New estimates suggest nearly 5% of the National Disability Insurance Scheme (NDIS) is spent in error.

John Dardo, the integrity chief of the National Disability Insurance Agency (NDIA — the agency that runs the scheme), has warned around A$2 billion of the scheme’s spending was not on genuine needs, leading to the misuse of the NDIS’s $42 billion budget, including by organised crime syndicates.

Large-scale, publicly funded schemes, such as Medicare and childcare, have been targeted by criminals, with $1.5–$3 billion lost to Medicare fraud annually.

The NDIS is vital for the lives of around 650,000 people with disabilities, and the recent estimates expose errors in the NDIS design that must be addressed.

Types of fraud

Latest reports show criminals use different ways to target the NDIS.

The most concerning incidents show NDIS participants are being harassed by criminals to give up their NDIS budget or are encouraged to misuse their funds to buy luxury items.

There have been reports of some criminals posing as support coordinators. They then change participants’ contact details and bank accounts to redirect funds. This lets them take large amounts of money for fake services.

Another method is adding extra charges to invoices, making participants pay more than the services are worth, or for services that were never provided.

Some have also been creating fake businesses to divert NDIS funds.

Could registration stop the fraud?

Currently, the NDIS operates through a mix of registered and unregistered service providers.

Registered providers are approved to provide services to NDIA-managed participants and are subject to oversight. However, unregistered providers, who typically service participants receiving less than $100,000 per year, are not controlled by the NDIA.

Both types of providers must comply with the NDIS Code of Conduct and can have complaints filed against them.

There are more than 150,000 unregistered providers, making up around 87% of service providers. The recent NDIS review proposed registering all providers to safeguard the system. However, this has faced backlash as it could threaten the choice and control promised by the NDIS.

Selecting who provides support is important to NDIS participants, especially when it involves personal care, such as showering.

Registration is costly. Registered providers incur additional expenses, such as those related to regular audits, staff clearances, and quality and risk control. Forcing providers to register could lead some to stop offering NDIS services rather than undergo the registration process.

This could result in NDIS participants living in areas with few or only one provider and therefore receiving limited or no services.

New legislation

The recent Getting the NDIS Back on Track legislation aims to reduce the overall cost of the NDIS by $14.4 billion over the next four years.

One aspect is to control plan inflation — where participants spend all of their NDIS funding before the end of their plan and request more funds for supports. The legislation also introduces a new needs-based assessment along with clarifying what items and supports can be funded.

It also reinforces participant compliance. For example, the NDIA will be able to request extra information to reassess participants’ eligibility to access the scheme.

The NDIA can also decide if the agency must step in to manage the participants’ funding. If they believe participants are not complying with NDIA requirements, they might raise a debt against the participants. Although it is still unclear how this would operate, the government says it intends to co-design the new requirements with the disability community.

Fighting fraud must include prevention

Fraud against the NDIS is investigated by the Fraud Fusion Taskforce, a multi-agency partnership established in 2022 to combat fraud in the NDIS. The latest reports show the taskforce has 500 investigations of compliance matters under investigation. There are 20 prosecutions in the courts and another 12 on the way, according to NDIS Minister Bill Shorten.

This year, the government announced a joint taskforce with the Australian Consumer and Competition Commission (ACCC) to combat incidents of overcharging in which NDIS participants paid more than people outside the scheme for the same product or service.

While fraud detection is important, more work is needed to prevent fraud in a system designed to help some of society’s most vulnerable.

At the moment, the system does not check all invoices submitted daily. A payment system that keeps records of provider information, such as business name, ABN number, bank accounts and addresses, can allow for tracking provider activities. Such a system would also check invoices against participants’ plans and provider records. It could also identify and alert authorities of any irregularities or suspicious activities.

The government also needs to recruit more staff and invest in training them to detect red flags. Staff who are familiar with the circumstances of people with disabilities can be more effective in checking claims submitted daily and identifying irregularities.

Importantly, fraud can be fought by informing participants about possible ways criminals might abuse the system and how they can report these activities. This should extend beyond media releases and the information provided on the NDIS website. Here, disability advocates and community services can play an important role.

Participants might feel intimidated by criminals and fear that reporting fraudulent activities could impact the services they receive or even lead to a loss of NDIS funding. Disability advocacy groups could provide information and guide participants. But to do so effectively, they would need better government funding.

This year, the government announced an increase in the allocation of funding to some disability advocacy groups. This is a good start. However, to achieve the best outcomes, funding must be provided in a continuous and systematic way.

Mona Nikidehaghani, Senior Lecturer in Accounting, University of Wollongong

This article is republished from The Conversation under a Creative Commons license. Read the original article.