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2.5  Information on service costs

This paper includes analysis of the costs associated with different individuals and subpopulations. The costs included cover income support payments, costs associated with serving sentences administered by the Department of Corrections, and costs associated with the services provided by CYF in childhood.

Adult benefit costs are derived from the database of Work and Income's Income Support Expenditure (ISE) which stores the payments from January 1993. The payments were categorised into three groups, Tier 1 (main benefits), Tier 2 (supplements) and Tier 3 (support for people in hardship). Adult income support assistance can be received from the age of 16. To attribute welfare costs directly to children when they were supported by an adult's main benefit, we multiplied the number of days that the child was included as a dependent child in an adult benefit by an average per day payment of approximately $14, which was approximately the extra benefit entitlement for beneficiaries with a dependent child. The benefit costs included in this study did not include Working for Family tax credits, student allowances or student loans.

Corrections costs were calculated by multiplying the length of each sentence (taking the days actually served) by an average cost per day from a table of average per day sentence costs provided by the Department of Corrections. The average cost figures provided by the Department of Corrections related to the last four financial years. In this analysis, the cost figures for those four years were averaged (giving more weight to recent data) and applied historically (after adjusting for inflation). The cost estimates both direct and indirect costs. Note that average per person costs are not the same as marginal costs, and therefore the figures used in this analysis cannot be used to calculate the aggregate costs that could be added or saved by increasing or decreasing the total numbers of persons serving sentences.

CYF costs can be distinguished by the two distinct areas of services it provides, care and protection for children (up to age of 17, or 20 in exceptional cases) and youth justice for children or young adults (ages 14 to 17 only) who have been referred to CYF. The CYF costs data used in this study include both direct and indirect costs. Direct cost estimates are derived from actual detailed receipts covering the actual services provided. Indirect cost estimates are averages that are applied to cover more general business overhead costs. Note that a very small proportion of outlier cost records were excluded from this analysis due to their implausibility. All cost estimates used in this study are CPI adjusted to December 2014 dollars. Further information on the costs data is available in Treasury’s Analytical Paper 15/01.

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