Chapter 1


Chapter 1

Introduction

Referral of the National Vocational Education and Training Regulator (Charges) Bill 2012

1.1        On 22 March 2012, the Senate referred the National Vocational Education and Training Regulator (Charges) Bill 2012 to the Senate Legislation Committee on Economics for inquiry and report by 9 May 2012.

Conduct of inquiry

1.2        Details of the inquiry, the bill and associated documents were published on the committee's website.

1.3        The committee wrote to 67 organisations and individuals inviting submissions by 13 April 2012. Submissions were received from 12 individuals and organisations, as listed in the Appendix.

1.4        There were no public hearings held for this inquiry.

1.5        The committee thanks those organisations and individuals who made submissions to the inquiry.

Background

1.6        The National Vocational Education and Training Regulator (Charges) Bill 2012 is the fourth bill to be introduced as part of a Council of Australian Governments (COAG) initiative to standardise Vocational Education Training (VET) across Australia.

1.7        The first three bills, namely the National Vocational Education and Training Regulator Bill 2010 [2011], the National Vocational Education and Training Regulator (Transitional Provisions) Bill 2010 [2011] and the National Vocational Education and Training Regulator (Consequential Amendments) Bill 2011, were introduced into Parliament and passed by the Senate on 23 March 2011[1] and by the House of Representatives on 24 March 2011.[2]

1.8        On 10 February 2011, the bills were referred to the Senate Legislation Committee on Education, Employment and Workplace Relations for inquiry and report by 21 March 2011. The final report is available on the committee's website.[3]

1.9        The first bills collectively establish the Australian Skills Quality Authority (ASQA), which is the national VET regulator. The bills also provide the regulator with administrative and enforcement powers and create offences and civil penalties relating to the conduct of registered training organisations (RTOs) and others involved with the VET sector. The use of infringement notices and enforceable undertakings as an alternative to criminal offences and civil penalties are also legislated.

1.10      The Commonwealth Acts replace state and territory arrangements for administration and regulation of the VET sector, with the exception of Western Australia and Victoria.

The Inter-governmental Agreement (IGA)

1.11      On 7 December 2009, COAG agreed to establish a national regulator for the VET sector to 'drive better quality standards and regulation and to strengthen Australia's international education sector'—the IGA.[4]

1.12      Consistent with this agreement, ASQA was established under Commonwealth legislation, responsible for the registration and audit of RTOs and the accreditation of courses. With the exception of Victoria and Western Australia, most state governments have passed (NSW, ACT, SA, Tas and NT) or are in the process of passing (QLD) referring legislation.

1.13      Victoria and Western Australia have elected to retain responsibility for regulating RTOs in their jurisdiction. However, providers that operate in other states and/or territories or who are registered on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) must be registered with ASQA as RTOs.

1.14      At its December 2009 meeting, COAG agreed that ASQA should operate on a cost recovery basis, with a phased implementation of the various fees and charges (Table 1).[5] This is compliant with the Australian Government Cost Recovery Guidelines, which 'promote accountability of Commonwealth cost recovery arrangements and the efficient allocation of resources.'[6]

Table 1: Funding profile for ASQA, based on the 2011-12 Portfolio Budget Statements

$m

2011-12

2012-13

2013-14

Expenses

26.6

25.0

25.4

Related revenue

11.4

15.9

20.7

Budget funded

15.2

9.1

4.7

Source: DIISRTE & ASQA, Submission 7, p. 7.

Australian Government Cost Recovery Guidelines

1.15      In December 2002, the Commonwealth Government adopted a formal cost recovery policy. The policy intent is to ensure that entities set charges to recover all the costs of products or services where:

  • it is efficient and effective to do so;
  • the beneficiaries are a narrow and identifiable group; and
  • charging is consistent with Australian Government policy objectives.[7]

1.16      This policy applies to relevant bodies operating under the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC Act).

1.17      The cost recovery policy is administered by the Department of Finance and Deregulation (DoFD).

1.18      As ASQA is an FMA Act body, it is obliged to operate under the Cost Recovery Guidelines, if it is reasonable for it to do so, as outlined in paragraph 2.15 above.

ASQA's risk ratings and fee arrangements

1.19      ASQA's monitoring activities are essentially designed to manage risk. The regulator will conduct regular risk assessments of RTOs and will use the results of these assessments to rate each provider as low, medium or high risk, indicating its non-compliance risk with the VET Quality Framework.

1.20      The rating scale will determine the level of regulatory intervention and compliance auditing necessary for individual providers. These additional regulatory activities are the subject of the National Vocational Education and Training Regulator (Charges) Bill 2012.

1.21      In allocating ratings, the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE) and ASQA informed the committee that the following framework will be used:

ASQA uses a risk assessment process to assess each provider and all registration applications. ASQA uses a range of indicators including financial management, governance arrangements and the RTO's past performance to assign each provider a rating that indicates its non-compliance risk.[8]

1.22      ASQA's fees and charges are standardised across Australia and are generally higher than previous charges under the states and territories. State and territory arrangements did not operate on a cost recovery basis, opting instead to partly subsidise registration and regulation costs.[9]

1.23      It is important to note however, that under the COAG agreement, states and territories are still able to provide subsidies and/or financial support to RTO's to assist with registration costs.[10]

1.24      According to their joint submission, DIISRTE and ASQA write that the fees and charges have been the subject of extensive consultation and available for public scrutiny since ASQA was formed in July 2011:

The Bill enables part of ASQA's proposed cost recovery arrangements which were subject to extensive consultation in 2011. The feedback from those consultations assisted in designing the final fees and charges structure and ensuring that the new cost arrangements were appropriate for the vocational education and training (VET) sector. The fees and charges structure, including the consultation process, is explained in a Cost Recovery Impact Statement (CRIS). A copy of the CRIS has been publicly available on the ASQA website since the commencement of ASQA, and prior to this on the interim website since June 2011.[11]

1.25      DIISRTE and ASQA informed the committee that the formula for calculating fees has been made public via the CRIS, available on ASQA's website. This formula is described in their joint submission:

The charges are calculated by time on task multiplied by an hourly rate designed to reflect the cost of delivering the activity – based on the identifiable costs – and designed, as much as possible, so as not to act as a barrier to participation in the market or stifle competition.[12]

1.26      Table 2 below outlines the proposed charges for compliance auditing and additional monitoring. These fees are consistent with audit charges imposed by the states and territories, and by the National Audit and Registration Agency (NARA).[13]

Table 2: Proposed charges for ASQA's additional monitoring activities

Description

Activity

Proposed charge
$

Capped at
$

Explanatory
notes

Additional monitoring activities

Compliance audit

150 per hour

5000

These audits are outside those required as part of normal registration, other than for new RTOs which require a compliance audit within their first 12 months of operation.

Investigation of a substantiated complaint

150 per hour

3000

This fee is payable by a RTO where a complaint is substantiated by ASQA.

Off-shore monitoring

Off-shore delivery site included in audit

Audit costs plus Govt approved travel costs

N/A

This fee will vary according to the location of the off-shore activity. Travel costs will be in accordance with the Commonwealth „Best Fare of the Day‟ requirements and ASQA‟s travel policy.

Source: DIISRTE & ASQA, Submission 7, p. 12.

Purpose of the bill

1.27      The purpose of the bill is to impose charges in relation to certain matters under the National Vocational Education and Training Regulator Act 2011 (NVETR Act), and for related purposes.

1.28      In her Second Reading Speech, the Parliamentary Secretary for Higher Education, Ms Bird, MP, stated that the purpose of the bill is to:

...support ASQA's cost recovery arrangements by enabling it to recover reasonable costs and expenses related to additional compliance activities that are not application based, including compliance audits and complaint investigations. Application based fees are authorised by the NVETR Act.[14]

1.29      In their joint submission to the inquiry, DIISRTE and ASQA wrote that:

The object of the Bill is to support ASQA's cost recovery arrangements by enabling the National VET Regulator to charge NVR registered training organisations (RTOs) for compliance audits and substantiated complaint investigations it conducts. The Bill will allow ASQA Commissioners – if necessary – to apply charges for compliance audits of off-shore providers, in addition to regular renewal fees. In the case of an NVR RTO who applies for a renewal of its current registration, and who delivers services at an off-shore location, this Bill will allow ASQA to charge the RTO for the cost of a compliance audit in monitoring their off-shore VET operations.[15]

1.30      Therefore, the bills enable ASQA to recover costs associated with additional compliance audits conducted throughout Australia and overseas. This will ensure that low-risk RTOs will not be subsidising the compliance audits and complaints investigations of high-risk RTOs.

1.31      Under the bill, charges relating to additional monitoring activities and/or investigations of substantiated complaints will be payable by the relevant individual RTO.

Provisions of the bill

1.32      One of ASQA's key functions is to monitor provider compliance with registration standards. Compliance audits are the main method used for monitoring compliance, as well as investigations into complaints received about the performance of training providers.

1.33      Compliance audits are particularly necessary to ensure ongoing compliance with the VET Quality Framework and to identify issues relating to the quality of VET.

1.34      This bill will enable ASQA to recover reasonable costs and expenses associated with these additional monitoring activities, including reasonable costs associated with overseas travel should a need arise to audit or investigate a provider located overseas.

Report Structure

1.35      This report is divided into two chapters. The next chapter discusses issues raised by submitters and the committee view.

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