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Centrelink And The Mystery Of The $4 Billion

12 January 2017
Justin Warren
Eigen Magic

The Australian Derpartment Department of Human Services continues to cover itself in glory* this week hundreds of people go public with their stories of incorrect debts being raised against them and the Kafka-esque bureaucracy that awaits anyone caught in its dragnet.

I’ve been digging into the financial justifications for the automation effort, and it’s a convoluted beast. The numbers being bandied about sound good in a headline, but figuring out the real numbers has been surprisingly difficult. Little wonder that the stories containing any of the figures, particularly the ones used by Ministers Alan Tudge and Christian Porter, are confusing at best.

Here’s my attempt to unravel what’s really going on here. I’ll provide links to primary sources, rather than media reports, where I can.


An important thing to note here: with accruals accounting (which is what is being used here, like most organisations) you never get your receivables to zero. Receivables are used to track the difference in timing between when a debt is incurred (you owe the money) and when you actually get the cash. Whenever anyone buys something on credit, this happens. The bigger the organisation, the larger this number will be, because the total volume of payments is larger.

What we’d need to look at (and I haven’t yet) is how large this running balance of receivables should be. Is it too high? Maybe. But by how much?

The bottom line here is that it will not get to zero unless DSS/Centrelink can manage to never overpay anyone for any reason, ever. That’s unrealistic, because it would require Centrelink’s systems to be perfect, and no system is perfect.

And that’s okay! As long as the running balance isn’t too large (and we need to know what that amount is and why) and stays relatively constant over time, then the money is flowing in and out of the system nice and smoothly. There will always be errors and mistakes, because we’re dealing with humans and human made systems, which always have flaws. It’s how you manage those flaws that matters.

Double-entry book-keeping and accruals accounting have been developed for just this reason. Provided you do it properly, and that’s where we should be focusing our attention. What does a properly run system look like, and how different is that from what we currently have.

Unless you can clearly articulate that, then you cannot fix the system. And this is the big, big problem with the Government’s current approach.