Strengthening integrity through system design and market oversight | External submission

National Disability Services Submission:

About National Disability Services

National Disability Services (NDS™) is Australia’s peak body for disability service organisations, and Australia’s biggest and most diverse network of disability service providers. Our valued members collectively operate several thousand services for more than 300,000 Australians with disability and employ a workforce of more than 100,000 people.

NDS is committed to a sustainable and diverse disability service sector, underpinned by the provision of high-quality, evidence-based practices and supports that strengthen,

safeguard, and provide greater choice for people with disability in Australia.

Acknowledgement of Country

NDS acknowledges the Aboriginal and Torres Strait Islander peoples as the Traditional Custodians of the lands, waters, and skies where we live, learn and work. We pay our respects to Elders past, present, and future and honour the enduring cultural authority, knowledge systems, and Ways of Knowing, Being and Doing that continue to strengthen

communities across Australia.

About National Disability Services ……………………………………………………………………… 2

Acknowledgement of Country …………………………………………………………………………… 2

Contents ……………………………………………………………………………………………………… 3

Key messages ………………………………………………………………………………………………. 4

Overview ……………………………………………………………………………………………………… 5

Scope of submission ……………………………………………………………………………………. 5

System drivers of non-compliance …………………………………………………………………….. 6

Provider impacts and market dynamics ………………………………………………………………. 7

Structural drivers of integrity risk ……………………………………………………………………….. 8

Recent reform announcements and implications for integrity ………………………………….. 9

Strengthening integrity through system design ……………………………………………………. 11

Conclusion …………………………………………………………………………………………………. 13

Contact ……………………………………………………………………………………………………… 14

Key messages

Integrity risks in the NDIS are systemic, not isolated. Fraud and sharp practices have emerged within a system characterised by limited visibility, uneven regulation, and misaligned incentives, rather than solely from individual misconduct.
The challenge is not the level of investment in the Scheme, but whether funding delivers value, safeguards participants, and supports a sustainable provider market.
Right now, most of the provider market operates outside consistent regulatory oversight. Approximately 94 per cent of NDIS providers are unregistered, limiting transparency, early risk detection, and proportionate enforcement across the Scheme. Given that the recent measures announced by the government will take time to implement and will not be fully in place until 2030 these risks remain current and critical.
Uneven regulation and misaligned pricing distort market behaviour and place disproportionate pressure on providers investing in quality, compliance, and safeguarding.
Integrity cannot be achieved through enforcement alone. Reactive compliance measures address harm after it occurs and do not resolve the system settings that generate risk.
Strengthening integrity requires system redesign, including a clear accountability perimeter for all providers, risk-proportionate regulation, independent pricing, and stronger whole-of-system stewardship.

Overview

The National Disability Insurance Scheme (NDIS) was designed to deliver reasonable and necessary supports to people with significant disability in a way that is fair, sustainable, and built on trust. That intent is now under pressure.

Non-compliance, including fraud and sharp practices, is not occurring in isolation. Integrity risks have emerged within a system where visibility across the provider market is incomplete, regulatory coverage is uneven, and pricing and commissioning settings do not consistently reward quality or accountability. There is sufficient investment in the Scheme. The core challenge is ensuring that this investment delivers value for money while safeguarding participants and supporting a viable, high-quality provider market. Inaction is not cost neutral. Without stronger and more coherent integrity settings that address underlying system design, risks to participants, providers and Scheme sustainability will continue to grow.

National Disability Services (NDS), as the peak body for disability service providers, supports reforms that strengthen integrity while maintaining the original intent of the Scheme: delivering consistent, equitable and high-quality supports to people with significant disability across Australia.

Scope of submission

This submission responds directly to the Committee’s Terms of Reference by addressing:

the nature and extent of non-compliance, including how current system settings enable fraud and sharp practices.
the impacts of non-compliance on participants, families, and market sustainability
the effectiveness of policy and regulatory responses to date in improving integrity and safeguarding participants.
the legislative and system reforms required to strengthen integrity.

This submission takes a system-level perspective. Integrity is not solely a matter of enforcement or individual behaviour. It is shaped by the interaction of pricing, regulation, market oversight, and service delivery settings. Where these elements are misaligned, they create conditions for non-compliance and reduce the effectiveness of safeguards.

Strengthening integrity therefore requires more than expanded powers and penalties. It requires clear visibility across the full provider market, proportionate and consistent regulation, and system settings that align incentives with quality, accountability, and participant outcomes.

System drivers of non-compliance

Non-compliance in the NDIS, including fraud and sharp practices, is real and systemic. It reflects the operation of a complex market where integrity settings remain reactive and where significant parts of the provider market operate outside consistent oversight.

A central driver of integrity risk is the lack of visibility across the full provider market. NDIA data indicates that approximately 94 per cent of active NDIS providers are unregistered, limiting the ability of government to monitor activity, identify emerging risks and respond proportionately. These gaps create conditions where poor practice can occur with reduced scrutiny, undermining participant safeguards, and confidence in the Scheme.

Regulatory settings are also uneven. Different levels of oversight apply to providers delivering similar supports, resulting in inconsistent expectations and enforcement. This weakens incentives for quality and compliance and contributes to an uneven operating environment.

Pricing and commissioning settings further compound these risks. Where prices do not reflect the cost of delivering safe, high quality and compliant supports, providers face pressure to reduce investment in capability, shift service models or exit higher risk areas of service delivery. In this environment, lower cost and higher risk models can persist, while providers committed to quality face growing viability challenges.

Taken together, these settings shape market behaviour. Misalignment between pricing, regulation and oversight reduces transparency, weakens accountability, and limits the system’s ability to prevent and respond to risk early. Integrity measures are therefore often applied after harm has occurred, rather than preventing it.

The impacts are system wide. Participants face increased risks to safety and quality, including exposure to exploitation and harm. Providers operate in an uneven and uncertain environment. Government faces ongoing challenges in assuring value for money and maintaining confidence in the Scheme.

Provider impacts and market dynamics

The impacts of current integrity and regulatory settings are most directly experienced by providers. While there is strong support across the sector for strengthening integrity, existing arrangements place disproportionate pressure on providers already investing in workforce capability, governance, safeguarding, and quality systems.

NDS member research highlights the scale of these pressures. The State of the Disability Sector Report 2025 shows that nearly half of providers are operating at a financial loss, with many others breaking even or achieving only marginal surpluses. At the same time, 81 per cent report they cannot continue to deliver services at current NDIS prices.

These pressures are compounded by the extent to which providers absorb unfunded costs to sustain participant outcomes. Seventy-seven per cent of organisations report delivering unfunded supports, at an average cost of almost $500,000 per provider. This reflects a system where provider viability is relied upon to compensate for gaps in pricing and policy settings, rather than being supported by them.

An uneven regulatory environment further distorts market dynamics. Providers subject to registration requirements incur higher compliance and operating costs, while others delivering similar supports face fewer obligations and lower overheads. Although all providers are subject to the NDIS Code of Conduct, this baseline is reactive and does not

provide the same level of proactive oversight, monitoring, or assurance as registration- based regulation.

This imbalance is reflected at a system level. NDIA data indicates that approximately 94 per cent of active providers are unregistered, limiting transparency and consistent oversight across the market. In practice, this creates a gap between regulatory expectation and lived experience. While behavioural standards are nominally consistent, the mechanisms for ensuring compliance are not, reinforcing competitive imbalances and weakening incentives for quality investment.

Over time, these dynamics shape service availability and market composition. Providers increasingly make decisions about what supports they can offer based on financial and regulatory sustainability, with some reducing service scope or exiting higher complexity supports altogether. This has significant consequences for participants with complex needs and in thin markets, where service continuity depends on a stable and capable provider base.

At the same time, integrity measures, including stronger compliance activity and expanded regulatory powers, are being introduced into a system that has not yet resolved these underlying structural issues. Without a balanced approach, there is a risk that integrity responses reinforce existing pressures rather than addressing their root causes.

Structural drivers of integrity risk

Current approaches to integrity in the NDIS place significant emphasis on enforcement, compliance activity, and penalties. While these measures are necessary, they are being applied within a system that is not consistently designed to support integrity in practice.

Integrity risk does not arise solely from deliberate misuse. It is also shaped by structural factors, including pricing adequacy, regulatory coverage, market design, and system complexity. Where these settings are misaligned, risk is generated and often displaced into less visible parts of the market.

Reactive mechanisms such as complaints-based regulation and post-payment compliance play a key role, but they do not prevent harm or enable early intervention. Without addressing these structural drivers, expanded powers and penalties are unlikely to deliver sustained improvements in integrity outcomes.

At the core of these challenges is the absence of a clear and consistent accountability perimeter across the provider market. Integrity begins with visibility. A system cannot effectively regulate what it cannot see, and where parts of the market sit outside consistent oversight, the ability to prevent, detect and respond to poor practice is inherently constrained.

Strengthening integrity therefore requires a shift from a reactive approach to one grounded in system design, transparency, and proportionate oversight.

Recent reform announcements and implications for

integrity

The Australian Government has recently outlined a suite of reforms aimed at securing the long-term sustainability of the NDIS. These include changes to eligibility, stronger fraud and compliance activity, mandatory registration for providers of higher risk supports, and reforms to pricing and payment systems.

NDS supports the intent of these measures. Strengthening integrity, improving value for money, and ensuring the scheme remains sustainable are shared objectives across government and the sector.

Several elements of the announced reforms represent important steps forward.

Pricing reform

The decision to shift pricing responsibility to the Minister signals a stronger focus on accountability and alignment with broader system objectives. However, for pricing to effectively support integrity, it must be independent, transparent and evidence based.

Consistent with the direction of the NDIS Review, pricing should be informed by an independent body, such as the Independent Health and Aged Care Pricing Authority (IHACPA), to ensure it reflects the efficient cost of delivering safe, high-quality supports, including regulatory and workforce requirements.

Without this, there is a risk that pricing settings will continue to distort provider behaviour, placing pressure on quality providers while enabling lower-quality models to persist.

Payment system reform

Improvements to payment systems and greater visibility of transactions are strongly supported. Strengthening payment integrity is a critical enabler of system oversight and aligns with recommendations to improve transparency across the market.

Enhanced payment visibility will support earlier identification of risk, reduce opportunities for misuse, and improve the ability of agencies to respond to emerging issues.

Provider registration

The move toward mandatory registration for some supports, is an important step toward strengthening oversight. However, its effectiveness will depend on how it is implemented.

A partial or segmented approach to registration risks entrenching existing gaps in visibility and oversight. As highlighted in the NDIS Provider and Worker Registration Taskforce Advice, visibility across the full provider market is critical to scheme integrity, and regulatory settings must be applied on a graduated, risk-proportionate basis. Although the proposed digital payment system will make funding flows more transparent, it is essential that any new enrolment process also incorporates safeguards like NDIS worker screening and confirmation of commitment to the NDIS Code of Conduct. Recent consultation on the definition of a provider highlighted that some NDIS providers are unaware they must adhere to the Code of Conduct.

To deliver meaningful integrity outcomes, registration must apply across the whole market, with obligations scaled according to risk, rather than maintaining a divide between registered and unregistered providers.

Overall implication

Taken together, these measures represent a shift toward stronger system control and oversight. However, they are primarily focused on enforcement, access, and administrative levers.

On their own, they do not address the structural drivers of integrity risk within the NDIS, including pricing misalignment, incomplete market visibility, and system complexity.

Strengthening integrity through system design

Integrity in the NDIS must be built through system design, not delivered through enforcement alone.

Addressing integrity within the NDIS requires more than strengthened enforcement. It requires a system that is designed to support transparency, accountability, and quality from the outset.

This includes establishing a clear accountability perimeter across the provider market, aligning pricing and regulatory settings with the cost and complexity of service delivery, and strengthening proactive risk identification and whole-of-system stewardship.

Recommendations

Establish a clear legislative definition of an NDIS provider to support full market visibility Define an NDIS provider in legislation to capture all entities delivering NDIS-funded disability supports, including those who hold themselves out as providing such supports.

The definition should establish a clear accountability perimeter, separate from registration requirements, ensuring all providers are visible to the system while allowing regulatory intensity to be applied proportionately.
Implement mandatory, risk-proportionate registration across the provider market Introduce a modular, graduated and risk-proportionate registration model applying to

all providers within the defined perimeter, with obligations calibrated based on risk, complexity, and type of support. At a minimum these should include NDIS Worker Screening and commitment to the Code of Conduct. This should recognise that risk is not determined by business model alone and ensure appropriate oversight of higher-risk supports, including high intensity supports, and complex service delivery. The model should incorporate mutual recognition of existing professional, sectoral and jurisdictional accreditation where appropriate, to reduce duplication, support workforce mobility and enable efficient implementation without compromising safeguarding outcomes. 3. Transition to independent pricing to align funding with quality, compliance, and market sustainability Urgently transition to independent pricing, including through IHACPA, to support the Minister to make pricing decision and ensure NDIS prices reflect the full cost of delivering safe, compliant, and high-quality supports. Current pricing does not adequately account for workforce capability, supervision, governance and safeguarding requirements, creating conditions that undermine both provider viability and integrity outcomes. Independent and differentiated pricing is essential to remove perverse incentives, support quality provision and ensure that regulatory expectations are matched by sustainable funding. 4. Strengthen proactive, system-wide risk identification and information sharing Move beyond a predominantly reactive model by strengthening data capability, analytics and information sharing across the NDIA, the NDIS Commission and other relevant bodies.

This should support early identification of emerging risks, including organised fraud, systemic poor practice and market failure, and enable timely, coordinated responses. 5. Strengthen whole-of-system market stewardship and regulatory alignment Ensure integrity measures are aligned with pricing, planning and regulatory settings, with clear accountability for whole-of-system stewardship across government. This should include mechanisms to coordinate decision-making, manage

interdependencies and respond to cross-system risks, consistent with findings from recent performance audits and ongoing reform activity.

Conclusion

NDS supports efforts to strengthen integrity across the NDIS and recognises the importance of addressing fraud, misuse, and participant harm.

However, as this submission outlines, integrity cannot be achieved through enforcement measures alone. It must be supported by system settings that promote transparency, consistency, and accountability across the provider market.

Current challenges reflect not only gaps in compliance and oversight, but broader issues in system design, including uneven regulatory coverage, misaligned incentives, and limited visibility across the market. These will be partially addressed by the changes announced by government, but gaps remain.

Addressing these issues will be critical to ensuring that strengthened powers and penalties deliver their intended outcomes. Without this, there is a risk that integrity responses place additional pressure on compliant providers, while failing to address the underlying drivers of poor practice.

Effective implementation will be key. This includes ensuring reforms are sequenced appropriately, informed by engagement with the sector, and aligned with broader changes to pricing, planning, and regulation.

NDS stands ready to work with government to support the development of a NDIS that safeguards participants, supports quality providers, and delivers long-term Scheme sustainability.