Drugs, alcohol, rent, holidays and cars: Integrity chief reveals dodgy NDIS spending

Dodgy providers have used the National Disability Insurance Scheme to take participants to ATMs to withdraw cash for illicit drugs including heroin, cocaine and ice.

Others are encouraging people to use their NDIS funding for holidays worth tens of thousands of dollars, or spend it on alcohol, rent, gift vouchers and lifestyle purchases. In one case, a participant used their plan to buy a $73,000 car while another spent $240,000 a year on personal expenses including their mortgage.

NDIS fraud and integrity investigators have found some providers allow participants to spend funding on alcohol.Credit: Gabriele Charotte

The revelations from the scheme’s integrity chief at Monday night’s budget estimates hearing add to a complex debate about how to weed out bad practice and limit growth of the $45 billion scheme – the federal government’s second-largest budget expense – without taking choice and control away from people with disabilities.

As parliament continued this week to debate new laws that will tighten what scheme participants can spend funding on and how they receive that money, NDIS Minister Bill Shorten faced pushback from disability advocates and the Greens who said the changes gave the government and agency too much power.

In a fiery late-night hearing, NDIS head of fraud and integrity John Dardo said at least 5 per cent of the scheme – more than $2 billion – was being spent in error. “There would be thousands of cases where participants are claiming things that are not consistent with their plan,” he said.

“Examples just in the last week: a $20,000 holiday, a $10,000 holiday … We had a participant that bought a car, brand new [for] $73,000. The money was processed overnight. Now, fortunately when we were able to approach them, they understood that they should not and they were willing to repay the money.

“But we have other participants … [who] then cease contact and refuse to engage.”

Dardo gave another example in which a participant on a $480,000-a-year plan would put in a $40,000 claim for each month. “When we do the integrity work, we find out he only has costs of $20,000 ... but because his plan is $480,000, he claims the whole amount,” he said.

“The other $20,000 goes to his mortgage or his bank account or his cost of living. I can’t break that down into how much he spends on alcohol or a pet or something else because there is no way to unpack that.”

Dardo said looming changes to the scheme – which will tighten the way providers are regulated and revolutionise how plan budgets are allocated – were causing angst for participants whose providers had said they could access rent subsidies, alcohol, other lifestyle expenses and gift vouchers through the scheme.

“The participants … have grown accustomed to that as a standard of living, or they have signed leases on the understanding that was the lifestyle they would enjoy. And saying, ‘Sorry, you cannot keep claiming that money to subsidise that type of spend’, you can imagine some of our participants are having their standard of living disrupted.”

But Dardo came under fire from Greens senator Jordon Steele-John, who pushed him for concrete numbers around what proportion of NDIS funding was being spent in the inappropriate ways he had outlined. Dardo did not give specific figures.

“When you put into the public domain an assertion such as you have made … it has really serious implications for the discrimination faced by disabled people in Australia,” Steele-John said.

“In a scheme of 660,000 people, you will find individual examples of many different types of behaviour. You have specifically referenced alcohol, and yet when asked to provide the specific numbers, you are unable to do so. That is deeply concerning to me.

“It is of service to the narrative of the government to imply that disabled people are using our NDIS funds for holidays, drinks and alcohol. Then your minister [Shorten] gets to go around and brief members of parliament, and use those examples as scare tactics to get them to support his cooked legislation.”

Dardo said it was difficult to answer. “Some of the channels participants can claim through require no ABN, no description, no word. Nothing. They can put in a dollar amount and they get paid,” he said. “I have been really transparent in saying the systems are immature. We rely on a range of indicators and data points and exemplar work and casework to actually bring a picture together.”

Liberal senator Maria Kovacic said there was a challenge in ensuring participants with genuine needs were having their needs met, while at the same time addressing exploitation in the system. She asked Dardo whether the agency was aware if illicit drugs had recently been sourced or sold through the scheme.

“Absolutely,” Dardo said. “I have spoken very recently to a participant who would meet the provider at the ATM, the provider would withdraw cash, and provide that cash to the participant for her to source illicit substances ... We’re not talking dozens or hundreds of participants, we’re talking significantly higher. And these are providers going out of their way to put people in harm’s way to commoditise those participants and their plans.”

Asked which drugs were being pushed, and whether that included heroin, cocaine and ice, Dardo said: “You name it, it’s on the list.”

There were also dozens of examples where organised crime had gotten people onto the scheme through fraudulent health reports, to facilitate a cashflow for substance abuse, he said.

“The scheme was designed with the best intent; you talk to anyone who was there at the beginning ... What nobody planned on, when there’s such a big pot of money there, [was that] it would attract behaviours, risks, things that weren’t there before,” Dardo said.

“It should be easier for the money to flow. But it should be easy for it to flow for good things … and that requires reform. There are weaknesses in the design of the system that need to be addressed. We just cannot prosecute or audit our way out of this.”

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