Report 25: 2019-20

WA’s Transition to the NDIS

Audit conclusion and key findings

Audit conclusion

WA State government entities have been largely effective in preparing for the transition to the NDIS, and responsive in addressing many emerging challenges. However, clear determination of WA’s role going forward, further monitoring and close management of transition risks, and negotiations on interim transition targets and agreement on payment obligations are required.

The most significant early fiscal risk to the State with transition to the NDIS has been effectively managed by Communities, DPC and Treasury. WA potentially avoided having to pay several hundred million dollars a year to the Commonwealth for people not receiving services by not accepting the default agreement, which was based on the normative population profile of other jurisdictions. The State undertook substantial actuarial analysis, closely examined implementation issues in other states and engaged in extensive negotiations with the Commonwealth to achieve this cost mitigation.

From 1 July 2020, the Bilateral Agreement requires the State to pay financial contributions based on a minimum estimated number of Western Australians being on the NDIS. Delays in achieving full and timely implementation present the risk of the State paying for services that Western Australians are not accessing. DPC and Treasury have told us that WA’s financial contributions from 1 July 2020 to 30 June 2023 will be based on the actual number of participants in the scheme, rather than what is documented in the Bilateral Agreement, and that the State will not be required to pay for non-participants. However, at the time of the audit this remains to be formalised in documentation with the Commonwealth.

The original transitional targets for moving people onto the NDIS throughout 2018 and 2019 were not met. Up to the end of the audit period at 31 December 2019, approximately 76% of the total planned number of participants at the time had moved to the NDIS. Western Australians that were on the WA NDIS and had not transferred by the time the WA NDIS ended in 2019 continued to receive support. However, there is a risk of delayed access to the NDIS for new participants and those accessing other State services.

The original NDIS governance structure, set up by NDIA and Communities, did not effectively mitigate the early implementation challenges and risks. However, State entities demonstrated a keen willingness to learn lessons from NDIS implementation in other jurisdictions, and WA’s own early experience delivering disability services across a vast and sparsely-populated state. The establishment of the NDIS Interface Steering Committee (NISC) goes some way toward strengthening governance. NISC aims to specifically improve collaboration and delineation of responsibilities between the Commonwealth and State and manage risks across the entities. The Executive Steering Committee (ESC) will continue to be responsible for managing WA’s transition to the NDIS.

In addition, entities, through the NISC, need to continue to effectively monitor the interaction between the NDIS and State services such as health, including mental health, education and transport. This is important in order to reduce the risk of shifting or duplication of costs and services. Entities should also monitor for potential administrative savings. Because the transition is not due to be completed until 30 June 2023, it is too early to determine with any certainty how effectively responsible entities will mitigate the remaining risks.

Key findings

NDIS is a major and complex reform that will significantly change disability funding and service delivery in WA

The NDIS is expected to provide more choice and control for participants and guarantee funding support into the future. More people in WA are planned to access NDIS than were able to access the State’s disability schemes. By 1 July 2020, an estimated 39,000 people were expected to have transitioned to the NDIS in WA, with the scheme modelling capacity for up to 48,000 by 2022-23.

Since the early 1990s, WA has had a mature disability service system which included funding allocated to providers in response to local decisions about client disability needs. However, resourcing limitations resulted in some people being unable to access all the disability support they needed. Under the universal care model of the NDIS, funding obligations by the Commonwealth and State are determined by need rather than a defined annual appropriation that effectively rations services within a fixed funding bucket.

During the 6 years of transition to 2023, the State estimates it will pay approximately $740 million per year to support Western Australians in the NDIS. Disability funding will double from an average of $877 million per year between 2013-14 to 2016-17 (Table 1) to $1.9 billion a year of combined State and Commonwealth contributions in 2022-23 (Table 2). The fixed annual contributions for the full scheme from 2023-24 will be determined in 2023, based largely on the number of participants in the scheme.

Fully moving from the 3 separate schemes and adding new entrants to NDIS (Figure 2) is particularly challenging for WA. Until July 2018, there were 3 different ways that people with disability could access support, depending on where they lived. The State has long provided its own disability support services scheme. Between 1 July 2014 and 30 June 2018 two separate trials of the NDIS were run in WA. One was administered by NDIA and one by the State through WA NDIS. All 3 schemes had some difference in eligibility, administration and information requirements.

In WA, Communities is the lead entity for disability support and transition to NDIS, but implementation is a shared responsibility between entities at a national and state level. DPC has a governance and ongoing monitoring role while the Department of Treasury (Treasury) is responsible for providing advice and managing the financial impact of NDIS on the State finances and budget arrangements. Due to the shared responsibilities of entities sound collaboration from all parties involved and close monitoring of progress is important.

Initial targets for moving people onto the NDIS were not met, but the rate of transition has increased

Initial planned targets for moving people onto the NDIS were not met. By 31 December 2018, 9,517 (56%) of an expected 17,054 participants had moved onto the NDIS, which included 45% of WA NDIS participants. By 31 December 2019, only 24,132 (76%) of an expected 31,741 people had moved onto the NDIS. DPC and Treasury have told us that the State will only pay for the actual number of participants on the scheme from 1 July 2020 to 30 June 2023.

Despite an acceleration in the number of people moving across to the NDIS in the first 3 quarters of 2018-19 and the 2nd quarter of 2019-20, the rate of transition onto the NDIS will not be sufficient to reach the planned target of 39,097 participants by 1 July 2020. To achieve the planned target, 14,965 people need to be accepted onto the NDIS in the second half of 2019-20.  

Communities has little influence on how quickly people are accepted onto the NDIS as eligibility is assessed and plans are developed by NDIA. Almost all WA NDIS participants have already moved across, leaving around 9,100 other State participants to move. These people receive a range of support. The differences between the existing support and the NDIS mean that their NDIS planning is effectively that of new entrants. Participants are re-assessed by NDIA and need to provide evidence to NDIA of their disability.

A mix of the slow roll-out in the early stages and the fact that there will be people who are ineligible for NDIS support, means that there are people that are not getting support early enough or may not receive support. The extent and impact of this is unclear because State entities are not adequately monitoring how many people are missing out. Many are not known to the entities because they have not previously accessed State-funded disability services.

According to data from the NDIA at 31 December 2019, around 3,800 West Australians with disability were found to be ineligible for NDIS. The majority of these people were not previously accessing State services. It is unclear whether these people are eligible for support from State disability services or other entities. This may impact on the extent of ongoing non-NDIS services the State will need to provide. Consequently, this needs to be closely monitored by the State.  

Governance has been enhanced to manage remaining implementation risks

NDIA and Communities-led governance arrangements that were in place from the start were not initially comprehensive. Other State entities such as the Department of Health and the Mental Health Commission were not effectively represented in the structure. However, at the end of 2018, the NISC was established to improve collaboration and manage risks across State entities affected by the NDIS.

There were challenges in how Communities and NDIA worked together and implementation difficulties which had some impact on moving people onto NDIS. These included a lower than expected number and rate of staff transfers from Communities to the NDIA, gaps in the setup of working arrangements that delineate responsibilities between the parties, and the lack of availability of participant data in the required digital format.

The mechanisms for ensuring quality and safety of NDIS services to protect vulnerable people with disability in the State are not being fully applied during the transition period. At March 2019, about 125 providers who were providing services under NDIS were not registered on Communities’ WA Disability Services Providers Panel (DSPP). This means that Communities has limited ability to enforce compliance with quality requirements and standards.

Effective interaction between NDIS and other State services such as health, transport, education and mental health has emerged as a key risk that needs to be managed to prevent shifting or duplication of costs and services. People who need support but do not qualify for NDIS may need to access these State services. The NISC has been established to focus on this risk. However, the extent of the ongoing need for State provided services will only become clear over time as the scheme matures. The Disability Reform Council (DRC) has also recognised that further work is required to clarify the interface between the NDIS and mainstream services including mental health and transport.

The cost risks to the State have been effectively minimised in the short term, but delays increase the risk of WA paying for unused services

The cost risks to the State at December 2019 have been effectively minimised. Until 30 June 2020 WA is only paying contributions for people that have been accepted onto the NDIS, consistent with the transition arrangements that were in place in all other jurisdictions.

For 2020-21 to 2022-23, initially the Commonwealth wanted WA to pay fixed contributions, aligned with an agreed higher number of people even though the State was not in control of the transition process, and where WA analysis showed there was not expected to be that many participants. However, the State effectively negotiated with the Commonwealth before entering into the Bilateral Agreement and, from 1 July 2020, is only required to pay a minimum contribution based on a lower agreed estimated number of people in WA being on the NDIS (Table 2). As it looks more likely that there will be delays in getting that number of people onto the NDIS, there is a risk that unless documentation with the Commonwealth is formalised the State could be required to pay for services that Western Australians are not accessing and pay for State services for longer than expected.

It is not yet clear what level of State delivered disability services will be needed and how much it will cost. The State has commissioned a Functional Review to identify what services the State will need to continue to administer and the potential cost from 1 July 2020. Communities advised us that the review is now complete and the final report is with the Expenditure Review Committee (ERC) of Cabinet for consideration.

Changes to funding and pricing of services under the NDIS has caused some concern in the sector about the long-term financial sustainability of some disability service organisations. Providers we interviewed expressed concern that the NDIS prices were inadequate and did not sufficiently meet the actual cost of service delivery. During the audit, the Commonwealth announced in June 2019 an increase to price limits for NDIS service providers, including for regional and remote providers in WA, but it is still too early to determine the impact of the announced changes.

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