This report is based on an examination of the adequacy of arrangements for most Commonwealth agencies to provide financial compensation for errors or omissions. We also contacted agencies responsible for some aspects of the current compensation system, eg the DoFA and the Attorney General's Department (A-G's)10.
Conclusions
Agencies agreed at our meeting in April 1999 that adapting the UK experience to Australian conditions could improve the effectiveness of existing compensation schemes here.
Recommendations
The backdating provisions in the Social Security Act 1991 should be amended to allow Centrelink discretion to backdate income support payments for up to twelve months in some
Agencies should
BACKGROUND
Introduction
Aims of the investigation
Scope of the investigation
How we conducted the investigation
CIRCUMSTANCES LEADING TO REQUESTS FOR COMPENSATION FOR FINANCIAL LOSS
We suggest that the client himself contact the agency and request compensation once he has determined the amount of his own damage. The letters mean that the agency has accepted (A) or rejected (R) the client's request for compensation or termination, or that we are not aware of the outcome of their request (U).
Case Studies
GENERAL CONTEXT IN WHICH COMPENSATION REQUESTS ARISE
The goalposts are shifting all the time
One deals with technical rules relating to various matters, including the collection of information and the effective date of decisions.
APS values and standards of conduct
Other legislation and agency-based requirements' '..Where your work involves applying the provisions of legislation, you must understand all the requirements of the legislation that relate to the performance of your official duties. As evidenced by complaints to the Ombudsman, they are not always met and it is unrealistic to expect that they always will be.
Service charters
Failure to comply' '..If you are found to have breached the code of conduct, your agency may decide to take misconduct action against you.'.
Maintaining good customer relations
The TPT is involved in creating administrative structures that accept that there will be some error in agencies' activities. Compensation is only justified in limited circumstances, where an apology or a willingness to change a decision is not a sufficient remedy.
Customer expectations
CURRENT FRAMEWORK FOR PROVIDING COMPENSATION
Overview of current arrangements
If a compensation request fits within the rules of one mechanism, any financial compensation must be considered in accordance with the rules of that mechanism. It is not possible to look at one of the other mechanisms to 'top up' or increase the compensation offer.
Current mechanisms for providing compensation
- Settlement of monetary claims against the Commonwealth
- Compensation for detriment resulting from defective administration
- Act of grace payments
- Ex gratia payments
- Write off
- Waiver
- PRINCIPLES RELEVANT TO COMPENSATION AND OMBUDSMAN RECOMMENDATIONS
- Write-off of debts 43
- Waiver of the right to recover a debt
- Ombudsman recommendations
- OMBUDSMAN’S EXPERIENCE OF CURRENT ARRANGEMENTS FOR PROVIDING COMPENSATION
The inherent constitutional power of the Commonwealth government to remedy the effects of certain adverse circumstances can be used to provide relief to a group of affected people where no other avenue is available. There are circumstances where it is not in the interests of the Commonwealth to seek recovery of a debt (for example, where it would cost more to recover the debt than the amount of the debt itself); or when it is legally irrecoverable (for example, because the right to sue the debt is prevented by the expiry of the time specified in a law); or it is practically irrecoverable (for example, because the debtor is impecunious or there is some doubt about the ability of the Commonwealth to prove the debt). It authorizes the ombudsman to report to an agency after an investigation if he believes that the agency's action:44.
Problems affecting financial compensation
A 72% success rate might sound pretty high, but it's achieved in part because we usually only recommend compensation if we believe it's strong. We occasionally ask an agency to consider compensation in less certain circumstances where past experience makes it unclear what their response might be. It makes no sense to cite individual cases if the agency has rejected recommendations in similar circumstances in the past.
Resource intensive and time consuming
Can the present rules provide compensation in all circumstances
But if the agency does not believe that a payment is warranted, our arguments in favor of compensation may be rejected by the decision maker who takes a very narrow, restrictive view of the rules for each mechanism, especially the CDDA scheme. In addition, it is not easy to understand the implications of the mixture of statutory and non-statutory schemes. It is also difficult to understand the differences between the rules for settling a money claim and the CDDA rules for considering a claim for maladministration.
Disputes about the facts
The DoFA indicated that they are considering whether to recommend the transfer of deed of grace and waiver powers. But the agency then rejects our conclusion about the facts because their records or staff tell a different story. Comments made during and after our meeting with agencies in April 1999 indicate that we need to address negative perceptions in some agencies about the quality of our investigations in order to develop an improved working relationship.
Lack of understanding of the Ombudsman’s role
Other considerations will remain relevant, including assessment of the harm caused and how to quantify it.
Limitations on backdating payments in social security legislation
If, after six months, the client discovers that they have been underpaid for an unknown reason, they cannot claim compensation for their loss, as they would have to use the revision provisions in the Social Security Act to change the decision, by requesting a revision within three months of being notified of the incorrect decisions. If the customer has no reason to believe that the decision is wrong, compensation is the only possible way to recover "arrears" if it discovers the error more than thirteen weeks after being notified of the decision. It may also alleviate some of the anger and cynicism people express towards governments when they are denied payments they feel they have a legal right to receive.
Waiver of recovery of debts
INTERNATIONAL COMPARISON The UK Ombudsman’s experience
According to his 1995 annual report, a British parliamentary committee63 reported in January 1995 on the practice of public authorities in providing compensation for errors or omissions. His annual report for 1997-98 shows that he had experienced similar difficulties to ours in trying to achieve solutions based on the principles underlying the Ombudsman's recommendations in the light of. 63 'Maladministration and Redress', Report of the Inquiry by the Select Committee on the Parliamentary Commissioner for Administration, SC: First Report, 1994–95, HC 112.
Major incentives for improving compensation arrangements
DSS (UK) Guide to Financial Redress for Maladministration
We corresponded with DSS (UK) during the investigation to clarify some of the differences between our compensation arrangements and theirs. As with our agreements, consideration of compensation for legal liability remains separate and outside the scope of the guide. Although there is no statutory basis for that clause, in all other respects it appears to equate to the act of grace contained in our FMA Act.
Advantages compared with our compensation arrangements
The guidance states that it is not necessary for a customer to claim such payment or disclose that a loss has occurred. The guidance contains target dates (number of working days) for completion of requirements for each type of benefit. To support this consideration, objective indicators of delay (number of months) have been set out in the guidance for each type of benefit.
ATTACHMENT A
COMPLAINTS CLOSED 1.1.97 TO 31.12.98 INVOLVING COMPENSATION FOR ALLEGED MALADMINISTRATION
T P raised for us to for us to the client's request for the client's request for waiver proposed remedy. Agencies listed from Australia Post to the National Gallery of Australia are subject to the CAC Act. DFAT Department of Foreign Affairs DPIE Department of Primary Industry and Energy DVA Department of Veteran's Affairs FAM COURT Family Court of Australia FED COURT Federal Court of Australia NGA National Gallery of Australia.
ATTACHMENT B
FMA ACT FRAMEWORK AND MECHANISMS FOR PROVIDING COMPENSATION
Financial Management and Accountability Act 1997
Chief Executives’ Instructions (CEIs)
Compensation for detriment caused by defective administration : the CDDA scheme
The scheme is not available to meet claims previously determined in terms of the clemency law. It gave the authority for the Minister of Finance and other 'authorised persons' to approve disbursements of grace. DoFA was still authorized to consider claims that did not comply with the CDDA rules under the statutory act of clemency.
ATTACHMENT C
OMBUDSMAN AND AGENCY CORRESPONDENCE ABOUT PROBLEMS WITH EXISTING ARRANGEMENTS
Ombudsman’s letter to major agencies in mid 1998 and their responses
Ombudsman Act standards
It also stated that we make recommendations based on the standards set out in Section 15 of the Ombudsman Act, as described in Chapter 5. It is the prerogative of the Office to decide how to respond to the Ombudsman's recommendation and to ensure that ensure that the answer is given. implemented. The complainant should not be told that the Ombudsman has recommended compensation until the end of the Ombudsman's discussions with the office concerned.
Act of grace payments
The fact that large payments (over $100,000) can only be made after the Minister for Finance and Administration or DoFA has considered a report from a committee consisting of the heads of DoFA, the Australian Customs Service (ACS) and the relevant agency may involve a conflict of interest (the head of the responsible body could not provide an independent point of view). Additionally, there appears to be little role for the ACS in determining whether an installment action would be appropriate. 81 These claims cannot be met through the mercy mechanism because alternative powers exist under the Public Service Act.
Settlement of monetary claims
It was created specifically to allow agency heads to make ex-gratia payments to people badly affected by mismanagement, but it covers complaints about bad oral advice that used to be dealt with in the context of clemency. Difficulties may arise in applying the general proposition in Jones82 that the exercise of a verifiable statutory authority in good faith will not give rise to an action for negligence at common law. If the DLO believes that there is legal liability, the matter is referred to the appropriate authority specified in the CEI.
Compensation for detriment caused by defective administration (CDDA scheme)
DFaCS applies the usual standards for torts in the CDDA scheme and DoFA agrees with this approach. The HIC is a statutory body governed by the CAC Act and not the FMA Act and therefore cannot use the CDDA scheme to provide compensation. DHAC saw no reason in principle why the CDDA scheme should not be.
Ex gratia payments
Most of the decision-making powers that may give rise to requests for compensation are exercised by the HIC as a delegate of the Minister for Health. For that reason, it is important that the grace mechanism is not interpreted restrictively or in such a way that the inevitable possibility of apparent overlap between these mechanisms becomes the focus of pointless debate. Devolution of clemency back to agencies may encourage a more comprehensive assessment of a particular case under both schemes rather than leaving the final decision to the DoFA.
Relationships between mechanisms
The ACS agreed that the distinction between the schemes could be artificial and suggested that devolution of the act of mercy and the possible amalgamation of the current schemes could allow agencies to apply a more flexible application. DHAC said that the Ombudsman's concerns about the arbitrariness of the restrictions on the use of grace payments following the refusal of a claim under the CDDA scheme were justified. Much of the problem will go away if it is made clear under the CDDA scheme that the Ombudsman's recommendation can only be a basis for payment with the concurrence of the agency concerned.
Interest
The recommendations of the impartial investigator, moderated by the views of the agency, provide a solid basis for payment. They asked DoFA for guidance on what interest rate to use when the CDDA scheme first came into effect. DoFA suggested that the rate used in calculating simple interest should approximate the theoretical gain the Commonwealth made with the lag.
Taxation implications
Review of decisions
C.106 DEETYA foresaw difficulties in assessing compensation decisions if there is no legislative framework but merely policy guidelines providing broad criteria for the delegate to consider. But they also said that some discretionary decisions are not open to reconsideration for some good reason related to the case to be decided. DFaCS said that the various mechanisms, each with its own set of conditions, can be a reason against merit review, and there are very likely historical reasons why acting on mercy decisions would not be considered appropriate for merit review.
Review of existing compensation arrangements
Complainants find the merits review system much preferable because it is cheaper, faster, more informal and the tribunals have wider powers than the courts and can change a decision even if it was legal (courts cannot). They said there are arguments in favor because these decisions are discretionary. C.118 DoFA stated that there are no plans to review the effectiveness of the compensation mechanisms, other than the possible devolution of the act of mercy.
ATTACHMENT D
AGENCIES CONTACTED DURING THE INVESTIGATION
ATTACHMENT E
MEETING ON 23 APRIL 1999 - SUMMARY OF DISCUSSION
Ombudsman’s views
Agencies sometimes give us the impression that they agree with our conclusions, but cannot offer compensation because that would fall outside the rules of the existing mechanisms. They would then be directly responsible, would learn from their experience, and most likely would not pay unwise fees, as they would still be subject to the restrictions of the FMA and Court of Audit legislation. The rules should be clarified so that a fee has to be paid if the agency does the.
Agency views
DoFA tended to consider whether the payment would set a precedent and whether it was in the taxpayer's interest, ie whether the Commonwealth had a moral obligation to pay. Nor would it be intended for the agency to make concessions to the ombudsman when it is not satisfied that it has to pay. There is a lot of room for behind-the-scenes negotiations for the Ombudsman's office to collect some complaints to discuss with the agency concerned.
