FUNDING ISSUES

Part Two:

FUNDING ISSUES

The Dept. of Finance controls levels of ATSIC funding to the CDEP program. Dept. of Finance determines the per participant Weekly Wage allocations, Recurrent proportions, and the level of Capital to the program. Dept. of Finance also determines the numbers of new participant positions that the overall scheme can increase by each year.

Recurrent spending can be divided into four categories:

  1. compulsory expenses, such as worker’s compensation, superannuation, vehicle registration and third party insurance;
  2. administrative overheads;
  3. repairs and maintenance to existing equipment
  4. work place activity funding
  1. Compulsory expenses are generally payable in advance. They include Workers compensation, which alone may account for approximately ¼ of the recurrent budget, superannuation on all non-CDEP salaries, vehicle registration, and third party insurance, and comprehensive insurance on all assets. This means that half the recurrent budget can be spent, even before administration expenses are met.
  1. Office and property administration overheads represent a more constant figure, as all CDEPs have certain minimal administration costs. Every CDEP, irrespective of how small, must maintain and run premises for work activities, and an office with a computer, photocopier, fax machine, phone and vehicle. Now that CTP and CYS have been axed, these overheads also include coordination salaries and associated costs, such as superannuation. Smaller CDEPs attract fewer Recurrent dollars, which means that they spend a higher proportion of Recurrent to meet these administration expenses.

The above two categories make up non-activity expenditure

  1. Repairs and Maintenance to existing equipment. These include, for vehicles, registration, third party and comprehensive insurance, fuel and oil, regular maintenance and repairs to vehicles. This would average out at around $3,000 per vehicle.
  1. Work place activities receive what is left over after all other expenses are met, which in a small CDEP may amount to almost nothing. This is most unfortunate, for it is this portion that is spent on materials to keep participants employed. See A3>.


A. Funding Constraints

1. Basic Grant Constraints

a. Wages

The wages payment to Organisations on a per participant basis is not significantly greater than the Adult Jobsearch payment. As at 1/1/97, wages payments to urban CDEPs is $164.05 p.w., and Adult Jobsearch $160.10 p.w. CDEP participants may be disadvantaged by not being eligible for rent assistance, which is worth up to $36.50 pw for a single person on Jobsearch. Most CDEP participants work for non-monetary reasons, some of which are described in the section Benefits of CDEP.

b. Recurrent

Recurrent costs are a proportion of Wages, which the Dept of Finance has set at 20% of wages. In recent years, ATSIC has reduced this to 19%, to use the other 1% to fund setting up costs of new CDEPs, although for the foreseeable future, no new CDEPs are being started. This 1% is actually a 5% reduction of each CDEPs Recurrent budget. A further 2% (or 10% of each CDEPs Recurrent budget) is withheld in Canberra intil the 4th Quarter, as a hedge against suspensions or the possibility that the CDEP might not be able to maintain participant numbers throughout the 4 quarters, which would reduce the Recurrent allocation to that CDEP. Given that grants are now made to CDEPs on an adjusted quarterly basis, it is not clear why the need for this at all.

From the diminished Recurrent budget, the CDEP must fund Workers’ Compensation. This is close to 5% of wages, or around 25% of the total Recurrent allocation. It must also fund comprehensive insurance on all assets owned, and now, following the axing of CTP and CYS programs, may also have to fund superannuation for all full-time staff, which is currently 6% of salaries, and rising by an additional 1% each year. Together, these non-producing outlays may account for over half the total Recurrent grant allocation, before any Recurrent funds are actually spent on activities, which is what must happen before there can be any outcomes.

c. Capital

Capital is a fixed lump sum per participant. For many years, after being reduced from $1250 per participant, capital was fixed at $1190, reducing real spending each year by the amount of inflation.  This year, Capital was increased by 2.8% to $1223 per participant.

Recommendation 1:

That capital allocation be subject to rate of inflation increases, to allow ongoing expenditure to be on a constant dollar value basis.

During 1995/96, there was a relaxation in the strict demarcation between Capital and Recurrent, allowing the Capital/Recurrent split to reflect a CDEP’s actual needs. This puts greater onus onto the CDEP to ensure that too much of the Capital outlay does not become absorbed into Recurrent expenditure, as this would severely diminish the ability of the CDEP to build up a long-term capital asset base.

A requirement has been imposed for 1997/98, that at least 70% of Capital funding shall be expended as capital. This has come at a difficult time for those CDEPs who have suffered the loss of CTP and CYS funding for CDEP management. Some were hoping that the Recurrent grant would provide some relief from the salary loss.

2. Reduced Funding to Urban CDEPs

It does not cost less to work than to remain unemployed, but take home pay of CDEP participants, after tax, are almost always significantly less than the Jobsearch allowance. In addition to this disadvantage, urban CDEP wages and recurrent outlays per participant are set at around 90% of that outlaid for remote participants. Many people consider that, apart from the cost of food, urban CDEP participants have higher costs of living than do remote CDEP participants.

Purchase of materials and equipment for remote CDEPs is more expensive, because of higher costs of transport. These differing expenses between remote and urban CDEPs, and the demand for urban CDEPs to fund the setting up of enterprises, points to the need for a more comprehensive study of the differing funding requirements of remote and urban CDEPs.

Recommendation 2:

That ATSIC Central Office determine for itself, the actual living costs of Urban Participants, and present findings to Dept. of Finance, as a case for Urban Participant wage payments to increase to more closely reflect reality.

3.  Funding Inequities to Smaller CDEPs

Larger CDEPs have always enjoyed funding benefits that accrue because of their size, while smaller CDEPs struggle just to survive.

Using the latest estimated figures for weekly Wages of $164.05 (urban), each CDEP receives $1620 recurrent p.p., p.a. From this worker’s compensation, at around 4.7%, absorbs approx $400, per participant, while comprehensive insurance, including for vehicles at around $1,000 each, may cost $10,000. Superannuation and workers comp. on a manager’s and two assistants’ salaries may cost $9,000.



No. of
Recurrent Work Comp Cmprhsv Superann Office non-Activ Bal of  Rec. Actvity
Parts. at 19% at 4.7% Insur Allow O’heads Expend for Activit’s % of Rec
30 48,624 12,284 8,000 9,000 16,000 45,284 3,340 7
40 64,832 16,379 9,000 9,000 18,000 52,379 12,453 19
50 81,040 20,473 10,000 9,000 20,000 59,473 21,567 27
60 97,248 24,568 11,000 9,000 22,000 66,568 30,680 32
70 113,456 28,663 11,000 9,000 24,000 72,663 40,793 36
80 129,664 32,758 12,000 9,000 26,000 79,758 49,906 38
100 162,080 40,947 13,000 9,000 28,000 90,947 71,073 44
120 194,496 49,136 13,000 9,000 32,000 103,136 91,360 47
140 226,912 57,326 14,000 9,000 34,000 114,326 112,586 50


Recommendation 3:

That a`more equitable re-distribution of recurrent funds be made so that smaller CDEPs can more reasonably fund workplace activities and become more viable.

This inequity could be addressed fairly simply by allocating a minimal overhead $ amount to each CDEP, and apportioning the remainder according to participant numbers. A constant figure would be allocated to each CDEP, and the remaining funds allocated on a per participant basis, as normal.

B.  Recent Funding Cuts

Funding to CDEPs has been constrained for many years. Despite this, the Dept. of Finance, under the Coalition Govt., imposed across-the-board funding cuts of 10% upon ATSIC. This has resulted in particularly savage cuts to some programs in order to achieve the effect of an across-the-board cut of 10%.

1. Recurrent Reductions to Larger CDEPs

Recently, ATSIC has imposed a reduction in Capital funding to CDEPs of 150 participants and above from 19% to 12%. This is a 41.67% reduction, and for a CDEP of 150, amounts to $67,586 pa. This gives rise to a certain anomaly. Now a CDEP of 100 participants generates a greater capital and recurrent allocation than does a CDEP of 150.

No Capital Recurrent Total Cap/Rec
Participants $ $ Cap/Rec per Part.
100 122,300 162,080 284,380 2,843.80
110 134,530 178,288 312,818 2,843.80
120 146,760 194,496 341,256 2,843.80
130 158,990 210,704 369,694 2,843.80
140 171.220 226,912 398,132 2,843.80
149 182,227 241,499 423,726 2,843.80
150 115,863 243,120 332,051 2,393.22
160 123,587 259,328 382,915 2393.22
170 131,311 275,536 406,847 2393.22
180 139,035 291,744 430,779 2393.22
190 146,759 307,952 454,711 2393.22
200 154,484 324,160 478,644 2393.22

If any CDEP of between 150-180 participants wished to increase their recurrent funding, they could achieve this by decreasing their participants to 149. This would, of Scourse, not help local CDEP participant employment.

Recommendation 4:

That the formula of reducing recurrent to 12% for CDEPs of over 150 participants, be revised to make a more equitable formula without anomalies.

2.  Reductions to Funding of Business Development

Funding to the CEIS program, which may provide grants to assist the starting up of enterprises, and to the BFS which may provide loans, has been reduced by 10%, at a time when increasing pressure is being applied for CDEPs to become enterprising.

3. Abolition of Training and Support Programs

One consequence of the 10% cut was that all Community Training Programs were axed from 1 October 1996, and all Community Youth Support programs were axed from 1 April 1997. These programs are where the coordination of many CDEPs were being funded from, so axing these programs has effectively ended the funding of Coordinators, Assistants and Trainees to a large number of CDEPs. ATSIC is now without a program by which it may fund CDEP administration and coordination.

C. Restrictions on Participant Numbers

Participant numbers restrictions is another form of funding constraint, as it is participant numbers that determine the amount of capital and recurrent that a CDEP organisation attracts.

Employment levels of participants on CDEPs is of great interest to the Dept. of Finance, who take it into consideration when allocating annual funding and participant number s to the program each year. The numbers of participants on “sit-down”, or not working, is known to the Dept. of Finance.

More than anything else, it is the numbers of participants on “sit-down” that prevents ATSIC from being able to lobby aggressively for extra funding to expand and improve the program. Instead of the program expanding to meet the demands for new participant placements throughout the country, the Dept. of Finance has, in recent years, dictated to ATSIC funding restrictions, as well as constraints on participant numbers.

1. Reaction to Ghostings

Following the discovery, in 1995,  that more than half of the names on one rapidly-expanding urban CDEP were “ghostings”, or fictitious, severe limitations were placed on the numbers of new places available each year. Commission Decision 1529 was as follows:

Urban CDEPs are now constrained to be no more than 1995/96 first quarter participant numbers, and may not expand in this financial year.

Discrete CDEPs may expand only if new additional participants are Aboriginal or Torres Strait Islanders, and are between 15 and 25 years old.

This ended the right of urban CDEPs to increase their numbers at all, which had been set at up to 15% per quarter, if the people were there to employ. Discrete CDEPs were able to increase by the numbers of new starters under 26 yrs old.

It was later found that these restrictions were an over reaction, as overall participant numbers fell across Australia

2.  Current Participant Number Restrictions

Currently, there is a freeze on new CDEPs starting up, and the program has now been capped at 28,000 participants, without allowance for either natural or demand driven increases for urban CDEPs. This leaves very little room for expansion to take up unfilled demand. There is now a large unmet need amongst urban Aboriginals for CDEP participation.

The problem for some town-based CDEPs, is that because places are now scarce, those participants wishing to take a break from the project may not now be willing to, for fear of losing their place for all time, whilst those wishing to get onto the CDEP are not able to through lack of expansion and the reluctance of less enthusiastic participants to leave. The outcome of such a dynamic is for urban CDEPs to have increasing numbers of less enthusiastic participants, while the keener, would-be participants are prevented from joining the program.

It is understood that such restrictions and constraints have been imposed to encourage the program to become leaner, and to eliminate pockets of waste. While this is a laudable intention, it has not necessarily transferred through to improve all individual CDEPs performances.

Recommendation 5:

That, as far as possible, funding constraints and participant number restrictions be directed towards, and limited to, those individual CDEPs requiring such impositions, while leaving the responsible and better performing CDEPs to develop to the best of their abilities.

Recommendation 6:

That the 1% retained Recurrent funds, previously used to establish new CDEPs, be redirected to fund coordination of existing CDEPs, until a proper management fund is established, or until the capping is relaxed and creation of new CDEPs is resumed.

Recommendation 7:

That ATSIC Central Office conduct negotiations with Dept. of Finance to determine under what conditions would Dept. of Finance be prepared to increase participant numbers, to enable placement of all seriously-interested, eligible Aboriginal persons who wish to become participants.

Advertisements
This entry was posted in Empowering CDEPs. Bookmark the permalink.