services for the purpose of child care fee reduction to parents;

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manage compliance activities in relation to CCB families;

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provide day to day support to approved child care services, through helpdesk function and managing opening and closing of child care services;

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approve registered carers;

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provide CCB payments to parents for registered care used;

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manage backdating and adjusting CCB payments as necessary;

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make CCB payments to families that elect to receive CCB via lump sum;

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carry out the CCB reconciliation process for families at the end of the financial year; and

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manage the advance/acquit process for child care services for the purposes of CCB.

The current responsibilities of approved child care services are to:

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provide care to children in a safe and nurturing environment;

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report quarterly child care usage data to Centrelink for CCB acquittal process;

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report weekly availability and usage data to CCAH;

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report vacancy and usage information for CCSP funding;

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provide information to parents about their CCB eligibility; and

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calculate parents' CCB in order to provide fee reduction.

3.2 Limited action

A second option, of doing only the minimum required to address particular issues, was also considered. This option focused on improving the technology capability of all child care services.

Under this option FaCSIA would provide a personal computer to child care services without basic computing facilities. Where child care services already had the necessary technology, a one-off incentive payment would be provided, equivalent to the cost of a personal computer. Child care services would then bear the cost of establishing an ongoing internet connection.

The provision of appropriate hardware was targeted at facilitating child care services' compliance with the weekly usage and availability reporting requirements required for the CCAH. The assistance provided under this option would have enabled the simplification and partially automation of the reporting process that is currently undertaken by child care services. However this option would not gather any more sophisticated data than that which is currently provided.

The CCB payment cycle would remain an advance/acquit process but could have operated on a more frequent (for example weekly rather than quarterly) basis, enabled by the electronic reporting of usage data. This had the benefit to the Government of significantly reducing working capital requirements and manual processes associated with the existing advance/ acquit system.

This option was considered at the beginning of the development of the CCMS proposal. However, given its limitations, a final model for this option was not defined (for example, defining the duration of a more frequent advance/acquit cycle).

3.3 Recommended option - CCMS

This option involves the development and implementation of a national CCMS.

Under this option, an interface will be established for reporting actual usage data by child care services on a weekly basis, removing the existing manual reporting process and reducing the government resources required for data validation. The advance/acquit system will also be replaced by a weekly arrears payment cycle, based on actual usage data.

The data will be of greater detail than the other options and will include actual weekly usage and fees charged in close to a real-time environment. The administrative burden on child care services will be reduced, including the need for services to calculate parents' CCB fee reductions. It will remain the responsibility of child care services to provide accurate attendance information and they will receive CCB fee reduction payments upon provision of information in the required format.

To facilitate this all providers will some receive assistance with software upgrades and internet connections. In addition, some child care services will be brought online through provision of funds towards the cost of purchasing a computer where need. All approved child care services will need to operate under the CCMS as a condition of their ongoing approval.

This option also includes an enrolment amount, which will be paid to services when they enrol a parent-child combination (where that parent-child combination is matched against FAO records, indicating a possibility that they will claim CCB either by fee reduction or a lump sum claim at the end of the financial year). While the child care service continues to provide care, this enrolment amount will remain with the child care service. The enrolment amount is repaid by the service when the child ceases care. This provides a 'float' which may be used as the service wishes, such as to offset timing differences in the service's billing cycle and the fee reduction payment cycle.

The arrears payment cycle and electronic reporting will reduce the level of inappropriate CCB payments from human error or fraud, and the improvements in data quality and timeliness will assist targeted compliance programs. In addition, interfaces between the FAO and FaCSIA will allow all information gathered to be readily available between agencies.

Parents will have access to meaningful child care attendance and CCB payment information for each of their children through an online statement facility, which will increase families' visibility of the Government's significant investment in child care and provide a valuable compliance mechanism. This type of information is only possible under a payment in arrears model.

The CCMS option has the further benefit of aligning the operational functions of FAO and FaCSIA with their departmental responsibilities. The FAO will continue to be responsible for determining child eligibility, family entitlement and interacting with families, but in the majority of cases will no longer have any direct relationship with child care services. FaCSIA will assume responsibility for making payments to child care services, and monitoring compliance based on the entitlement information supplied by the FAO.

This option addresses a range of challenges currently being faced by the child care sector:

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Forms of communication between child care services, parents and the FAO are improved to assist the management of child care by the Government.

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The Government's decision making, planning and budgeting is improved from receipt of more detailed, more accurate and more timely information.

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Policy decisions can be made with more detailed and up to date information.

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More timely and detailed information assists the detection of fraudulent or inappropriate practice by child care services or parents.

4. IMPACT ANALYSIS - COSTS, BENEFITS AND RISKS

4.1 Who is affected by the problem and who is likely to be affected by the proposed solution?

4.1.1 Child care services

There are around 10,400 child care services approved for CCB purposes. ^[F2] All approved child care services will be affected by the CCMS proposal.

There are a number of types of care provided by the child care sector:

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Long day care is a centre-based form of child care providing all day or part-time care for children of working families and the general community. Long day care services provide care mostly for children not yet attending school, but may also provide care for school children before and after school and during school holidays. Community organisations, local councils, private operators, employers or non-profit organisations may run these services.

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Family day care services support and coordinate a group of family day carers who provide child care in their own homes for other people's children. The service also assists parents to select an appropriate family day carer for their child. A family day care service can provide flexible care, including all-day care, part-time, casual, before and after school care, and care during school holidays.

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Outside school hours care services provide care before and/or after school and/or during vacation time. These services often operate in school grounds. They may also be in other locations such as community centres, halls, neighbourhood houses, recreation centres or other types of child care services (for example family day care).

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Occasional care is centre-based child care that supports families by providing flexible care for children. Families can access occasional care regularly on a sessional basis, or irregularly. While occasional care is available to all children, most of the children in care will not have started school. Community organisations, non-profit organisations or local councils may run occasional care services.

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In home care services provide a targeted form of child care where an approved carer provides care in the child's home. It aims to provide care for children within the family unit, and is only available for families who do not have access to an existing child care service, or where an existing service cannot meet their needs such as parents who work irregular hours.

4.1.2 Child care software providers

There are currently around 25 providers of software specifically designed for or customised to use by child care services. Currently it is not necessary for child care services to use specific software, as CCB related dealings with government can be conducted entirely through paper processes. However, use of specialised software is common, with only a very small percentage of services across the country regularly submitting paper based claims.

The CCMS will make it necessary for all child care services to use appropriate software to communicate with FaCSIA.

The software currently available varies greatly in sophistication, ranging from spread sheet based products to integrated child care business management and reporting systems.

4.1.3 Child care users

Over 1 million children used approved child care in 2005-06, with more than 700,000 families receiving CCB in respect of child care provided by approved child care services. ^[F3]

There are a number of incidental policy changes required to implement the CCMS which may be apparent to families. These are likely to be experienced only by families affected by the change. For example, the changes to absences are only likely to become apparent to families where they exceed 42 absences per year (refer to section 5.3.4 for more detail).

Administrative changes required in the implementation of the CCMS should be largely invisible to parents, although some such changes may be apparent. For example, where child care services bill in advance, under current arrangements services calculate the fee reduction at the time the billing information is prepared. Any variation between the fee reduction provided by the child care service and the actual entitlement (for example, resulting from absences not covered by CCB) are adjusted with the family at the end of the financial year when the family's CCB entitlement is reconciled.

Under the CCMS the actual fee reduction cannot be calculated by government until usage information has been received (after care has been provided). In this situation child care services can chose to anticipate the fee reduction (using family entitlement data provided to them to calculate an estimated fee reduction), but will be required to adjust for any variation once care has been provided and the actual fee reduction calculated.

4.1.4 Government

Clearly government have a significant stake in addressing the problems inherent in current arrangements, and will particularly benefit from improved data quality and availability.

Key agencies affected include FaCSIA, which will be able to access to much improved data, but will be taking on a very significant administrative function, with the CCMS processing records for all children attending care every week. ^[F4] The FAO, and in particular Centrelink, will also be affected by these changes, as under the CCMS services will deal directly with FaCSIA. Data received from and provided to services relating to customers will be communicated between FaCSIA and Centrelink systems via data links.

4.2 Cost benefit analysis of options

4.2.1 Continue with status quo

Likely benefits

The primary benefit of continuing with the status quo is avoiding the potential negative consequences of change. All stakeholders - child care services, software providers, users of child care and government - can continue to operate as they do now. The financial costs of system upgrades, the risks of a large scale change process and so on are avoided.

The current arrangements also allow child care services to operate in an almost entirely paper based system, if they choose (aside from telephone or email contact with the CCAH). This allows child care services to avoid the costs of implementing and using technology, although at the cost of potential technological efficiencies (and at increased cost to government for processing of paper claims).

Likely costs

The costs of this option are largely outlined in section 0, in that the problems apparent in the current arrangements will continue. In summary this includes:

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lack of reliable data to inform policy and planning;

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limited ability to conduct compliance checking; and

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lack of control of CCB funds, with large advances remaining with the sector.

4.2.2 Limited action

Likely benefits

This option addresses some of the immediate concerns of some child care services, such as access to modern computers and the internet, while also avoiding potential costs of substantial change. Some child care services, especially outside school hours care services and family day care services rely on paper copy attendance reporting. This form of reporting is costly and time consuming. Importantly, the provision of computers enables the utilisation of a more comprehensive child care management system in the future. This option may also result in a small increase in the take-up of specialised software (increasing the market for software providers).

This option also facilitates the timely provision of availability and vacancy data to the CCAH. Changing to a more rapid advance/acquit cycle would significantly reduce the government's working capital requirements, and improve the timeliness of data.

Likely costs

Under this option CCB would continue to operate under a complex advance/acquit system, the majority of data will continue to have significant time lags, and child care services will still be required to carry out complex CCB calculations in order to provide fee reductions for parents. Child care services would continue to rely on the complex and manually driven reporting system and will still need to report a variety of items such as submitting reports to acquit their CCB quarterly advance payment, at a significant cost to the Government.

Although this option caters for the timely provision of availability and vacancy data to the CCAH, it is not the preferred option because it fails to address issues around relating to data quality (current items reported are very basic and subject to reporting error). This impacts the government's ability to assess supply and demand for child care due to lack of sufficiently detailed and robust information.

This approach could be used to speed up the reporting cycle using current processes. Data collected from the child care services would improve in terms of timeliness, but will continue to only be a subset of the information required to sufficiently inform policy decisions. Also, inefficient communication channels between child care services and government agencies will remain, and the operational functions of FAO and FaCSIA would still not match the respective departmental responsibilities of the two agencies.

Using current advance/acquit processes at an increased cycle speed would also create a number of practical issues. A number of the policy changes in the CCMS aim to increase the efficiency of processing, to support the weekly processing of fee reductions. ^[F5] Greatly increasing the cycle speed (such as to weekly cycles) under existing arrangements is likely to be problematic, and require significant rule changes to support this in the longer term. Longer cycle times (such as monthly cycles) may be more practical in the interim, but reduce the potential benefits of this option. Moving to a shorter advance/acquit cycle would also not reduce the administrative burden on services, as they would still be required to calculate CCB fee reductions, but report on fee reductions on reduced timeframes.

4.2.3 Recommended option - CCMS

The recommended option proposes implementation of a national CCMS. This option will provide the Australian Government with more timely, accurate and detailed availability and usage data for policy making and for compliance and performance monitoring. The total funding for this project can be represented as a combined FaCSIA and FAO change in fiscal balance of -$73.2 million over four years.

Likely benefits

This option provides a number of benefits to child care services, in that it:

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reduces the current administrative burden, as services will no longer need to calculate families' CCB fee reductions;

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streamlines the reporting requirements for services, replacing the complex advance/acquit cycle with weekly arrears payments based on actual attendances;

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reduces the likelihood and quantum of incorrect payments to services, as payments will now be based on actual attendance data, as opposed to advances calculated in advance and then acquitted; and

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ensures services have suitable electronic means to migrate to the new system, through training packages and Government contributions to the cost of upgrading their existing hardware and software.

This option provides benefits to software providers, in that it:

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provides an opportunity to upgrade their software, and creates a requirement for services using their product to upgrade to the new version; and

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increases the potential market for their product, as it will now be necessary for all services to use appropriate software in order to submit data.

The families using services will also benefit, in that the CCMS:

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reduces the likelihood of family debts at reconciliation of their CCB entitlements, both as fee reductions will be calculated on actual usage (rather than possibly anticipated usage) and reduces the scope for services making errors in calculating fee reductions, as these are now calculated by the FAO;

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provides parents with access to meaningful child care usage and CCB payment information through online monthly reporting facilities with daily attendance information. Parents will be able to access this information online. This is the only option that enables this to occur and is essential for families to gain an understanding of the actual level of assistance provided by the Australian Government.

The government gains very significant benefits from this option, as the CCMS:

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improves the accuracy and timeliness of child care data (including usage and expenditure) by minimising manual processing through systems interface;

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provides greater efficiencies in the administration of CCB;

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decreases the funds tied up in the current advance/acquit cycle by moving to a weekly arrears payment model;

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reduces financial impact from incorrect claims due to fraud and human error, and aligns payments with FaCSIA's increased compliance role;

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operational functions of FAO and FaCSIA are aligned with their departmental responsibilities;

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enables a significant amount of child care related information and data to be held by one central agency, improving the reporting ability of FaCSIA;

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generates significant administrative savings for the government; and

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provides for daily attendance records to be submitted and analysed (modified due to consultation - refer to section 5.4.1).

Likely costs

The CCMS option has financial and non-financial impacts on various stakeholders.

This option will have the following costs to child care services:

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Child care services will be required to purchase and maintain new or upgraded software and possibly new or upgraded hardware, and set up and maintain internet access. (Some of these costs will be subsidised).

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Revised administrative processes will need to be developed and implemented in many child care services (although the impact of this will vary greatly between services). This includes training of staff on new or upgraded software, more frequent reporting periods requiring more frequent book keeping, and so on.

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Services will no longer be paid large advances (currently paid monthly). Services who currently use these funds to smooth their cash flows across the month will no longer be able to do so. This cost is mitigated by the enrolment amount, which is a 'float' paid in respect of each child enrolled at the service.

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There will be implementation costs for child care services, although implementation assistance funding is expected to result in minimal net costs for services (refer to section 4.3 for details).

Software providers will also experience some costs as a result of the CCMS implementation:

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Software providers will need to upgrade and deploy their software, including revision of their program, and deployment costs such as training and support. These costs (as in any normal business model) will be passed on to services.

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New users of software, particularly those moving into computerised record keeping for the first time, may require higher than usual levels of support from software providers.

The CCMS option also involves some costs to Government:

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As outlined above, implementation of the CCMS includes committed funding of $73.2 million.

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The CCMS is a significant change project, and the government is aware of the impact this change may have on the child care sector to absorb change. For example, services may loose some productivity during the transition as staff adapt to the new process. If the CCMS fails to deliver to expectations, is delivered behind schedule, or the benefits of the CCMS are not realised, these change costs may be exacerbated.

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While the CCMS/software interface will be largely invisible to child care service users, the CCMS may be blamed unfairly for inadequacies in commercially available software. The CCMS model relies on commercial software providers to deliver appropriate and usable software to child care services on time and at a reasonable cost.

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The CCMS moves data communications between child care services and government to a primary, technologically based channel. Provisions for business continuity in case of unexpected failure and exception circumstances need to be included in the design of the CCMS.

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Use of the internet to transfer data between child care services and FaCSIA does raise some data security issues. The design of the CCMS seeks to mitigate these issues.

4.3 Compliance costs of the CCMS on child care services

The CCMS is to be implemented in the context of the existing regulatory regime, under the auspices of family assistance law. Approved services currently must comply with a range of obligations and conditions of continued approval under family assistance law, and this will continue to be the case. It should be noted that an application by the child care service for approval for CCB purposes is a voluntary decision. There is no need to be approved under family assistance law to operate as a child care service (unlike, for example, the requirement for child care services to be licensed under relevant state based regulatory regimes). However, services wishing to offer child care which attracts CCB fee subsidies for families (either as fee reductions or where families claim as a lump sum at the end of the financial year) must be approved.

To support child care services during the transition to the new system, assistance arrangements are being developed. Targeted and capped assistance will be provided to child care services approved for CCB at the time the system is implemented. The details and guidelines for this assistance are being developed in consultation with the child care industry. It is envisaged that assistance will include:

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modest financial assistance towards the acquisition or upgrade of hardware or software;

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advice to assist with the improvement of business processes through Professional Support Coordinators; and

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training and education.

Funding of around $18.8 million has been included in the CCMS budget to support services in their transition to the CCMS, including subsidising the cost of software and hardware. Additional funding was also included to cover implementation costs such as the development of training packages for services and the management of help desk services.

4.3.1 Compliance cost analysis

The costs of compliance with the CCMS have been assessed below against the categories outlined in Business Cost Calculator. The assessment relates to the change in compliance costs created by the CCMS, starting from the base point of compliance with the existing regulatory regime.

Compliance costs have been assessed against a number of categories, as outlined below.

Notification

Prior to or at the point of a child commencing care, the service is required to enrol the parent-child combination via the CCMS. This involves entering the name and date of birth of both the parent and child, and their Centrelink Customer Reference Numbers if known (services should seek this information from families, and already have this information for their current customers). This record is then forwarded via the CCMS interface to FaCSIA, where a data matching process with the Centrelink mainframe is conducted. Relevant information on the family passed to the service if and when the match is successful. Where families do not have a Centrelink record no match will be made. Potentially eligible families may apply to Centrelink to be registered on the mainframe if they do not currently have a mainframe record.

The enrolment process involves minimal (if any) cost to the service, as services currently need to record far more extensive enrolment details than the CCMS requires. In addition, where there is a successful data match with mainframe records, the child care service may opt to receive the enrolment payment in respect of that parent and child. Use of this enrolment amount for the duration of the child's enrolment at the service should offset any cost which might be incurred.

Education

The CCMS changes will involve some additional educational costs for child care services at the time they transition to the new arrangements. Implementation arrangements being developed by FaCSIA include provision for this cost, both in terms of material outlining the changed legislative and procedural arrangements, and subsidising the cost (including training) of new or upgraded software used by the service. As such, the net costs of this education process for child care services have been assessed as minimal.

Permission

Under the new arrangements, CCB fee reductions will not be able to be passed to parents until usage data has been submitted and the fee reduction calculated. Information relating to the fee reduction and the payment is passed back to the service, which is then required to pass this amount to the parent. Information relating to the fee reduction will also be made available to the service, which needs to be included on receipts provided to parents.

Services are currently required to calculate the rate of the fee reduction based on child care usage. They also need to report usage and fee information, including the full fee charged, fee reductions passed and other details which may have affected the calculated rate of the fee reduction. Under the CCMS, services will no longer be required to the calculate fee reductions or maintain records of information supplied by the FAO on the conditional eligibility of the family (which services use in calculating the fee reduction).

While the regularity of the reporting will be increased to weekly from the current quarterly reporting cycle, the volume of data being generated and passed by child care services will be no greater overall.

The impact of these changes will vary depending on the service's current administrative practices. Where services currently update their records on a weekly or fortnightly basis, there should be little change or even an overall reduction in the cost of administering and reporting on CCB. Where a service chooses to bill their customers in advance, they may chose to continue calculating an estimated fee reduction and anticipate this in their billing process. Reconciling anticipated and actual fee reductions may result in an overall increased cost of reporting. Where services are currently submitting paper based claims, the introduction of computerised administration would be expected to increase their efficiency, although this will be largely dependent on the manner in which they implement the change. For example, a service which continues to manage their business based on paper records, and simply uses the computer as a lodgement system would probably experience an increase in the cost of reporting, as this approach adds the cost of entering data without capitalising on potential efficiencies.

The cost to services of administering and reporting on CCB relate much more strongly to the manner in which services design their business processes and use the technology available to them than to the implementation of the CCMS itself. FaCSIA is working with software providers to support them in their role of setting up and training services in the use of their software products, and encouraging services to adopt administrative practices which maximise the opportunities of the CCMS and upgraded child care business management systems.

While the cost of the administration and reporting will vary between services, given the assistance to be provided to assist services to maximise the opportunities, the overall cost on compliance for this factor have been assessed as minimal.

Purchase cost

Services will be required to have appropriate computer hardware and use child care software registered for interaction with the CCMS. This cost is to be subsidised by implementation funding to be provided by FaCSIA. The details of this implementation program are still under development and will be targeted based on need (for example, a service which is already fully computerised will receive less funding than an uncomputerised service). These implementation arrangements are being developed in liaison with the industry through the CCMS Industry Reference Group (detailed in 5.2 below), and it is anticipated the net cost to services will be minimal.

Record keeping

The CCMS does not require services to maintain any records they are not already required to keep, and in fact reduces some record keeping requirements. For example, under the CCMS documentation of the reasons for absences will not be required until a child has used 42 absences. Under current arrangements the reason for all absences need to be documented and records such as medical certificates need to be maintained for a number of absence types.

Services are currently required to keep records of sign in and out times for children in their care. This is done as a paper based process in most child care services, with parents signing a paper sheet as they drop off and pick up their children.

The proposed requirement under the CCMS for services to electronically submit sign in and out times for attendances is an additional requirement. In recognition of sector concerns about the cost of computerising these records, this requirement has been reduced to reporting on a sample month each year (see sections 5.3.1 and 5.4.1 for details). The reporting periods for this information will be reviewed as services become used to operating under the CCMS, and as technologies for electronic sign in and out procedures which would eliminate the data entry issue (such as swipe cards and PINs) become more prevalent.

The roll out to all approved services of computer technology to a minimum standard which will occur as a result of the CCMS may assist in the take up of such technologies.

As the overall impact of the CCMS is to reduce record keeping requirements, and the reduction of the sign in and out reporting requirements to a sample month each year, the total cost the child care services of record keeping changes as a result of the CCMS have been assessed as minimal.

Enforcement

The records of approved child care services may be inspected by authorised officers at any time. While the records being inspected may change somewhat under the CCMS arrangements, this is an existing requirement. Given that the CCMS does not increased the records a service must keep, there is no enforcement cost relating to the CCMS.

Publication and documentation

There are no additional publication and documentation requirements for child care services as a result of the CCMS.

Procedural

There are no additional procedural requirements for child care services as a result of the CCMS.

5. CONSULTATION

5.1 Who are the main affected parties?

The main affected parties are:

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child care services;

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child care software providers;

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the Family Assistance Office/Centrelink; and

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FaCSIA.

Some families will notice the impact of incidental policy changes, however are not directly impacted by the administrative changes. They continue to:

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deal directly with child care services regarding the provision of care;

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be able to received CCB fee reductions; and

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deal with the FAO in relation to their payments and circumstances.

5.2 Consultation process

On 18 November 2006, FaCSIA released a series of documents to support the development and implementation of the proposed option. These documents consisted of the CCMS Information Paper and the Draft Service Provider Interface Specifications .

Both these papers were released via the FaCSIA website and the CCMS Information Paper was advertised in national and major metropolitan and large regional newspapers. The Draft Service Provider Interface Specifications were advertised in the IT sections of the major metropolitan newspapers in the following week.

Comments on these papers were invited from child care services, software providers, families and the Australian public. Comments were accepted until late December 2006, and could be made to the department in writing, via regular or electronic mail. A dedicated email address (ccms@facsia.gov.au) was established for this purpose.

Consultation forums on the CCMS proposal were conducted in all capital cities and Townsville throughout November and December 2006. Feedback collected through the consultations has been considered in the development of policies and processes to be implemented with the CCMS.

Two reference groups have also been established to work with the Department during the development, testing and implementation of the CCMS:

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The CCMS Industry Reference Group drawn from child care services across the sector, was formed to focus on providing guidance and advice on change management strategies, training and support needs.

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The CCMS Technical Reference Group was established to work with software providers and selected IT staff from within the child care sector to assist with the development of CCMS compatible software.

5.3 Outcomes of consultation to date

A number of child care sector concerns about the CCMS proposal were identified through the consultation process. The ways in which these concerns were addressed is outlined in section 5.4.

5.3.1 Requirement for actual attendance times to be provided on an attendance record

This aspect of the CCMS required services to report the in an out times for each child for each session of care. This provides the Government with comprehensive, accurate and timely data on the child care usage patterns of families, and is essential for establishing compliance patterns and service snapshots without physically visiting a child care service site. However it would increase the administrative burden for services.

The sector's response to the requirement under the CCMS to record both the charged hours and the in and out times for each child for each day of attendance was particularly intense. There was concern as to the additional workload associated with this requirement. This was considered by services to be a significant impost, in terms of both administration effort and cost.

Suggestions included deferring the collection of actual hours until after the CCMS has been implemented or to only collect actual hours for a sample period during the year (similar to the current census arrangements).

5.3.2 Application of CCB eligibility limits

Families accessing child care are eligible to receive CCB for up to 24 hours each week, except where the care is related to work, training or study, when families are generally eligible for up to 50 hours of care each week.

Families may access more than the 24 or 50 hours of care they have CCB eligibility for. Where the care is provided by two or more different services during the week, the services may not be aware the family has exceeded the limit, and provide fee reductions for the excess hours. This may result in the family being overpaid CCB. As the CCMS uses actual usage to calculate fee reductions, these overpayments can be prevented, by only paying for the first 24 or 50 hours of care claimed.

This approach allows eligibility limits to be applied correctly across all services while ensuring families receive their full entitlement and no more. It also ensures the payment of fee reductions occurs efficiently: once a service submits its attendance records fee reduction amounts can be calculated immediately, without the need to wait for any other services to submit records. However this approach may increase the administrative burden for some services, particularly those which chose to bill in advance (anticipating fee reduction amounts).

The sector expressed a high level of concern at the proposal for a 'first-in, first-served' application of CCB eligibility limits under the CCMS. Services believe that it will make it difficult to predict the amount to be paid, because they would not know if another service had already claimed the family's fee reductions. There was also some comment that families should be able to choose the service that receives their fee reductions. The family day care sector also raised concerns that they may be disadvantaged given their current fortnightly administrative processes.

5.3.3 Availability of the CCB percentage

The CCB percentage is one factor used to calculate a parent's CCB entitlement. It is based on the family's income estimate and the number of children in care. Currently services are provided with a family's CCB percentage, which is used along with other factors such as school age, part time percentage and eligible hours, to facilitate their calculation of fee reductions.

Under the CCMS, it was proposed that services would no longer have responsibility for calculating fee reductions, with this function being performed by the FAO based on weekly attendance records submitted to FaCSIA by services. Services will be required to pass to families the fee reduction amounts as calculated by the FAO.

Given the revised role of services under the CCMS, it was originally proposed that the CCB percentage no longer be provided to them. As the CCB percentage is just one factor used in calculating fee reductions, it may not give a true reflection of future fee reduction amounts. New services that commence operating under the CCMS will have no history of calculating fee reductions and may not fully understand the complexity involved in the calculations.

Feedback from the sector indicated some concern at not having CCB percentages upfront and the impact that it would have on services' ability to provide families with fee quotes and bill in advance if this is their business practice. There was a strong preference from the sector for CCB percentages to be made available when an enrolment is confirmed to allow services (or their software) to undertake estimates of fee reductions.

5.3.4 Absences

Currently families may receive CCB fee reductions for days when the child is absent from care, for up to 30 days each year, without a documented reason for the absence (known as an 'allowed' absence), plus absences due to public holidays. They can also receive fee reductions for any absence which is due to a listed reason and supported with documentation where appropriate (such as illness supported by medical certificates, etc, known as an 'approved' absence).

Under the CCMS, CCB will be paid for the first 42 absence days per child per year (no matter what the reason) without the need for documentation. Once the first 42 days are used, CCB will only be paid for any further absences that are for permitted circumstances (as per existing provisions, less public holidays) where evidence is provided by families and maintained by services.

This approach minimises the frequent resubmission of attendances where services revise absences from 'allowed' to 'approved' following documentation provided after the event. This enables more streamlined payment of fee reductions. It also reduces the burden on parents to obtain documentation for the first 42 days of absences, and on services to maintain records of absence reasons and supporting documentation.

Sector feedback consistently highlighted concern that the proposal for absences under the CCMS may disadvantage families with children that have a long term illness by not allowing for the presentation of medical certificates in the first absence period. This concern arises in the situation where a child may use up the initial period of 42 days due to an extended illness, preventing them from claiming any further absences, for example for a respite holiday or remaining public holidays, for the rest of the year.

The sector also expressed concern that absence provisions discriminate against families using full time care as all families granted 42 days for absences regardless of work status.

Services were also concerned about difficulties in keeping track of absence tally for families that use more than one service. Under the CCMS absence tallies will be maintained by FAO and advised to services and families along with fee reduction advice. Overall the sector response indicated that the level of understanding of existing rules and provisions around absences varies greatly.

5.3.5 Weekly submission of attendance records

Under the CCMS child care usage needs to be submitted weekly, and fee reduction advice and payments to services do not occur until data is submitted.

There was a general perception that this would increase administrative costs to services, especially where administration staff employed for only a small number of hours, for example two days a fortnight or monthly.

The family day care sector has expressed some concern in relation to the weekly reporting requirement under the CCMS. Most family day care (and in home care) schemes have adopted administrative practices based on fortnightly reporting, in line with carer's timesheets. These are submitted to the family day care scheme each fortnight and depending on the technology used, there can be significant delays for the scheme in receiving information required for the purposes of CCB. The family day care sector is concerned that the imposition of weekly reporting will significantly increase the administrative burden for family day care schemes and carers.

5.3.6 Payment of enrolment amounts

Under the CCMS arrangements, when services enrol a child and that combination of parent and child are recognised by the FAO system (that is, they have a Centrelink Reference Number, or CRN), the service is paid an enrolment payment. This payment is recoverable when the child leaves care. There was general acceptance that the enrolment advance would mitigate the impact on service viability from the move to payments in arrears. However concern that the level of the advance would not be enough to be effective in this.

Feedback from the sector suggests that some services believe they will incur additional administrative cost in managing the payment and recovery of enrolment amounts under the CCMS. It was also noted that the timing of the recovery, particularly where children attend the service less frequently, needed to avoid the necessity to have to repeat enrolments, such as children attending care only during school vacations.

5.3.7 Data and systems issues

The consultations also highlighted a need for assurance on the security and confidentiality of information being transferred from services to FaCSIA. Services want assurances around processes and procedures for business continuity and disaster recovery, such system failures or natural disasters at either the service or FaCSIA end of the system. Issues were also raised around access to broadband connections and whether the system would be able to operate using dial-up connections.

5.3.8 Support for services

The availability of targeted financial support was welcomed, though more information regarding the amount to be paid and purpose is required. Concern was raised about the capping of financial support for services and how this will be worked out. Capping at 15 services per operator was not seen as fair in the context of non-government organisations that auspice a large number of services (such as auspicing 80 outside school hours care services across the State) or large local government organisations. Some also suggested that the level of support offered to services that still submit manual CCB claims (about 150 services) should be higher.

It was noted the type and mode of education support provided needed to be simple and accessible, and needs to take account of the different service types, locations and capabilities. Accessibility of the help desk support for services was raised. This included operating hours and numbers and expertise of staff. Services want to talk to a 'real person'.

The need for the provision of information throughout the development and implementation of the CCMS direct to all services, and not placing a reliance on the internet as a vehicle for information sharing, was also raised. Suggestions included writing directly to services, such as through fact or information sheets.

5.3.9 Support for parents

It was noted that information products for families will need to be updated and an emphasis placed on informing families about the application of the eligible hours limits. Access for parents to the Centrelink online statement other than via the internet was raised as an issue.

The ongoing role of services in educating families about CCB was raised, and the need for services to have access to CCB information in order to assist families with claims and understanding their entitlements.

5.3.10 Software providers

The need for FaCSIA to work with the software providers was emphasised. Concerns were raised by service providers about the variability of the cost of software, its functionality and the training and support provided.

5.4 How have stakeholder views been taken into account?

Various aspects of the CCMS have been modified in response to concerns raised through the consultation process.

5.4.1 Requirement for actual attendance times to be provided on an attendance record

In order to balance sector concerns about the impact of this requirement with the need for Government to have the information it needs, it was agreed that at this stage the reporting of in and out times will be mandatory only for certain periods of time during the year.

This approach:

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reduces the workload for services;

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provides some data for the Department for a sample period each year;

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maintains the requirement for the reporting of some in and out times, and

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allows for the possibility of the time period being increased once all services are used to operating under the CCMS, if desired and supported by appropriate technology.

However, the change is not without disadvantages. Data available is not as comprehensive or consistent and therefore less valuable from both a compliance and policy development perspective. Also, by limiting the reporting period and not having consistent reporting throughout the year, this approach may highlight the additional administrative costs for services of reporting in and out times. This approach requires services to adopt special work practices for only part of the year so may not encourage automation in this area.

5.4.2 Application of CCB eligibility limits

While there was consistent concern expressed, available data indicates that this may be overstated, as illustrated by data for 2005:

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Less than 16,000 families (or 2.4 per cent of all families) eligible for 50 hours per week had claimed more than 50 hours of CCB in a week and used more than one service in that week. This includes families actually approved for more than 50 hours.

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Less than 8 per cent of families eligible for 24 hours per week claimed more than 24 hours of CCB in a week, and used more than one service in that week. Again, this includes families actually approved for more than 24 hours.

As this 'first in, first served' principle is critical in enabling the CCMS to process payments in a timely and effective manner, the principle has been maintained as a default setting. However parents, if they wish, will now be able to nominate the number of eligible hours to be paid at each service they attend. A form will be developed for parents to sign at each service identifying the number of hours they want the service to claim on their behalf. This option was suggested by the sector.

This approach will provide services with a greater level of certainty from week to week as to the amount of fee reductions they can expect to be paid. However it does shift responsibility to parents to manage their eligible hours, which may be confusing for some. Families with changing circumstances will need to frequently advise changes to their services. This approach may still create some uncertainty for services if parents misinform the number of hours to claim, as FAO will not pay above 24 or 50 hour limit. FAO will also only pay hours specified by services where parents elect this option. If parents allocate less than their eligible hours to the services, they may be underpaid (although they will receive this when reconciled at the end of the financial year).

5.4.3 Availability of the CCB percentage

Information already proposed to be provided to services when an enrolment is confirmed includes the CCB method (lump sum or fee reduction) and the CCB eligible hours for that parent-child combination. In response to child care sector feedback, the CCB percentage will also be provided to services at the point at which an enrolment with CCB eligibility is confirmed by FaCSIA. This provides a simple solution to a common concern expressed across the sector.

The CCB percentage used by the FAO when calculating fee reduction amounts will be made available to service providers on the advice FaCSIA generates against an attendance record when payments to services are made, so services are provided with updated CCB percentages.

There is an ongoing risk that services will provide inaccurate advice to families in estimating fee reductions. Services will need to be provided with a clear explanation (for example, in the Child Care Service Handbook) as to what the CCB percentage represents, and how fee reductions are calculated.

5.4.4 Absences

To address sector concerns about new absence rules, services will be able to approve additional absences for exceptional circumstances. Once the initial 42 days were used, services will be able approve additional absences based on an exceptional circumstances provision.

This approach provides greater flexibility for dealing with family circumstances. It would, for example, resolve the situation of a long term illness by allowing the payment of CCB for absences beyond the first 42 days where the service considered exceptional circumstances applied. However, it does create service compliance risks and a potential for increased CCB outlays if services apply exceptional circumstances for their own purposes or without the parent's knowledge. Rigorous guidelines and compliance mechanisms will be developed to mitigate this risk.

5.4.5 Weekly submission of attendance records

The concept of weekly submission of attendance data is a crucial element in the weekly-in-arrears model of fee reduction payments that is being established with the CCMS. Extending the weekly reporting period would jeopardise the efficient and timely payment of fee reductions.

As such, the concept of weekly submission is to be maintained and all services are encouraged to submit their attendance records to FaCSIA on a weekly basis. If however, a service chooses to report fortnightly they can do so, but they will only receive fee reduction advice and payments once they have submitted their attendance data.

This approach allows family day care services to report on a fortnightly basis. However under the first-in, first-served principle outlined above, the services that submitted earlier would have their fee reduction amounts calculated first. Any services that chose to report fortnightly may consider themselves disadvantaged in this regard. It also remains a mandatory requirement for every service to submit vacancy reports on a weekly basis.

In recognition of the unique circumstances of carers provide family day care and in home care, the Department is investigating additional support which may be provided to these carers as part of the targeted support package being developed to assist services to transition to the CCMS. This support could include additional funds to family day care and in home care schemes to assist carers in the timely submission of attendance reports.

5.4.6 Payment of enrolment amounts

To accommodate child care sector concerns, services will be able to nominate whether they wish to receive an enrolment payment for each eligible child. Once a service has indicated they do not wish to receive payment for a particular child, they can not change their mind - a new enrolment would need to be created.

This approach still provides support with cash flow to services that elect to receive payment, while enabling services to 'opt out' where they think it will create extra administrative effort, particularly for casual attendances. However this may make the transition to the CCMS more difficult for services that choose not to accept the payment on purely administrative grounds, which may be erroneous.

Due to the nature of occasional care, enrolment payments will not be available. The Department is working with the sector to consider alternate arrangements.

It is expected that the majority of services will continue to nominate to be paid enrolment payments, particularly at the point of transition to the CCMS. However this option enables services to 'opt out' should they be concerned about an additional administrative burden.

5.4.7 Data and systems issues

The CCMS is being designed to ensure that the security and confidentiality of information being transferred from services to FaCSIA, and from FaCSIA to services, is a key concern in the design of the CCMS.

The project is also developing processes and procedures for assuring business continuity and disaster recovery contingencies, whether the issue is with services or FaCSIA.

It has also been confirmed that, while a broadband internet connection is preferred, the CCMS will also operate effectively if accessed using a dial up internet connection.

5.4.8 Support for services

In the consultation process a number of issued relating to the support of services during the CCMS implementation were raised, and a number of suggestions provided. This feedback is being considering in the context of developing the implementation support arrangements and communication strategies, together with advice from the CCMS Industry Reference Group and the CCMS Technical Reference Group.

5.4.9 Support for parents

The consultations also highlighted the need to inform families about those aspects of the CCMS implementation which may affect them, such as the application of the eligible hours limits and new absence arrangements. This is being taken into account in development of the CCMS communications strategy.

5.4.10 Software providers

The feedback provided through the consultations also confirmed the importance of working with software providers in managing the CCMS transition. The CCMS Technical Reference Group was established to ensure that the views and concerns of software providers and selected IT staff from within the child care sector are identified and addressed.

6. CONCLUSION

The proposed solution to introduce the CCMS meets the requirements of the Australian Government's new e-government strategy Responsive Government - A New Service Agenda , which sets the direction for the future use of information communications technology (ICT) in government, to:

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accelerate the improvement of service delivery to citizens and business;

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promote the development of connected and responsive government; and

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improve public administration.

The CCMS will use technology to enhance process and channel efficiency between relevant government bodies, child care services and the families. The CCMS option:

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assists in gaining a better understanding of supply and usage of child care;

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provides timely information on CCB expenditure for different care types;

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provides more timely, accurate and detailed data for policy making and for compliance and performance monitoring; and

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enables an efficient flow of availability, usage and CCB expenditure data between FaCSIA and the FAO as required, ensuring that the required information held by each agency is up to date.

The responsibility of providing accurate attendance information for CCB payments will continue to rest with the child care services, and the providers will only receive CCB payments if they provide correct information in the required format. The system will be designed to support child care services and reduce the risks of incorrect information being submitted. Assistance will be provided to help the transition, such as appropriate software, training and ongoing helpdesk support.

7. IMPLEMENTATION AND REVIEW

7.1 Implementation plan

A CCMS pilot will be conducted with a selected number of services prior to the system being rolled out more broadly. The pilot will simulate business process including training, information and support products, transition processes and helpdesk support.

The CCMS pilot with selected long day care and family day care services will commence from July 2007 and will consist of the following phases;

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firstly, a Simulation Phase where the CCMS will be used by child care services but no live payments will be made; and

•

subsequently, a Live Payment Phase where are small group of child care providers will commence using the CCMS for day to day CCB processes.

FaCSIA is working closely with Centrelink, child care services, software providers and reference groups to ensure a comprehensive assistance process takes place during the pilot, so that the system and associated business processes are robust.

Following on from the CCMS pilot, services will be gradually transitioned over to the CCMS. The transition will commence with those services that were participating in the pilot phase.

Final transition arrangements are still being developed. FaCSIA will be working closely with services to ensure that adequate time and information is provided to ensure an efficient transition.

7.2 Evaluation strategy

Evaluations of the CCMS will be undertaken at various points throughout the implementation and once implementation is finalised.

The evaluation will involve an assessment of the impact of the CCMS on the child care sector, analysis of the extent to which the CCMS operates as a functional, integrated system focusing on the effectiveness, efficiency and appropriateness of individual components of the CCMS.