CHAPTER 6 | how the Ombudsman helped people

Facilitating compensation for financial loss

It is not necessary for a person to resort to legal action to obtain compensation for loss suffered as a result of defective administration by a government agency. A discretionary payment of compensation can be made under one of two administrative schemes: as an Act of Grace payment by the Minister for Finance and Administration (or a delegate), under s 33 of the Financial Management and Accountability Act 1997; or by an agency under the government-approved scheme for Compensation for Detriment Caused by Defective Administration (CDDA).

The purpose of the CDDA scheme is to provide agencies with a discretionary authority to compensate where there is no legal entitlement but where a claimant has suffered loss as a result of an agency's defective administration. Although the Department of Finance and Administration (DOFA) is responsible for CDDA policy and guidelines, each agency is responsible for administering the CDDA guidelines in relation to claims against the agency.

The Ombudsman's office has taken a close interest in the development and administration of these compensatory schemes. The office issued a major report on the topic in 1999—To compensate or not to compensate: own motion investigation of Commonwealth arrangements for providing financial redress for maladministration. The CDDA scheme explicitly recognises the Ombudsman's role, in clause 21 of the CDDA guidelines issued by DOFA:

Where the circumstances of a case do not clearly fall within the exact criteria for defective administration, but the agency concerned agrees with the Ombudsman that detriment has occurred as a result of defective administration and the agency is inclined to compensate a claimant, a recommendation by the Ombudsman supporting compensation is sufficient basis for payment.

The criteria and procedures for payment of compensation are now clearly spelt out in the CDDA guidelines, and the role of the Ombudsman's office will shift from the routine operation of the scheme. We continue to play a strategic role, and each year either investigate complaints about the refusal of compensation or suggest to agencies that compensation should be paid as a suitable remedy for administrative error detected by the Ombudsman. The role that we can play is illustrated by the Incomplete advice and Processing a claim case studies.