Chapter 2

Issues raised by submitters

2.1        Training and education providers raised a number of issues relating to the National Vocational Education and Training Regulator (Charges) Bill 2012. Submitters argue that more thought and consideration needs to be given to the meaning of specific terms and that guidelines ought to be issued that outline the Australian Skills Quality Authority's (ASQA) service responsibilities to registered training organisations (RTOs) when conducting compliance audits.

2.2        A number of concerns were raised with the bill, including:

• the discretionary powers of the Minister to set charges;
• the high cost of registering as a RTO; and
• ambiguity in the details relating to the exact nature of the charges to be incurred when being audited.

2.3        This chapter examines the concerns and issues raised by submitters to this inquiry. The committee view is also discussed in the relevant sections.

Discretionary powers and the cost of registration

2.4        Concerns regarding the discretionary powers of the Minister were expressed by a number of submitters. The Queensland Government Department of Education and Training (DETA) is concerned that the Minister is able to determine a charge without the oversight of the Ministerial Council. They argue that this appears 'inconsistent with the tone of the Inter-Governmental Agreement for Regulatory Reform in Vocational Education and Training'[1] (the IGA). The National Meat Industry Training Advisory Council (MINTRAC), provider of education and training products and services to the meat industry, argued that the Minister's discretionary powers create confusion and do not appear to be guided by legislation.

2.5        In their joint submission, the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE) and ASQA contradict MINTRAC and DETA's claims and highlight that any changes to fees and charges need to be approved by the Ministerial Council.[2]

2.6        Concerns were raised by MINTRAC that the items incurring charges are not clarified in the bill. They argue that their members are confused as to the definition of 'cost recovery' and its associated fees and charges. They write:

• Does ‘cost recovery’ include auditor travel time and costs – in which case this is a significant impost on the smaller, regional RTOs?
• Does ‘cost recovery’ include report writing and preparation time, and if so, how will the amount of time taken be controlled?
• Does the ‘cost recovery’ include appeals to audit findings and outcomes, and to what extent, especially if the appeals are upheld?
• Does the ‘cost recovery’ include the addressing and closing out of corrective actions, and if so, how will this practice be monitored to ensure that the system is not abused by auditors?
• One RTO stated: “Already moving to ASQA has seen our audit cost increase from $3 000 to $17 000; full cost recovery based on earlier modelling will push it up to $32 000.”[3]

2.7        The Australian Chamber of Commerce and Industry (ACCI) also expressed concern over the cost recovery model adopted by ASQA and question the usefulness of this policy approach.

2.8        The ACCI stated that whilst it 'supports reasonable fees to training providers as a market mechanism, we do not support the notion that ASQA has to be a cost recovery body.' They believe that the cost recovery model could lead to two unsatisfactory outcomes:

• insufficient monitoring of the quality of training delivery; and/or
• fees, including fees for audit, that are so high as to limit the participation in the training market of small business training companies.[4]

2.9        The belief that these new compliance costs will limit RTO participation in the training market is supported by MINTRAC who stated in their submission that:

Smaller RTOs indicated that they already felt overwhelmed with costs associated with financial audits, insurances and compliances; and that their profit margins had already significantly decreased with greater competiveness and reduced access to User Choice. Please note that this has been quite significant in the meat industry with both state and federal restrictions to the Certificate II Traineeships which constitute the majority of training enrolments in the industry. Since the beginning of this year, one RTO has closed down, another has withdrawn from providing services to the meat industry and a third is considering relinquishing its RTO status.[5]

2.10      Concerns relating to 'cost recovery' were also raised by the Tasmanian Government Education and Training International body, who argued that providers with multiple campuses could incur very high costs, encouraging providers located overseas to not register as an RTO.[6]

2.11      The Australian Council for Private Education and Training (ACPET) claimed that regional providers would be greatly disadvantaged due to their distance from large regional centres/capital cities:

...conducting an audit in remote or regional Australia will be significantly more expensive than audits conducted in capital cities. As such the case for a cost recovery model seems to be grossly unfair on regional and rural communities and the RTOs that operate in these areas.[7]

2.12      As such, ACPET argues that the conditions stipulated by the Department of Finance and Deregulation for the application of a cost recovery model are not fully met:

CR [cost recovery] should not be applied where it is not cost effective, where it is inconsistent with government policy objectives or where it would unduly stifle competition or industry innovation.[8]

2.13      Limiting competition and placing greater restrictions on an already struggling industry was also a concern for the Tasmanian Government and MINTRAC, who both claimed that the cost recovery model will place too much financial burden on RTOs and is counter-productive to COAG's reform agenda setting specific targets for increasing the skill levels of all Australians.[9]

Committee View

2.14      The committee believes that there has been adequate consultation with industry regarding fees and charges and there has been reasonable time provided for RTOs to adapt to the new regulatory regime and pricing structure.

2.15      The committee notes DIISRTE's and ASQA's joint submission and agrees with the rationale underpinning ASQA's cost recovery model:

The CRIS process concluded that it was appropriate for ASQA to recover the cost of the regulatory functions it conducts, including the costs associated with additional monitoring activities. This conclusion is based on the following reasons:

• charging is consistent with policy goals;
• charging is efficient;
• charging fees and charges does not create exclusive rights – organisations can operate as training providers but cannot deliver AQF qualifications without being registered to do so;
• charging avoids taxpayer burden for approvals that provide a distinct commercial advantage to training organisations and course owners;
• charging will not create anomalies in the market; and
• it is easy to identify the recipient of the service.[10]

2.16      It is important to emphasise that compliance audits are above and beyond the strategic industry audit used to ascertain a RTOs rating, which is included in the registration costs. DIISRTE has informed the committee that:

Importantly, the audit charges proposed by this Bill relate to compliance audits only and do not include audits conducted as part of the registration process.

Where ASQA conducts strategic industry audits, charges will not apply. These costs will be met out of appropriation funds.

With respect to complaints investigations, a charge will only be payable in the circumstance that ASQA substantiates the complaint following investigation.[11]

2.17      However, the committee believes that when conducting compliance audits, ASQA needs to remain cognisant of the financial circumstances of RTOs and that all precautions need to be taken by auditors to ensure that costs are maintained at a reasonable level, particularly where regional and overseas travel is required.

2.18      The committee also believes that a strong and sustainable VET sector is vital for the future prosperity of the nation. With this in mind, compliance costs should not hinder the operation of otherwise viable and compliant education and training service providers.

2.19      It may be useful to conduct a review into the impact of ASQA's cost recovery policy within a suitable timeframe, so as to monitor its impact on RTOs and to assess whether the regulator has been conducting compliance audits in a reasonable and cost efficient manner.

2.20      Finally, the committee would like to note that the transfer of regulatory responsibilities from states and territories to the Commonwealth may represent a saving for states and territories. As such, the opportunity might exist for some jurisdictions to use savings to continue to partially subsidise regulatory costs, should they choose to do so (see 1.22).

Ambiguity of charges

2.21      A number of submitters expressed concern over the lack of clarity relating to the terms 'cost recovery' and 'reasonable expenses'. The Tasmanian Government Education and Training International argued that this lack of clarity could lead to auditors making excessive demands. They wrote in their submission that when Departmental officials travel to their overseas campuses, they stay on-sight and in cheap accommodation. They are concerned that auditors will not be willing to make the same compromises and will consequently pass on charges to the Tasmanian Government that would be abnormally high.[12]

2.22      Skills Tasmania also argued that more clarification needs to be provided as to what will be considered reasonable costs.[13]

2.23      Similarly, Innovation and Business Skills Australia (ISBA) posited that multiple audits should be performed per trip so as to reduce costs:

In relation to the auditing of Australian RTOs delivering qualifications overseas, IBSA would be supportive of ASQA undertaking a larger number of audits of several RTOs whilst travelling abroad to reduce costs for the individual RTOs. IBSA is also of the view that recognition might also be given to jurisdictions with robust or reciprocal processes so that the function could be performed more cheaply by the offshore jurisdiction.[14]

2.24      In relation to the above issue, ACPET argued that guidelines should be issued to clarify auditing procedure:

...it is imperative that ASQA acts with diligence in arranging such audits to minimise the reasonable expenses that the RTO will be required to pay. One way of minimising such fees would be to undertake audits of multiple RTOs in a single overseas trip. ACPET would like to see clearly defined protocols for implementing such a process. This strategy could also be used to minimise the costs of undertaking audits of remote and regional RTOs.[15]

2.25      Moreover, ACPET is concerned that there does not appear to be a service or standards charter for ASQA:

Of great concern to ACPET is the lack of publicly accessible service standards that the National VET Regulator, the Australian Skills Quality Authority, adheres to. Given such service standards either do not exist or are not available for public viewing it is not possible for ACPET to fully understand the level of service and the functions that will be performed by ASQA.[16]

2.26      Regarding 'standards guidelines', ISBA argues that there needs to be some protections for RTOs against unreasonable escalations in the number of audits conducted and that industry input and transparency need to be applied to ASQA's funding arrangements.[17]

2.27      On a related issue, the North Melbourne Institute of TAFE (NMIT) argued that greater clarity is needed regarding the auditing process and the potential frequency of audits:

We request that ASQA be required to base their decision to undertake (and the frequency of) audit offshore on what quality processes the RTO has demonstrated are in place for the transnational operations, rather than simply focusing on the largest providers. Overauditing will potentially confer a significant cost burden on the provider who has already made significant quality assurance investments. We would propose that ASQA prioritises audit of those providers that cannot demonstrate adequate internal Quality Assurance investment in the first instance through desk-top audit.[18]

2.28      Similarly, DETA argued that the circumstances which would initiate a compliance audit are vague and not clarified in legislation. They also argue that the Cost Recovery Impact Statement (CRIS) states that registration costs will include charges for additional monitoring activities (at least one compliance audit) necessary to ensure continuing compliance.[19] Therefore, DETA believes that at least one compliance audit should be included in the registration costs.[20]

2.29      If this contravenes the IGA and government policy, DETA argued that greater clarification needs to be provided as to the circumstances that would generate compliance audits and the number and nature of audits included in the registration costs.[21]

Committee View

2.30      The committee is of the view that adequate explanations have been provided regarding the services provided as part of the registration process. The committee believes that the CRIS sufficiently explains all relevant fees and charges and clarifies any uncertainties relating to the extraneous nature of compliance audits and additional monitoring activities.

2.31      However, the committee also believes that greater transparency and clarity are needed regarding the terms 'reasonable expenses' and 'cost recovery'. Clarity around the definitions and a clear outline of expected standards may reduce the likelihood of unrealistic expectations, both on behalf of ASQA and also RTOs. The regulator, and training providers, should have access to criteria and/or standards guidelines which they can use to measure their performance. These guidelines should also set out audit procedures and what RTOs can expect when ASQA conducts compliance audits.

2.32      Finally, the committee is concerned about the costs of compliance audits for regional and overseas institutions. Consequently, the committee strongly encourages ASQA to undertake multiple overseas and regional audits per trip so as to minimise costs for more remote RTOs.

Recommendation 1

2.33      The committee recommends that the bill be passed in its current form.

 

Senator Mark Bishop
Chair

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