Supported employment case based funding review – validation workshop Disclaimer Inherent Limitations The findings in this presentation are based on analysis of quantitative data collected from the ADE sector and the reported results reflect a perception of the ADE sector only to the extent of the sample surveyed, noting the limitations with the sample and in particular the representativeness of the sample. Any projection to the wider ADE sector is subject to the level of bias in the sample. No warranty of completeness, accuracy or reliability is given in relation to the statements and representations made by, and the information and documentation provided by, organisations that provided data as part of the process. The accuracy of the information provided by responding organisations has not been independently verified unless otherwise noted within the presentation. No reliance should be placed on additional oral remarks provided during the presentation. The findings in this presentation have been formed on the above basis. Third Party Reliance This presentation has been prepared at the request of the Department of Families, Housing, Community Services and Indigenous Affairs. No responsibility is taken in any way for reliance placed by a third party on this presentation. Any reliance placed is that party’s sole responsibility. The presentation and the accompanying slide pack are provided solely for the benefit of the parties identified in the contract and are not to be copied, quoted or referred to in whole or in part without written consent. Welcome: Purpose of the session The purpose of today’s workshop is to present to you the findings of the review of case based funding (CBF) for supported employment and to hear your views on the proposed funding approaches. Background A consultant was engaged to undertake a review of the current funding levels using the previous methodology A review of the previous methodology highlighted a number of concerns with the approach taken by the previous methodology including: • The use of open employment support and cost data as a proxy for supported employment data • Failure to adequately recognise the unique nature of ADEs and the impact this has on costs Given these concerns and other changes in the disability sector a full review was undertaken Background – trends in the disability sector There are a number of trends in the disability sector (locally and internationally) which will impact on supported employment, including: • A significant shift towards person centred service delivery and individualised funding • The proposed introduction of the NDIS • A shift towards the social enterprise model for the provision of supported employment (UK) • A move towards more integrated work forces and a shift away from segregated disability services (US, UK, Canada) • A move away from subsidising unviable organisations (UK) Data collection - overview A data collection tool was developed based on the understanding of ADEs during Phase 1 The tool sought to collect information for each ADE business line (rather than outlet) including: • Demographic and organisational structure information • Profit and loss information • Employee information Data was requested for three financial years, spread over a 5-year period (2006/2007, 2008/2009 and 2009/2010 or 2010/2011) Data collection – overview (continued) ADEs were asked to break their cost information down into four categories: • Employment support costs • ADE costs • Other support costs • Business costs Employee was requested broken down by: • Supported employees • FaHCSIA funded • non-FaHCSIA funded • Direct support employees • Other employees Data collection - Demographics • The data collection tool was emailed to 194 ADEs • Responses were received from 97 ADEs (50%) • A total of 67 (35%) responses were complete and usable for analysis • These 67 responses accounted for 182 outlets (57% of the total number of outlets) • Location of respondents broadly aligned with ADE population

Data collection - Demographics • Business lines captured by the sample broadly align with the characteristics of the population • The business line “Other” is over represented in the sample Data collection - Demographics Comparison of the size of responding organisations shows that: • The sample is largely representative of the population • Organisations with between 20 and 30 employees may be under represented. • Large organisations (250<) may be over represented.

Analysis – Costs • Analysis was undertaken at an aggregate and industry level • Employment support costs and ADE costs were separately considered The median cost per FTE (based on a 38 hour full time week) at an aggregate level is:

$/FTE

Employment support cost $13,936

ADE costs $3,269

Total $17,205

Analysis – Costs by industry type • Employment support costs differ by industry • Employment support costs were lowest in traditional ADE industries • Employment support costs can be grouped into three categories (low, medium, high) Analysis – Costs by industry type • Median ADE costs vary greatly (from $1658/FTE for packaging and repackaging to $11,247/FTE for retail sales) • ADE costs appear to be lower in traditional industries such as packaging

Analysis – Costs by industry type • Revenue is highest in industries with high costs/FTE • Revenue/FTE is lowest in traditional industries (i.e. packaging) • Revenue is lower in low cost industries but still may not cover costs Analysis – Cost by size • As the size of business line (FTE) increases, costs decrease • This is consistent with the notion of economies of scale • The decrease in cost appears to level off once a size of around 20 FTE is reached

Analysis – Costs by size • ADE costs decrease as the size of the business line (FTE) increases • The trend in ADE costs is not a strong as in employment support costs

Analysis – Costs by remoteness • Costs appear to increase as remoteness increase (an increase of 120% between Highly Accessible and Remote classifications) • The root cause of this cost increase is not clear but may be linked to scale rather than remoteness • ARIA classification is a measure of accessibility to service centres based on road distances and is thus not a direct driver of costs for ADEs.

Analysis – key themes • Employment support costs vary by industry • Costs are typically lowest in traditional industries (i.e. packaging) and higher in more contemporary industries such as light manufacturing • Lower costs in industries such as packaging are matched by lower revenue • Revenue is highest in high cost industries • Costs per FTE decrease as the size of the business line increases • Costs increase as remoteness increases – however the root cause is unclear, it may be that remote organisations are typically smaller Discussion • Group discussion (15 mins) − Discussion of questions at tables − Nominate a scribe to write down ideas/key themes − We will visit tables to check in and listen to the discussion. • Feedback from each table (15 mins). − Reporting back will be cumulative i.e. each table will add to things that have not been said previously or express a different view to what has been said previously. • Questions − What impact do you think the industry your organisation operates in has on the way you provide support and the costs of providing support? − If your organisation operates in multiple industries, what are the key differences in how you operate within each industry? Does the support you provide to employees vary from industry to industry? − What are the challenges of operating in your current industry(ies)? Funding model objectives Focus The focus of the models is on an new end state funding approach It is recognised that transitional arrangements and an agreed time horizon will need to be established to move to any new funding approach These transitional issues will need to be considered in consultation with the sector once an agreed model has been determined It is recognised that change will not happen quickly and will need to be planned so as to ensure that there is no or limited disruption to individuals and service providers. A focus on FTE Both proposed models focus on moving the funding arrangement from places to the individual consistent with the directions of the NDIS Both models assume that an individual seeking work will have a view as to how much time they would like to work and this will be supported through an assessment and planning process Based on an individual’s goals – funding will be allocated to an individual to purchase employment support consistent with their goals With funds allocated to the individual – service providers will then be able to offer a range of services within the confines of the individuals budget. – At times the individual’s available budget will align with the amount of service the provider can offer – At other times the individual’s available budget will allow a more limited amount of service to be provided by the service provider – In some instance the individual’s available budget may allow more service to be provided than desired – The market and provider capacity will determine the ‘degree of support’ that can be provided Option 1 – funding the cost of supported employment This model would seek to compensate ADEs for the costs of employing people with disability and the costs of being an ADE. Funding would be provided in two components:

Option 1 – funding the cost of supported employment • Funding for ADE costs will be a fixed amount paid on a FTE basis • An uplift will be provide for remote organisations (based on a percentage of total funding) • Funding for employment support costs will vary depending on the industry the ADE operates in: Analysis – Costs by industry type

$/FTE

Employment support cost $13,936

ADE costs $3,269

Total $17,205 Option 2 – update of the current case based funding model • Updating the current approach provides a simple means of improving the funding approach • Option 2 would involve a single funding amount paid on an FTE level • The single funding amount would compensate ADEs for the cost of providing employment and the costs of being an ADE • Removing the link between funding and DMI would reduce the administrative burden on ADEs • Ongoing receipt of funding would be linked to a number of simple performance criteria • An uplift will be provided for remote organisations

Introducing performance requirements Under the proposed funding models funding would be linked to performance criteria. Example criteria might include: • Revenue – to encourage ADEs to operate sustainably and viable • Growth targets for smaller organisations – to encourage small organisations to grow to a sustainable size • An integrated workforce target – to encourage ADEs to move towards integrated workforce models • A percentage of supported employees with low productivity, or from target groups – to ensure that employment is available to people with all types and levels of disability • A percentage of employees achieving outcomes identified in their Employment Assistance Plans – to encourage ADEs to assist their supported employees to reach their goals Discussion • Group discussion (30 mins) • Feedback from each table (20-30 mins) • Questions 1. Do you agree with the rationale for each of the proposed funding model options? 2. How would the proposed funding models impact on the way ADEs operate? 3. What changes would do you think ADEs would make to the way they operate? 4. What advantages can you see in the proposed funding models over the current funding approach? Disadvantages? Next steps • Workshops are being held in all major jurisdictions with the final workshop to conclude on 7th June 2012 • Slides from the workshops will be made available on the FaHCSIA website from mid June 2012. • Views from the validation workshops will be collated and used to update or refine the proposed funding approaches where practical • A short report will be provided to FaHCSIA highlighting themes that have emerged during the workshops and providing refined funding approaches by 18th June 2012 • Additional data collection will be undertaken with the data collection tool to be relaunched in early June 2012