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Education and Employment References Committee
16/07/2015
Private vocational education and training providers

LAVARCH, Professor Michael, Commissioner, Risk, Intelligence and Regulatory Support, Australian Skills Quality Authority

STAFFORD, Ms Elizabeth, Acting General Manager, Regulatory Strategy, Governance and Corporate, Australian Skills Quality Authority

[14:36]

ACTING CHAIR: I now welcome Ms Stafford and Professor Lavarch from the Australian Skills Quality Authority. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. The committee has received your submission. I now invite you to make a short opening statement. At the conclusion of your remarks, I will invite members of the committee to put questions to you.

Prof. Lavarch : We were not going to make a particular statement. We have provided the committee with a submission. The figures in the submission were derived as at the end of 2014. We are happy to provide updated figures if the committee would like. We do not normally produce our statistics in this particular format, but we can run them again if you would like some further figures. Could I also extend an apology on behalf of the Chief Commissioner of ASQA, Mr Robinson. He is currently in China accompanying the minister on a delegation and, no doubt, was very upset to miss the opportunity to appear before the committee today.

I would like to make one point which goes to a particular term of reference of the committee, and that is dealing with qualifications and the training and learning experience in the child care area. ASQA has recently completed a strategic review in this area. It was actually planned to release it this week but, given that the chief commissioner and the minister are both in China, it is my understanding that it is now going to be released next week. If the committee would at a later point like a particular briefing on that report and the findings in it, I am sure ASQA would be very keen to deliver it.

Senator KIM CARR: Professor Lavarch, I take it you have had the opportunity to look at the Hansard from the last round of estimates.

Prof. Lavarch : Yes; it was very interesting reading indeed.

Senator KIM CARR: What is your response to the questions that were raised there about ASQA's ability to perform its function given the experience in Victoria, where the state government has found very substantial breaches of quality assurance with great consequences for many thousands of Victorians?

Prof. Lavarch : I did read with interest the exchange that you had with the chief commissioner during that Senate estimates committee. I will go to what I think is at the heart of your question, and that really was drawing a contrast between the actions of the Victorian regulator in terms of one of the Vocation group entities in particular and the decision taken in Victoria to cancel a large number of qualifications. My reading of the exchange at that time is that you were contrasting that particular action against the action that ASQA had taken, and you were making the point that ASQA did not have a particular history leading to qualifications being cancelled and a concern about whether this meant there were substandard qualifications and the impact on the community and the like.

There are a number of observations I would like to make in response to that. Firstly, it obviously raises a very important issue; obviously the role of the regulator plays a part but, at its core, it is a system architecture issue. The Australian system has been based over time on the regulation of training providers and not the regulation of individual students. The system as a whole is regulating over 4½ thousand-odd providers between the Commonwealth and the two state regulators rather than attempting to directly regulate the competencies of three million-odd students who have some contact with and move through the VET system each year. A consequence of that is that the focus of the system is on what I would call a 'cake making approach' rather than a 'cake tasting approach'. I will explain my analogy. Our system assumes that, if you get the ingredients right—that is, if you put together the generic requirements of the national standards and the requirements of the VET quality framework and combine that with the particular elements of the particular training package or the accredited course requirements—and they are delivered adequately and properly together then the cake that will be made will be of a decent quality. The system does not put direct focus on 'tasting the cake'; the system is not about testing independently the competencies held by individual students. Of course, you get reactions from the market in terms of the quality of the students. That manifests itself through the quality indicators—surveys of employers or the students themselves of how satisfied they are and feedback and the like in terms of the satisfaction of industry in terms of the attributes of graduates as they move into the system. But the individual student is not as such tested.

In terms of regulation within that approach, the focus has been on the providers. This has been the approach which ASQA has adopted. And I would say it has also been a legacy approach—because after the exchange at estimates I went around the organisation and spoke to some of the old hands who had come out of the former state regulators. As you know, Senator Carr, ASQA is a merger of former state regulators. I asked them whether the wholesale cancellation of qualifications had been a feature of the way in which regulation had occurred in Australia. The answer that came back to me was that no, it has not been a feature; there have been specific examples where that has occurred, but it has not been a particular feature. So the focus has been on the regulation of the providers, rather than then trying to pick up the particular regulation of the students.

If we are to move from that, it is not, in my view, to be an ASQA-led redesign of the system. It will have to be sort of policy and governmental, through the ministerial council and the appropriate bodies, to change the shift of that. Let me explain why I do not think the system at the moment delivers it. We had an exchange about this at Senate estimates. When ASQA does its review of a provider against the standards and the particular training package requirements, it is doing a point-of-time examination and forming a view from that point of time. It does not go back and form a view as to what the situation may have been in the provider three months or six months or 12 months prior to that. So it is a bit of a leap to form a view that, because an adverse opinion has been taken by the regulator of the quality of that provider at that particular time, every student has come out without the required competencies.

Even in the case of Victoria, the Victorian regulator reached a position with a particular provider through the mechanism of an enforceable undertaking—an agreement for the cancellation, in a wholesale matter, of the qualifications—and then, stepping in behind that, was a state government process to deal with the students impacted by that decision. That is, the students could presumably be reassessed and, if competent, given a fresh qualification and, if not competent, taken down some sort of remedial pathway and then granted an appropriate qualification.

ASQA has no capacity, no resource and no mandate to go down some sort of wholesale reassessment pathway. If we are to go down that pathway, that has to be an initiative taken by government in terms of the architecture of the system, rather than an initiative taken by the regulator. The regulator's actions to date in the cancellation have been quite specific. We have cancelled qualifications, but that has been in particular circumstances. It has not been a wholesale consequence from a conclusion in terms of an adverse regulatory decision about a particular provider. I think that is the important point.

Senator KIM CARR: I will come back to my question: can ASQA do its job? You will say to me that you are doing your job according to the current policy prescriptions. That is the essence of your answer—and that, if you want to change that, it requires a change in policy. But I am interested in the practical effect of that. You have mentioned the early childhood area and the early childhood development workforce Productivity Commission report. In February of this year a study examined 1,018 registered training organisations in Victoria. Thirty-six per cent were registered with the Victorian qualifications authority and 64 per cent were registered with you. But in the case of Victoria there was withdrawal of 1,100 qualifications. This is just a small proportion of the total registrations in that area. One hesitates to draw conclusions on this, but it does seem to me a reasonable proposition that, if the Victorians are looking at 40 per cent and find that 1,000 people's qualifications have been illegitimately issued and have had to be withdrawn, it must say something about the 60 per cent that are operating in the same state at the same time—because you mentioned point-of-time studies. I come back to the point: is there a requirement to actually change the policy?

Prof. Lavarch : That is the role of the committee—

Senator KIM CARR: Yes, that is exactly the point.

Prof. Lavarch : and the government of the time. If you wish to move into a system at a national level which utilises as a standard tool the parallel cancellation of qualifications in conjunction with a regulatory decision made about a provider, which is what occurred in the Victorian example, then not only will you need to change the policy setting but you will need to change the architecture. There will need to be, as occurred in the Victorian situation, a process dealing with the consequences for the impacted individuals.

Senator KIM CARR: But that is a separate question.

Prof. Lavarch : But it is an important element, I believe. It is simply saying, 'Are we concerned that people are coming out—

Senator KIM CARR: Unqualified.

Prof. Lavarch : without adequate qualifications?' That is the fundamental risk that we are trying to regulate the entire system for. The risk is that a person cannot actually do what the certification and competencies on their piece of paper say they can do. That is the core risk in the way the system is operated. Obviously, it is a very real issue in terms of that point: if we have made a conclusion about a provider, then it is a reasonable implication about concerns about individual—

Senator KIM CARR: And their students.

Prof. Lavarch : However, it is at a point of time. You cannot go back and say, 'That means 12 months ago, six months ago or the like.' It is at that particular time.

Senator KIM CARR: What we can say—

ACTING CHAIR: Mr Lavarch, have you finished your answer?

Prof. Lavarch : Yes, I have.

Senator KIM CARR: But in the case where we have this study—in February of this year, where a study was undertaken and has produced these results—we do know at that point of time what the circumstances were. I would have thought that if I had kids in a preschool centre who were being supervised by people who had been put through this system and they were not properly qualified, I reckon I would have a real cause for concern—if you want to talk about risk factors. The problem we have here is that we have a regulatory model that does not seem to be identifying the problems, given what we have seen in Victoria. Or are you saying that only Victoria has these problems?

Prof. Lavarch : I am saying that we have a particular system. It has particular architecture and roles in which the components of the system play. If the view is taken by those who set the policy and make these judgements that the system is not operating adequately then that needs to be adjusted, obviously. I am making the point that it is not the role of the regulator to set the policy.

Senator KIM CARR: I understand that, but I am asking you a different question. As the regulator, your experience is of importance to this committee. At the moment, you are engaged in negotiations with the state of Victoria about bringing the Victorian RTOs into the national system. They are saying, 'Look at these experiences where registered training organisations weren't picked up in the way that our system has now picked them up. Why should we join a system that's inadequate?'

Prof. Lavarch : ASQA is not having negotiations with the Victorian government; the Commonwealth, I believe, is having those negotiations.

Senator KIM CARR: I think we really are splitting hairs.

ACTING CHAIR: Not really.

Prof. Lavarch : Not really.

Senator KIM CARR: The fact is there has been a request made of the Victorian government to join the national system and bring into play those RTOs that are currently not covered by ASQA, to which the Victorian government appears to be saying, 'You haven't been able to identify these problems. Why should we join and put ourselves at the mercy of an agency that can't do the job?'

Prof. Lavarch : Within the frame which we are asked to operate in, we are doing the job. If you look at the regulatory outcomes in terms of the regulatory decisions that have been made—and particularly at the regulatory decisions which have been made in the state of Victoria and the number of decision that have been made to either not renew a provider's registration or, more importantly, intervene with a provider within the registration cycle and take a decision in terms of cancellation and suspension—there is very strong evidence and there are figures that have been given repeatedly to the Senate through the estimates process about the number of decisions that have been taken. And that is quite pronounced in the state of Victoria, I have to say; in fact, it is running higher than the national average in terms of the number of cancellation, suspension and non-renewal decisions. So, within the frame of the architecture as it exists, I believe the system is operating effectively. Whether that system is completely effective, and whether the negotiations between the Commonwealth and Victorian government, and the ministerial council more broadly—and reform processes—lead to a change in system, well, it is for minds much greater than mine to land on where the outcome should be.

Senator KIM CARR: Your submission points to the compliance ordering of RTOs that use VET FEE-HELP, and you said that 110 complaints had been received on these matters. What is the nature of those complaints, or what is the dominant characteristic of those complaints?

Prof. Lavarch : That was 110 at the time of the submission and—

Senator KIM CARR: So how many is it now?

Prof. Lavarch : it was at a time when ASQA put together its particular strategy dealing with VET FEE-HELP. A range of issues which are not inconsistent with the flavour of submissions that the committee has received about what I call the front-end processes: how students are being found and recruited; what levels of information have been given to the students in terms of joining RTOs offering VET FEE-HELP; some degree of concern then about completion rates and the like; issues in terms of some of the design aspects of how the VET FEE-HELP system was configured at that time—that is, at the end of 2014—and, of course, there have been a range of reforms to the design of the system announced and implemented since then. But it is not inconsistent with the evidence that the committee has received.

Senator KIM CARR: Okay. So what is the nature of the complaints you have received?

Prof. Lavarch : As I said, Senator: practices in terms of the identification and the recruitment of students into providers into VET FEE-HELP; whether people fully understand the debt and obligations that they were taking on in going into the programs; the levels of support provided to students within providers; and the like—as I say, not inconsistent with a range of the submissions that the committee has received.

Senator KIM CARR: How satisfied are you with the level of information that is provided on websites of RTOs concerning the costs of courses and the operations of courses?

Prof. Lavarch : In response to the concerns that we have received, we have pulled together a strategy to try to provide what I would call a holistic—a whole-of-government—response to these concerns. Just let me explain for a minute—because it is a different approach to a standard provider-based or application-based regulation, which is a bog-standard regulatory model. We examine the complaints, we map the complaints that we had received against our legislation, against the national standards, against Australian Consumer Law, and against the VET FEE-HELP guidelines themselves, and we found that complaints were identifying concerns which ticked a number of those particular boxes. We then sought to engage the ACCC and the ACL regulators in terms of their functions, which particularly deal with the front-end part of the process, and they go—to some extent—beyond the reach of ASQA, particularly around the domain of brokers and the like, where ASQA has a more limited reach. In terms of the information we were given, we provided feedback to the department with responsibility in terms of the design of the VET FEE-HELP program.

We commenced our program of audits and investigations following our particular model. In addition, we supplemented that by doing analysis of student demographic information which we received from the department in order to select a range of students for individual interviews to ask the questions: 'How did you find yourself in this provider?' 'What information were you given?' 'How were you recruited?' and 'What has your experience been?' so that we had a cross-reference point between student information and what we might find in going in to the provider and undertaking our work. So in terms of the question of what we have found in terms of websites and the like, while the process is not completed—there is still a little way to go—we have found a degree of variability. We have found some good examples, and we have found some poor examples.

Senator KIM CARR: Do you think that there should be a requirement that the full debt implications of any course be revealed?

Prof. Lavarch : This is probably a question which the department will canvass as well, but, as I understand it, the guidelines have been changed to express that that information is to be given.

Senator KIM CARR: Do you think that that is being done?

Prof. Lavarch : Have the guidelines? Yes, they have been—

Senator KIM CARR: No. The guidelines have been done, but are the RTOs responding?

Prof. Lavarch : We have some flavour, I suppose, coming down. After the changes that occurred—and the great deal of publicity around the changes, the guidelines and the requirements—we have started to see an improvement in behaviour. We will make a concluded set of statements when we have completed our work so that a more complete answer can come a little bit after we have completed that work that we are doing.

ACTING CHAIR: In terms of resourcing ASQA to oversee the standards, have you been given additional resources to do that?

Prof. Lavarch : Yes, we have. ASQA is a relatively new organisation; it has been operating about four years in total. Queensland, which was the last of the referring states, actually came on board just on three years ago, in terms of the life of the organisation. Under the previous government, we received a first injection of additional funds when it very quickly became manifestly apparent that the original budget was inadequate. Under the current government, we have also received a strong injection of funds. Importantly, that enabled the organisation to move away from being a full cost recovery agency. The significance of that for regulation is that, essentially, if you are a full cost recovery organisation you have to structure your organisation and regulatory approach in order to meet the full cost recovery—return to Treasury the appropriation was given each year. The way in which a statutory agency brings in money is to charge fees, and the way that it charges fees is to do application based work. To enable our shift from being a permission-based application-led regulator to a 'data intelligence, find problems and react to problems' led regulator was a very significant change, which, to his credit, Minister Macfarlane started and Minister Birmingham has completed.

ACTING CHAIR: In evidence today there has been some commentary about the adequacy of ASQA to oversee the new standards and ensure that they are implemented throughout the industry. Do you have any words of confidence to give to the committee?

Prof. Lavarch : I am sure that I would be thrown out of the government and the regulator union if I were to say that we have plenty of resources.

ACTING CHAIR: You would.

Prof. Lavarch : I have no doubt we would.

ACTING CHAIR: Got lots of friends with that line!

Prof. Lavarch : We could always do with more. It is a big task, and the earlier conversations, particularly about Victoria, were just an illustration of the range of issues that need to be confronted. Obviously we will keep under very close scrutiny the level of resource that the organisation contends that it needs, and we will communicate that to government through budget processes. But, as we stand at the moment, we believe we have a sufficient resource base to enable us to engineer this shift in regulatory focus from being, as I said, a permission-based regulator to a data-and-intelligence-led regulator. Within the organisation, we are saying that we are flying the plane as we are building it.

ACTING CHAIR: Pretty breezy!

Prof. Lavarch : We have no choice. We still need to have a much stronger sort of analytical capacity in terms of our IT systems. We have been granted money to be able to fast-track that build. We need a stronger set of data in terms of being able to analyse where problems are and then respond to problems. We are gradually getting that. The rollout of total VET activity from the beginning of this year, and then more fulsomely from next year, will be an important component in that. And internally as part of the organisation we have got to grow and change the balance and the mix of our workforce. We started as an old state regulator writ large, and to make that transformation in terms of regulatory approach means skilling and changing the overall mix and balance of our people, and we are doing that. Importantly, from 1 July—only two weeks ago—we implemented our new organisational structure in order to match this change in regulatory approach. It is still a work in progress, but we have been able to communicate this with the executive, and the executive has responded in terms of budgetary change. We are conscious that has been in the light of a difficult overall budget position.

ACTING CHAIR: We have also heard, particularly from the perspective of employers and industry, about the complexity of the system as a whole—public, private, state, national. Do you have any comment to make, as the national regulator, about that complexity? Do you see reduction over time? Is there a willingness to move to something like that? It just seems to be part of the problem.

Prof. Lavarch : It is a complex system. I moved into this role out of the higher education system. I ran the largest legal education program in the country at QUT, in Brisbane, so I had a bit of a sense of it, but I have got to tell you it was relatively bewildering to move into the deeper reeds of vocational education. There has been an attempt to improve, I think, the overall structures and operations, just to remove a degree of complexity. Certainly ASQA on its behalf has attempted to select activities which it thinks have the best prospect of impact in terms of following our mandate in terms of quality—so doing things that actually mean something rather than just following processes. I think the fact that there remain multiple regulators, in Western Australia, Victoria and at the national level—even though we work cooperatively with the state systems, and I do not wish to say that those relationships are not good—is an unfortunate outcome in terms of the overall reform. So I would agree. Liz might have some comments on the complexity point.

ACTING CHAIR: I am watching your head, Ms Stafford. I think she does have some comments to make!

Ms Stafford : It is a very complex system, and that has been a longstanding observation.

ACTING CHAIR: Is it getting better?

Ms Stafford : On a range of fronts, yes, but still with different jurisdictions in the way they purchase training and the introduction of different purchasing models. That certainly increases the complexity, and the market is very adept at chasing opportunities for funding. Those sorts of things, and the rapid changes in training packages and the specifications they are going on, have no doubt contributed to a complex environment.

Senator RHIANNON: Thanks very much for your submission and for your evidence. I do remain surprised, I have to say—and this leads into my questioning people at estimates and here—that we so often hear you say that you are confident the job can be done. The job is just enormous: reading your reports shows us the very nature of the industry, the different jurisdictions and all of the courses are incentives to cut corners. These companies are on the earth to make money, so how do they make money? Cutting corners is obviously a big part of it. One example, which was startling, jumped out at me when I came across an organisation advertising on a website with the statement, 'You can become a nurse in five weeks'. This is just staggering. It would be fascinating, if we had the time, to hear about how you track all this down. You might be able to push that one down and managed that, but another one will pop up within the whole globalisation of this market place. How do you do it? Is it really possible?

Prof. Lavarch : These are profound questions, Senator, and, again, they are probably a little bit beyond my total remit, but I will give you a view about it. What has come through a number of times in the strategic reviews that ASQA has undertaken is a concern about the drive to the bottom, if you like, particularly in the area of the length of courses. We do see that there is quite a bit of evidence of significant differential between what the Australian quality framework might say—only indicative, but nonetheless indicative time frames for particular qualification levels—and what we have seen in the marketplace. I do not pretend that these things are not complex, because they are—there is infinite variety in terms of the position of individual students when they arrive, what their starting point levels of skills and knowledge are—but to simply mandate that everything should be a particular length of time is a very blunt instrument and not a terribly effective one. But there have been efforts—through the adoption of the new standards, through some of the further policy work that is going on, as I understand it, in the area of the assessment and the like—to try to get more robust and consistent sets of performance indicator data to get good visibility of how we are performing, which will help move us forward. Again, ASQA is a cog in this machine; it is not the total machine by any means. But, yes, you are quite right; it is a very big job.

Senator RHIANNON: I did come in late, so I may have missed it if you covered the aged-care sector. I know Senator Carr asked some questions about childcare, but the aged-care sector has come up as well. Sadly, it is an area where we often hear that there are low standards and that elderly people, often at the end of their lives, can often face some pretty daunting situations because of staffing issues. Could you outline where this is all up to please?

Prof. Lavarch : I will ask Ms Stafford, who is a little bit more up-to-date on that strategic review than me, to respond.

Ms Stafford : As you know, with aged care there were a number of things in that report that we spoke about regarding poor assessment practices and training programs that were often too short and had insufficient time in the workplace for skills development and things like that. Particularly in aged care, the assessment work and the requirement or the inference in that package for some of those skills to be assessed in a workplace or a simulated environment—and a very good simulated environment—has caused some of the problems. So the assessment in that space was of some issue in terms of its validity and reliability and things like that.

A number of things have to occur in that space, and some of them point to policy—what should actually be in a qualification. The government is now undertaking a review of training packages, qualifications and accredited courses. We are seeking to use the information to try to get some greater prescription or information into the assessment work in particular and likewise are encouraging and using our work to try to influence the skills of assessors themselves and the work with the training and assessment package and the importance of everyone having the skill base to do assessments properly, as well as working with the developers of the package itself. I understand that those arrangements are changing now, but it is what needs to actually change in the prescription of the units and then inside the qualification frameworks, largely.

Senator RHIANNON: What is happening in the meantime? It sounds like there is still quite a bit of work to be done, and I would be interested in when you think it would be concluded. But what is happening with the training at the moment when there is quite a cloud over how this is being undertaken? What do you do?

Prof. Lavarch : We continue to keep the aged care qualifications as a focus area for our regulatory scrutiny. That means that each time we conduct audit activity and a provider has aged care qualifications on their scope we include an examination of those qualifications and how they are being delivered within the work of our audit. That is a deliberate decision on our part. The regulator operates by way of a sample-of-samples methodology. We sample a number of the qualifications that a provider might have on scope and then within that will do some further sampling and testing for that individual—student assessments and the like—to test them against the requirements of the standards. We have continued to focus on the aged care area. I think it is safe to say that we are still seeing similar levels of noncompliance at first review, which often are then able to be rectified through a 20-day period in which we allow people to respond to the audit findings. So we continue to see issues in this space and we are feeding in our results to those who are looking at program redesign, a change in the training packages and the like. But it remains an important focus area for us.

Senator RHIANNON: When is it anticipated that the program redesign and the training packages would be concluded so that you can go on to something that would sound as though it should deliver better outcomes?

Prof. Lavarch : Well, we do not control those things—

Senator RHIANNON: I know; I just wondered whether you knew—

Ms Stafford : It might be a good question for the department to follow in terms of their time line. I think the other aspect of this is that in the meantime, post our completion of the aged care review we did, the new standards for training organisations have also come into play, and there are some more rigorous requirements sitting inside of these as well. And we have done a lot of information sessions and things to work with providers and fully explain their obligations and in that way try to give them more guidance and advice.

ACTING CHAIR: Thank you so much. Any further questions for ASQA?

Senator SINODINOS: Just a couple before Senator Carr wants to come back in. I just wanted to ask you: you contributed to the reform process that has just been implemented, or announced, by the government. In that context we have this inquiry going on which potentially could come up with recommendations that might add to that in due course; we will see. But in terms of your work now: do you have an ongoing role in monitoring the implementation of the reform framework? Who takes the lead role in that?

Prof. Lavarch : We do have a role, Senator, but it is not a sole role. Probably, in overall form, the department and the ministerial council has the overall insight. We are, we would like to think, a valuable input into what we find in terms of our regulatory experience. The new standards came into place on 1 April, so it is still very early days. Really, the audit work that we are finalising at the moment commenced prior to the introduction of the new standards. Realistically, have a conversation with us this time next year in terms of us having a flavour as to what has hopefully improved as a consequence of the reforms implemented to date.

Senator SINODINOS: You talked about greater use of data analytics and the like. You have been given some money, I think, towards IT upgrading?

Prof. Lavarch : Yes.

Senator SINODINOS: What is the time line for that to be implemented?

Prof. Lavarch : We had certain terms of our IT capacity that is on a build. We should see that largely completed by the end of this year. We have recently received a report from Ernst & Young, who we commissioned to give us advice in terms of selection of some analytic tools to help in the development of the overall risk model. Flowing from that, purchases will be made. So, end of this year, in terms of IT. In terms of some of the gathering of data: we get the first run through of total VET activity information this year, but there are a range of providers which were given a year's exemption in terms of getting themselves ready. Next year's collection, I think, will be more meaningful than this year's collection. Summing it all up, I think in terms of the reforms that are being done at the moment, improving our organisation and its capacity, 2016 will start, hopefully, being a strong year in terms of the capacities and the data availabilities.

Senator SINODINOS: There has been a lot of discussion here today about the impact of having gone to a contestable market—and that creates its own challenges. In terms of risk management, are you saying that your approach now is—you obviously will have the data analytics in due course—that you are seeking to develop an early warning system of where there are problems?

Prof. Lavarch : Yes. Can I put it this way, Senator—again, one of my analogies. If regulation were a movie, we are moving from Oliver Twist to Lord of the Rings. In Oliver Twist it is a model of regulation where Oliver comes up and says, 'Please, sir, can I have some more?'—and the 'more' is: 'Can I enter the market? Can I stay in the market at the end of my registration? Can I have these new things added to my scope?'—and the regulator's risk model is essentially: 'What level of scrutiny do I need to apply in order to say yes or no to that request?' That, as I said, was essentially the legacy model and the model which has largely described how we have operated. We are moving to Lord of the Rings, which has the great eye scouring the landscape looking for armies of orcs. We will find the orcs and then send in our forces to deal with them. In order to build our great eye, we need the IT; we need the analytics; and then we need the visibility—we need the data. So we are building our eye to change our regulatory approach.

The other shift is that the old or legacy system is very much a provider by provider one—'Yes/no you can do this; you can't do that.' It keeps you passive: you sit in your bunker and wait to be asked to do something. This shift enables us to have a much greater focus on systemic risk, as opposed to simply provider risk. The way in which we try to deal with VET FEE-HELP concerns is an example more broadly of the way we are trying to operate—that is, get data, analyse it, work out what issues are being raised; and it is not always simply ASQA. In that case, as consumer-law regulators have a role here with a broader remit for brokers and agents and the way people are brought in—which is beyond our legislative reach. The department has a program-design issue, which this is highlighting, and it needs to put its mind to how these things are coming up. It is trying to get a more holistic, comprehensive way of managing risk in the system, rather than just saying 'Yes' or 'No' to a particular provider's request.

Senator KIM CARR: Professor Lavarch, you have mentioned consumer law and, given your extensive and distinguished legal background, I would like to ask you about the effectiveness of consumer law. The Redfern Legal Centre has advised the committee here today that Australian consumer law against RTO marketing agents is effectively unenforceable. What is your response to that proposition?

Prof. Lavarch : I do not agree with it. One of the important parts of what we have attempted to do in the VET FEE-HELP space is to engage very closely with the consumer-law regulators—both the ACCC and the Fair Trading Commissions. We have established a good exchange of information; we have given them our data and complaints; we are giving them the results of the audit, student interviews and the like that we are doing as we are moving through; and they in turn are giving us an insight into the investigations that they are doing. There is a big call on consumer-law regulators—they are covering the entire economy. As big as the training market is, they are covering the whole lot. This exercise has been a positive one and the outcome will see action by ASQA and by consumer-law regulators; and it will also see improvements in program design. We have already seen that in announcements by the department. My overall reaction is that I believe the reach of the law for consumer-law regulators is adequate.

You might speculate about whether the overall architecture adequate. Is there a missing piece in the system in terms of, say, the role of a student ombudsman or a particular consumer focus? Again, that is a good question to debate but I think it would be a bit harsh to say that the consumer-law regulators are out of their depth.

Senator KIM CARR: The proposition was put to us that RTOs are relying on education agents or brokers, and that the relationship between the two is not clear. In fact, people go out of their way to hide the relationship. They are actually operating for a number of RTOs, and there is no way of enforcing that. That is the proposition that has been put to us, and it comes from direct experience of what is happening in Redfern.

Prof. Lavarch : The change that occurred with the standards and the requirements for direct identification of the relationship between brokers and RTOs has certainly been an improvement in the last few months. Again, it is early days, and indeed some of the reforms to the VET FEE-HELP design only came in on 1 July—it is only two weeks down. It is true that ASQA's reach here is limited. That flows from the fact that ASQA was established by way of a referral of powers from the states. The referral of powers was only centred on the registration processes of providers and the work of providers. We do not have a plenary power to go out and look at other players in the marketplace. We do need the Consumer Law regulators to be playing their role. If they say, 'We don't have the resources to do it' or 'This sector over here, in our risk model, is more important than your sector,' then that will certainly be a problem. Whether the overall architecture—going back to our earlier discussion—is quite right, that is for of the committee and others to determine.

Senator KIM CARR: Could I ask you specifically: do you think there is cause for concern that RTOs may well be under investigation by consumer bodies and that this information is not available to students who are being asked to enrol in those bodies?

Prof. Lavarch : A concern that they are being investigated and the information—

Senator KIM CARR: And that information is not available.

Prof. Lavarch : You have the conflicting natural justice consideration. An investigation does not mean that someone is guilty, I suppose. The consequential damage to reputation by the inference of an investigation which may lead to finding no problem is the balancing act—where you land in terms of those competing priorities. To an extent, that is unavoidable. I do not think this is unique to the training market. Consumer Law regulators—indeed, all regulators—are often doing work which, until it gets to a concluded point, is not out there in the marketplace.

Senator KIM CARR: How adequate do you think the regulations are to expose the relationship between RTOs and brokers?

Prof. Lavarch : It is better now than it was. It was quite inadequate and the relationships could easily be quite opaque and, indeed, were opaque. One of the attachments to a submission I think we gave to the committee was our strategic review into marketing, which was one of the earlier strategic reviews that ASQA undertook. In that we expressed particular concern about the transparency of the relationship between brokers, agents and providers. One of the recommendations was that there needed to be a great deal more specificity given in terms of what providers have to disclose so that students know who they are signing up with, who is going to provide training and if there are going to be third parties involved in the training—who is their actual relationship with? Those things, in large measure, have been incorporated into the new standards. Will that prove to be completely adequate? You would need to test that a few months or 10 months down the road. The thing has only been operating for a very short time at this stage.

Senator KIM CARR: I have asked this question before concerning the regulation of agents. We have regulation of immigration agents. It was introduced as part of the regulatory regime. Education agents are not regulated. Brokers are not regulated. What is the case against direct regulation of brokers?

Prof. Lavarch : I would not put a case against to you. I would make the point that you cannot ask ASQA to do it, unfortunately, because our—

Senator KIM CARR: You would have no objections to regulation in those areas?

Prof. Lavarch : No. I certainly do not put a case against it to you, Senator. We see a whole range of issues which have arisen through the activities of brokers. We will get further insight as a consequence of the work that is being done by us and the Consumer Law regulators in the VET FEE-HELP space. That will be a useful input into the policy thought in this area. I am not going to sit here and argue against the regulation of brokers. How you would properly configure that, balance it up and consider the cost-benefit, those are issues beyond my pay grade.

Senator KIM CARR: Thank you very much.

Senator O'NEILL: I have a couple of questions around some of the comments that you made, Professor Lavarch, in the last submission to Senator Carr about training organisations having a right for investigations to proceed without them being signalled in the marketplace as being under investigation. It does make students very vulnerable though, doesn't it?

Prof. Lavarch : I understand the point. At what point you make a market disclosure is a matter of judgement. As a regulator, our practice is not to publish. If you ask me directly whether X or Y is on our radar and whether we are doing some work, I would say, 'Yes we are doing some work with provider X or Y.' But, as a general thing, we do not go out and publish that we are currently doing audits of X and Y because simply doing an audit does not mean anything in terms of what we will find. When we do actually—

Senator O'NEILL: Are you actually able to put up something like, 'We are investigating on the back of a student report'? Are you able to put up—for want of a better term—a dashboard guide, where you show the minimal number of complaints? Students could read a dashboard that pushes up to a red zone. That is critical information. I am thinking as a citizen. With my son or daughter deciding they are going to invest $20,000 and secure a debt that is going to have compounding interest, it is in the interests of the nation's citizens to be able to see where there is risk. The only way they can see that risk is if the people who are investigating and responsible for that industry provide access to that information.

Prof. Lavarch : I understand 100 per cent the point you are making. I agree, obviously, with the proposition that for this market to operate, like any market to operate, there must be good flows of information so that people can then make informed decisions as to which provider is appropriate for them and their needs—just as there are for individual course choices.

Senator O'NEILL: Do you think that a good flow of information currently exists?

Prof. Lavarch : I think it could be much better. But that is a separate question as to whether you would ask a regulator, at an incomplete stage of some investigation that it was undertaking, to be flagging that it was doing an investigation of which the outcome one does not know at that time. If the investigation finds that the allegation is malicious and there is nothing wrong whatsoever—and, believe me, we do get issues where that is the conclusion—there is a very significant negative impact on what might be a completely straight-up-and-down, honest and good provider. There is a balance to be drawn here. Our practice is not to announce that we are undertaking work until we have reached the point of actually making a conclusion.

Senator O'NEILL: It would seem to me that there are training organisations that are clearly worth signalling to the public about. Having one malicious complaint is a very different thing to having a number of complaints coming through. Could I ask you about propositions that were put to us—that an ombudsman for Australian resident students needs to be made available at a national level so that students have a single point of call, and that there needs to be something within the system to feed into the other agencies.

Prof. Lavarch : I do not think ASQA has a view on it. You are asking me as an individual witness who is wearing a hat. Looking at the overall architecture of the system, I think it is notable that for international students we have an ombudsman structure with a particular consumer protection focus and that there is no equivalent entity operating at a level for domestic students. I have had some reasonable experience of ombudsman schemes, particularly in the financial services sector, which have, of course, grown out of industry initiatives as a means of helping to resolve complaints. They are not government initiatives; they have been industry initiatives. Telecommunications, energy and financial services all have ombudsman schemes. My personal view is that it would be a sign of maturity in the training market for industry. I think ACPET at one stage was advocating on behalf of providers. It would be a valuable addition to the architecture for there to be an ombudsman scheme. ASQA does not have a settled view as such on it, but my personal view is that that is a very worthwhile thought for the consideration.

Senator O'NEILL: There are alarming figures on the level of compliance at first audit. It is in the order of 70 per cent noncompliance. Is there a need for a fine system to provide some financial incentive for agencies to actually put a bit more effort into straight-up compliance?

Prof. Lavarch : I think it is a little bit more nuanced than that. Certainly, there has been a reasonably consistent experience over time. In terms of the remit of this committee, it has also been pretty consistent between a public and a private provider. We have not found, in terms of our examination of TAFEs or other public institutions, a particularly different statistic. It has been consistently across the marketplace. It would be misleading to say that this is all sitting in there. It is a system-wide issue.

What we think flows from this figure is a number of conclusions, particularly when you look back and say, 'If you give people just 20 days, the figures basically reverse.' Instead of finding some level of noncompliance in 80 per cent after 20 days, it is down to 20 per cent having some sort of level of remaining noncompliance. That tells me, in terms of the regulatory or compliance posture of the community that we are regulating, that there is a reasonable proportion of providers who essentially do want to do the right thing, but do not understand what the requirements are asking them to do in their fullest sense. So we need to get those requirements clear and get a meeting of the minds for the expectations about the system, and through it the regulator, about what is being expected. If we improve that, that will see these rates also improve.

I think there is some work to be done, and we are doing this work, in terms of trying to improve those overall compliance rates at first blush by improving understanding of requirements. My overall sense, and I think this is concluded from our work, is that we do not have the vast bulk of providers just completely indifferent to their obligations. We do have issues in this marketplace; we would not be having an inquiry if that was not the case. But the bulk of providers do wish to do the right thing and we need to work with them to get them up there. But people do contest our findings. If the auditor said, 'X, Y and Z,' they come back to us and say, 'That auditor is off their rocker. They have got it wrong. Have a look at this. They misunderstood what we are on about.' As much as we try, on occasions those criticisms are correct. We do make mistakes.

The more meaningful figure is not so much the 80 per cent figure; it is what remains after that 20-day period. It is that area around about the 20 per cent. That is a significant part of the market, but it is not 80 per cent. That is really in terms of where that risk-model change that I am talking about: getting the great eye out, working out where those 20 per cent are, finding them and intervening not simply at the stage of their re-registration application every five or seven years but as early as we can so that we are getting good detection and good data and we understand where they are going. That is the trick in terms of getting this regulator to work as effectively as it can do.

ACTING CHAIR: There may be questions on notice in writing. We know that you had the full hour, rather than the 45 minutes which other witnesses have had today. Thank you very much, ASQA.