Article in The Australian. It suggests small operators are defrauding gvt subsidies
Corrupt family daycare providers have defrauded taxpayers of more than $1 billion in just two years through systemic rorting that Education Minister Simon Birmingham has compared with Labor’s failed home insulation and school halls stimulus schemes.
Leaked documents obtained by The Australian reveal for the first time the state of crisis in family daycare, which is unfolding at such speed that Victoria proposed stopping all new federal government subsidies in a bid to get on top of the issue.
A copy of an agenda item from the most recent education ministers’ council reveals that 15 people have been arrested, 13 of whom have been charged, in relation to alleged fraud in the past 10 months, with fears stolen money could have been sent to Islamic State and other terrorist groups.
The documents show more than $8 million in assets have been seized in Australian Federal Police operations since December, including one raid in Lakemba in Sydney’s west in which two young men are suspected of using some of the $27m in taxpayer funds in aid of Islamic State.
Despite a federal government crackdown, one source said state and territory governments had bristled at the cost to their budgets of overseeing the booming sector, which has grown 61 per cent in the past two years, compared with just 7 per cent for centre-based childcare operators.
The agenda documents attribute this “overwhelming growth” to the introduction of the National Quality Framework in 2012.
Victoria has had a 303 per cent increase in FCD services since the National Quality Framework began, 87 per cent of which are for-profit providers compared with 32 per cent for-profit providers before the NQF.
In Queensland and Western Australia, about 60 per cent of new family daycare applications have been refused while in Victoria, which wants a pause on new funding, 42 per cent have been rejected.
Senator Birmingham has led a federal government reform of the sector that has so far saved more than $450m, although he says much of the compliance burden is carried by state and territory governments. “Some parts of the childcare sector have sought to exploit loopholes and, like the failed Pink Batts or BER programs, this continued because of Labor’s lack of focus on regulation and compliance,” Senator Birmingham said.
“We’ve been closing those loopholes as quickly as we find them but the states and territories need to fulfil their responsibilities as the level of government primarily responsible for ensuring the quality and compliance of childcare providers.”
The Australian understands Senator Birmingham is willing to consider setting up a taskforce or a review after the federal government has used the intelligence at its disposal to go after existing dodgy operators.
Senator Birmingham has also written to his counterparts urging them to increase their compliance checks and efforts.
“Unscrupulous operators are becoming increasingly adept at finding new ways to operate within the current quality and funding frameworks and these are serious issues that will require the co-operation of all governments and must be addressed in a timely way,” the agenda item from September 23 says.
“Families need to have confidence that early childhood education and care services are providing a quality and safe environment for children and taxpayers’ funds are not being rorted for private or potential offshore activities.
“FDC is an inherently higher risk service model, compared to centre-based care, in terms of quality for children and potential for fraud. It is also a resource-intensive sector to regulate.
“FDC providers deliver their service from multiple, usually home-based locations ... set-up costs are low, providers are agile and educators are not directly supervised, making it easier for unscrupulous providers to claim childcare fee assistance the family is not entitled to or when children do not attend the service.”
In the past financial year, 117 services have been cancelled, suspended, fined or hit with conditions.
The council agenda makes the extraordinary admission that state authorities have conducted assessments of providers and found “that care is not being provided in a number of educator residences or venues” but notes this is not considered a compliance issue under national law.
In one case, a 19-year-old received funding to look after 18-year-old twins.
At the education council meeting, every state and territory minister backed a proposal to hold an independent review of the FDC sector but this was vetoed by the federal government.
Much of the commonwealth’s overhaul so far has involved making the rules more explicit, but enforcement from all levels of government will be expensive, costing tens of millions of dollars.
In NSW, where one-sixth of its 420 services were hit with 109 “compliance actions” in the past financial year, Early Childhood Education Minister Leslie Williams says “there is still a lot more to be done”.
“Individual states can only go so far. I look forward to further national collaboration to put an end to defrauding of commonwealth payments,” she said.
Victorian Minister for Families and Children Jenny Mikakos said the problems had not been completely addressed.
“We’ve called for an independent review of family daycare to examine the interactions between the Commonwealth Family Assistance Law and the national regulatory regime, and for the Turnbull government to cease funding new family daycare services in areas already saturated with services until the review is complete,” Ms Mikakos said.
“Victoria doesn’t just want measures that will slow down fraud against the commonwealth. We want changes that will improve quality for children, which is the driving principle of the National Quality Framework.”
The education council agenda notes the current quality and funding frameworks are out of step and that “this appears to be an area where FDC operators seek to find loopholes in the (early childhood) system”.
GEM Price at posting:
$3.03 Sentiment: Hold Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)