Azaria Family Day Care Pty Ltd and Secretary, Department of Education
[2023] AATA 1858
•28 June 2023
Azaria Family Day Care Pty Ltd and Secretary, Department of Education [2023] AATA 1858 (28 June 2023)
Division:GENERAL DIVISION
File Number(s): 2019/0107
Re:Azaria Family Day Care Pty Ltd
APPLICANT
AndSecretary, Department of Education
RESPONDENT
DECISION
Tribunal:The Hon. Matthew Groom, Senior Member
Date:28 June 2023
Place:Melbourne
The decision under review is set aside. In substitution the Tribunal decides that pursuant to section 195F(2)(a) of the A New Tax System (Family Assistance) (Administration) Act 1999, the following condition be imposed on the applicant as a condition for continued approval:
(i)the applicant can engage at any time no more than 60 educators.
.......[sgn].................................................................
The Hon. Matthew Groom, Senior Member
Catchwords
Child Care Services —Application for Review of Decision — Family Assistance — Registered Carers— Day Care — Child Care Subsidy
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
A New Tax System (Family Assistance) (Administration) Act 1999
A New Tax System (Family Assistance) Act 1999
Education and Care Services National Law Act 2010 (Vic)Cases
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Frugtniet v ASIC (2019) 93 ALR 629
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Sunrising Family Day Pty Ltd and Secretary, Department of Education and Training [2018] AATA 1463
Lees v Comcare (1999) 56 ALD 84Secondary Materials
Education Care Services National Regulations 2011 (Cth)
Child Care Subsidy Minister’s Rules 2017
Child Care Subsidy Secretary’s Rules 2017
Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Rules 2017
Child Care Benefit (Children in respect of whom no-one is eligible) Determination 2015 Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Amendment Determination 2015 (No. 2)REASONS FOR DECISION
The Hon. Matthew Groom, Senior Member
28 June 2023
INTRODUCTION
This matter involves a review of a decision of an authorised review officer of the respondent dated 13 December 2018 to affirm an earlier decision of a delegate of the respondent dated 18 September 2018 to cancel the applicant’s approval as a provider of childcare services pursuant to section 195H(1)(b) of the A New Tax System (Family Assistance) (Administration) Act 1999 (Administration Act).
BACKGROUND INFORMATION
It is appropriate to set out some background to the legislative scheme governing the provision of childcare subsidies. The scheme has been referred to in the parties’ consolidated statement of contentions as the “family assistance law” and the Tribunal will use that nomenclatural for the purpose of these reasons.
The family assistance law comprises the Administration Act and also the A New Tax System (Family Assistance) Act 1999 (Assistance Act) together with subordinate legislative instruments made under both of those statutes as in force from time to time.
The family assistance law establishes a framework for the payment of childcare subsidies to eligible parents and guardians of children in order to reduce the expenses of childcare. Childcare subsidies were formally known as the Child Care Benefit (CCB) and the Child Care Rebate and are now known as the Child Care Subsidy. The benefits are payable subject to a number of conditions contained in the family assistance law. Payments are only payable in respect of childcare sessions provided by an approved childcare service. A childcare service provider is regulated as a provider under the Education and Care Services National Law Act 2010 (Vic) (National Law) together with the Education Care Services National Regulations 2011 (Cth) (National Regulations). The National Law and National Regulations collectively comprise a national regulatory framework for education and care services for children that was jointly developed and adopted by all Australian jurisdictions.
As part of a legislative package of reform introduced on 2 July 2018 a number of substantive amendments were made to the Administration Act as well as new legislative instruments including the Child Care Subsidy Minister’s Rules 2017 (Minister’s Rules) and the Child Care Subsidy Secretary’s Rules 2017 (Secretary’s Rules). The reform package legislation included a savings provision which provided that the relevant law that applied up until 2 July 2018 was saved in respect of things done or matters arising before that date.
In addition, the Minister’s Rules made provision for any sanction intention notice issued prior to 2 July 2018 continuing to provide a basis for sanction after 2 July 2018. For the purpose of these reasons, where relevant, the Tribunal refers to the version of the Administration Act that existed immediately prior to the 2 July 2018 amendments as the Pre-Amendment Administration Act.
On 11 March 2010 the applicant was approved as a childcare operator. On 6 September 2010 the applicant was approved as a childcare service provider for the purpose of the family assistance law. Mohamud Farah Isse was named as a director and Mulki Samater was named as operations manager of the applicant.
Between 2012 and 2018 the respondent issued the applicant with a number of notices of non-compliance with the conditions of continued approval under the family assistance law. There was engagement between the parties with respect to allegations of non-compliance but no formal enforcement action was pursued by the respondent at the time.
However, on 30 April 2018 the respondent issued the applicant with a “Notice of Intention to Impose Sanction” (Intentions Notice) advising of its intention to impose a sanction in respect of multiple non-compliances under the Pre-Amendment Administration Act including that:
(b)there were reported sessions of care provided by educators who were overseas;
(c)there were reported sessions of care for children who were overseas; and
(d)there were reported sessions of care in respect of non-eligible children without obtaining documentary evidence of specified circumstances.
On 18 September 2018, after consideration of further information provided by the applicant, a delegate of the respondent made the decision to cancel the approval of the applicant under the family assistance law (original decision).
On 26 September 2018, the applicant requested that the respondent undertake an internal review of the original decision.
On 23 October 2018 the applicant advised the respondent of its intention to pay back $43,725 in CCB/CCR payments and requested the issue of an invoice for that purpose. On 5 November 2018 the applicant paid the respondent the amount of $43,724.61.
On 13 December 2018 an authorised review officer (review officer) wrote to the applicant and advised of their decision to affirm the original decision to cancel the applicant’s approval under the family assistance law. In making their decision the review officer determined that the applicant had contravened various conditions of continued approval pursuant to sections 196(1) and (2) of the Pre-Amendment Administration Act. More specifically, the review officer determined that the applicant had:
Failed to comply with section 219N (the obligation to provide certain reports, and by implication, accurate information within those reports) including by:
(a)reporting sessions of care that did not occur because the educators or children were overseas at the time the care purportedly took place;
(b)reporting sessions of care to children in respect of whom no one is eligible, without obtaining documentary evidence of specified circumstances in relation to older children or child swapping;
Failed to comply with section 219B and section 219EA including by:
(c)failing to pass on fee reductions and receiving funds to which it was not entitled.
Failed to comply with section 219QB and section 219QE by:
(a)failing to remit amounts not able to be passed on as fee reductions.
Further, the review officer determined that the applicant’s non-compliance represented a significant failure of governance resulting in the applicant ceasing to be a “suitable person” to operate a childcare service which in turn resulted in non-compliance with Part 2 of the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Rules 2017 (Eligibility Rules). The review officer also determined that, as a consequence of the applicant’s non-compliance, the applicant ceased to be a “fit and proper person” to operate a childcare service, as set out in sections 194C, 194D and 194E of the Administration Act.
In their decision the review officer also noted that the original decision maker had, in addition, decided that the applicant had:
(a)failed to comply with its obligations to keep a register and/or documentary evidence in respect of care provided to children for whom no one is eligible unless specified circumstances apply; and
(b)failed to provide reports to the respondent in accordance with section 219N of the Pre-Amendment Administration Act.
In making their decision the review officer noted that he had reviewed information provided by the applicant in various submissions, section 219N reports submitted by the applicant, and other information obtained from Centrelink, including information on international movements advised by the Department of Home Affairs.
The effect of the decision to cancel the applicant’s approval as a provider of childcare services under the Administration Act is that the applicant is denied eligibility to claim childcare fee assistance from the Commonwealth Government on behalf of the families of the children in its care.
On 9 January 2019 the applicant applied for a review of the review officer’s decision by the Administrative Appeals Tribunal (AAT) which is the matter presently before this Tribunal.
As part of its application the applicant also sought a stay of the effect of the respondent’s decision until the outcome of the AAT review. That applicant was granted on 21 March 2019 subject to certain conditions.
In continuing to press this matter, the respondent contends that the Tribunal should also have regard to other historical allegations of non-compliance (set out in annexure C to the respondent’s consolidated statement of contentions) or otherwise additional allegations of non-compliance (set out in annexure B to the respondent’s consolidated statement of contentions) against the applicant in respect of the family assistance law.
This matter was the subject of a substantive hearing over five days held on 6 to 10 December 2021. The applicant was represented by Ms Blok of counsel and the respondent was represented by Mr Dube of counsel. Following the hearing, the parties provided subsequent written submissions the last of which were received by the Tribunal on 11 April 2022.
LEGILSATIVE PROVISIONS
Tribunal has set out a brief overview of the family assistance law framework above. A more detailed overview is set out in the respondent’s consolidated statement of contentions as follows:
OVERVIEW OF THE LEGISLATIVE FRAMEWORK
2 July 2018 changes to the family assistance law
4.1 A person will only be eligible for child care subsidies in relation to child care services if the provider of those services is a provider who has been approved by the Respondent for the purpose of the family assistance law.
4.2 The approval process in the [Pre-Amendment Administration Act] was repealed and substituted with a new Part 8 by the Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Act 2017 (the Amendment Act), which commenced on 2 July 2018.
4.3 The reviewable decision was made under the legislation as it stood after 2 July 2018 (i.e. the [Administration Act]). Consequently, references to provisions relating to the reviewable decision itself are references to provisions as they stood after 2 July 2018.
4.4 The law relevant to the conditions for continued approval and other provider obligations was saved under item 10 of Schedule 4 to the Amendment Act. Consequently, references in the relevant documents to the Applicant’s noncompliance with the ‘Administration Act’ are references to provisions as they stood prior to 2 July 2018 as provisions of the saved law (i.e. the [Pre-Amendment Administration Act]), unless expressly stated otherwise.
4.5 The Tribunal should apply the legislative scheme as it stood prior to 2 July 2018, in relation to things done, or matters arising before 2 July 2018, having regard to the Family Assistance Legislation Amendment (Jobs for Families Child Care Package)Act 2017, sub item 10(1) of Schedule 4 which provides that the ‘continued law’ (which is defined as the [Pre-Amendment Administration Act], the Assistance Act and other specified Acts or instruments in force immediately before 2 July 2018) remains in force. However, it should be remembered the Minister’s Rules did not come into effect until 2 July 2018.
Family assistance law framework
4.6 The family assistance law establishes a framework which provides individual entitlement to Child Care Subsidy (CCS), formerly known as child care benefit (CCB) and child care rebate (CCR). These are financial contributions to assist eligible individuals (for example, parents) with their child care fees and are only payable in respect of sessions of care, that attract a fee liability, provided by an approved child care provider (approved provider).
4.7 Payments of child care fee assistance can be made directly to eligible individuals or to an approved child care provider. Many eligible individuals choose child care fee assistance in the form of a fee reduction, such that the relevant approved provider becomes a conduit for the relevant funds that, in fact, reflects the eligible individual’s entitlement. The approved provider must then pass these funds on to the relevant eligible individual as a reduction in their child care fees within 14 days of being notified of the amount calculated (see sections 219B and 219EA of the [Pre-Amendment Administration Act], and section 201A of the [Administration Act].
4.8 The family assistance law, as it relates to child care fee assistance, is wholly directed to supporting eligible individuals with child care costs. In this context, the family assistance law provides a statutory framework under which eligible individuals have child care fee assistance calculated based on their particular circumstances, including by reference to personal income and activity-based parameters, such as paid employment.
4.9 Further to this, section 66 of the [Pre-Amendment Administration Act] (section 67GB of the [Administration Act]) expressly provides that child care fee assistance is the “inalienable” entitlement of eligible individuals. This principle follows from the fact that family assistance legislation is part of Australia’s social welfare framework. The family assistance law does not establish an entitlement to subsidies or business revenue for approved providers.
4.10 The central requirement of this approval framework is that approved providers must report fully and accurately to the Respondent. Accurate reporting is essential for the Respondent to correctly calculate child care fee assistance payable to eligible individuals and to ensure that payments of public funds are only directed to approved providers if they are entitled to receive them. Inaccurate reporting may lead to child care fee assistance being paid for services that have not been delivered or to ineligible individuals.
4.11 To the extent that any payments of child care fee assistance are first paid to child care service providers, the family assistance law requires that providers fully pass on any such financial assistance to eligible individuals by way of fee-reduction. If that is not able to occur (for example, because the relevant session of care was not provided), then providers were required under the legislation to immediately remit such amounts of child care fee assistance back to the Respondent.
4.12 A person (including a corporation) that operates a child care service is able to apply for approval as an approved provider under the family assistance law. If approval is granted, the approved provider is obliged to continue to comply with a number of “conditions for continued approval” in order to maintain its approval.
4.13 There were relevantly three categories of conditions for continued approval under the family assistance law in respect of the Applicant, as set out below.
4.13.1 as prescribed by the Eligibility Rules (in so far as they are applicable).
4.13.2 requirements imposed under the family assistance law, including:
4.13.2.1 conditions for continued approval referred to in Part 8 of the [Pre-Amendment Administration Act], and Part 8 Division 2 of the [Administration Act];
4.13.2.2 the obligations set out in Part 8A of the [Pre-Amendment Administration Act] and [Administration Act], and Part 8 Division 1 of the [Administration Act] (incorporating references to the Minister’s Rules); and
4.13.2.3 any other provision that imposes an obligation on an approved provider under that law, including obligations to not contravene civil penalty and criminal offence provisions.
4.13.3 Other child care laws that relate to the operation of the child care service, the provision of care and its construction and equipment. This includes the Education and Care Services National Law Act 2010 (the National Law) and Education and Care Services National Regulations (the National Regulations), as it applies in Victoria.
Power to impose sanctions—section 195H of the Current Administration Act
4.14 Under subsection 195H(1) of the [Administration Act], the Secretary (or their delegate) may impose one or more “sanctions” on an approved provider if satisfied that the provider has not complied, or is not complying, with a condition for continued approval. One of the available sanctions is cancellation of the provider’s approval under paragraph 195H(1)(b). The Secretary may also decide to vary or impose additional conditions under s 195F(2).
4.15 The Secretary (or their delegate), when deciding whether to impose a sanction and, if so, which sanction to impose must have regard to matters set out in section 52 of the Minister’s Rules.
4.16 Importantly, a sanction, including cancellation, does not mean that a provider cannot operate a child care service per se. Cancellation of approval under the family assistance law has the effect that child care fee assistance is not payable to eligible individuals for any child care service that is provided. A provider can continue to operate if it holds approval as an “education and care service” from the relevant State regulator (in this case, the Victorian Regulator) under the National Law, which contains a separate approval framework.
ISSUES
The issues for determination by the Tribunal are:
(a)whether the allegations of non-compliance made against the applicant by the respondent are sustained to the Tribunal’s satisfaction; and, if so,
(b)should a sanction be imposed in respect of the non-compliance and, if so, what should that sanction be.
A further detailed list of sub-questions to be resolved by the Tribunal in determining the matter were agreed on by the parties in what was referred to as an “Updated Agreed Decision Tree” and was set out in their respective consolidated statement of contentions. The Tribunal has had regard to that list in making its determination.
CONSIDERATION
The first question for determination by the Tribunal was whether the Tribunal is satisfied that the applicant has not complied with, or is not complying with, a condition for continued approval of a provider of a childcare service for the purpose of section 195H(1) of the Administration Act.
In considering this matter the Tribunal has had regard to the evidence before it including:
(ii)T-Documents of 8 February 2019
(iii)Supplementary T-Documents of 2 April 2020 (ST1)
(iv)Supplementary T-Documents of 14 May 2020 (ST2)
(v)Supplementary T-Documents of 6 December 2021 (ST3)
(vi)Azaria Family Day Care Notebook Handwritten pages with Educators CRN’s
(vii)Azaria Family Day Care Notebook Containing Handwritten records
(viii)Educator travel movement register
(ix)Bundle of educator travel itineraries
(x)Series of Harmony screenshots
(xi)Monthly report for Rajinder Kaur of 24 July 2019
(xii)Home safety check for Alice Telea
(xiii)Holiday notice for G Singh Saudliu
(xiv)Register of Family Day Care Educator in respect of educator Alice Telea
(xv)Timesheet E-forms in respect of Azaria Family Day Care
(xvi)Joint Tender Bundle
(xvii)Statutory Declaration of Mulki Samater
(xviii)Affidavit of Mulki Samater and its annexes 20 February 2019
(xix)Affidavit of Mulki Samater and its annexes 20 March 2019
(xx)Affidavit of Mulki Samater and its annexes 28 June 2019
(xxi)Affidavit of Mulki Samater and its annexes 3 December 2019
(xxii)Affidavit of Mulki Samater and its annexes 17 February 2020
(xxiii)Affidavit of Mulki Samater and its annexes 24 March 2020
(xxiv)Affidavit of Mulki Samater and its annexes 5 June 2020
(xxv)Affidavit of Mulki Samater and its annexes 30 March 2021
(xxvi)Affidavit of Mulki Samater and its annexes 23 April 2021
(xxvii)Affidavit of Mulki Samater and its annexes 25 November 2021
(xxviii)Affidavit of Chantal Louise Miller and its annexes 23 August 2019
(xxix)Affidavit of Chantal Louise Miller and its annexes 11 October 2019
(xxx)Affidavit of Chantal Louise Miller and its annexes 17 January 2020
(xxxi)Affidavit of Chantal Louise Miller and its annexes 18 May 2020
(xxxii)Affidavit of Chantal Louise Miller and its annexes 29 March 2021
(xxxiii)Affidavit of Ellen Joan Curran and its annex 30 March 2021
(xxxiv)Extracts of Documents produced under summons by Applicant
(xxxv)Timesheet E-form for Ethan Abbo Week ending 11 April 2021
(xxxvi)Child Care Benefit (Children in respect of whom no-one is eligible) Determination 2015
(xxxvii)Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Amendment Determination 2015 (No. 2)
In addition, at the hearing the Tribunal heard oral evidence from Ms Mulki Samater who is the general manager of the applicant, and Ms Chantal Miller who is the Assistant Director in the Network Payment Integrity Team for the respondent.
In giving consideration to the applicant’s non-compliance there was a dispute between the parties as towhether or not it was appropriate for the Tribunal to have regard to the historical and additional allegations. The applicant contends that it is open to the Tribunal to have regard to the historical allegations that were the subject of the April 2018 Intentions Notice to the applicant and then only for the limited purpose of determining whether or not the applicant was in breach of section 196(1) of the Pre-Amendment Administration Act.
The applicant contends that alternatively the Tribunal should place little weight on the historical allegations on the basis that there has been no finding of breach, the applicant failed to pursue any action or seek any sanction or condition in respect of them.
Further, the applicant contends that in considering the issues for determination it would not be appropriate for the Tribunal to have regard to the additional allegations as they were not the subject of a relevant notice and that the Tribunal should otherwise confine itself to consideration of the allegations that were the subject of the decision under review.
The respondent contends that the historical allegations are relevant to the Tribunal’s understanding of the applicant’s prior history of non-compliance with the family assistance law. In this context the respondent maintains the applicant’s non-compliance but acknowledges that it did not at the time, nor does it now, seek any further remedial action beyond the action that it seeks in respect of the non-compliance the subject of the decision under review.
The Tribunal is satisfied that there is no statutory basis for limiting the Tribunal’s consideration of non-compliance allegations to those specifically included in the April 2018 Intentions Notice. The Tribunal accepts that in undertaking its function of review the Tribunal is empowered to exercise all of the powers and discretions that are conferred by any relevant enactment on the person who made the decision, pursuant to section 43 of the Administrative Appeals Tribunal Act 1975 (the AAT Act). The Tribunal also accepts, as noted in Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at [589] that in exercising its power:
The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal.[1]
[1] See also Shi v Migration Agents Registration Authority (2008) 235 CLR 286.
However, as acknowledged in Frugtniet v ASIC (2019) 93 ALR 629 at [14] the Tribunal’s power is not without constraint but rather:
It is subject to the same general constraints as the original decision-maker and should ordinarily approach its task as though it were performing the relevant function of the original decision-maker in accordance with the law as it applied to the decision-maker at the time of the original decision.
Depending on the nature of the decision the subject of review, the AAT may sometimes take into account evidence that was not before the original decision-maker, including evidence of events subsequent to the original decision. But subject to any clearly expressed contrary statutory indication, the AAT may do so only if and to the extent that the evidence is relevant to the question which the original decision-maker was bound to decide; really, as if the original decision-maker were deciding the matter at the time that it is before the AAT. The AAT cannot take into account matters which were not before the original decision-maker where to do so would change the nature of the decision or, put another way, the question before the original decision-maker.[2]
[2] See also Sunrising Family Day Pty Ltd and Secretary, Department of Education and Training [2018] AATA 1463.
The relevant power in the present matter is the power to impose a sanction in section 195H of the Administration Act together with the Minister’s Rules. The Tribunal is satisfied that there is nothing in the wording of the Administration Act or the Minister’s Rules that would prevent the Tribunal having regard to either the historical allegations or the additional allegations not included in the Intentions Notice in making its decision. The Tribunal also accepts the respondent’s contention with respect to the effect of section 199A of the Administration Act and section 52 of the Minister’s Rules.
However, in respect of the historical allegations, given that those allegations were not previously pursued, and no previous findings were made in respect of them, the Tribunal is of the view that they should be afforded little weight in its determination of the present matter beyond acknowledging that the applicant was clearly aware that the respondent had significant concerns regarding the applicant’s compliance with the family assistance law prior to the April 2018 Intentions notice. The Tribunal otherwise makes no specific findings in respect of the historical allegations. The Tribunal has otherwise proceeded on the basis of the allegations of non-compliance made against the applicant as described in the respondent’s consolidated statement of contentions.
The applicant contends that sections 219N(1) and (2) of the Pre-Amendment Administration Act should be read as including an implied qualification that a service provider must be given a fair opportunity to withdraw or substitute reports that have been submitted with errors, and where the provider has either withdrawn or substituted a report within a reasonable time, the provider should not be considered to have submitted an incomplete or inaccurate report. The Tribunal is satisfied that a plain reading of 219N(1) and (2) of the Pre-Amendment Administration Act does not support the applicant’s contentions in this respect. In the Tribunal’s view, nothing in section 204B(1) of the Administration Act, which provides that a failure to provide an accurate or complete report is a strict liability offence, assists the applicant’s argument. The applicant’s contentions in this respect are rejected.
In their written post-hearing submissions, the parties both made material concessions with respect to this matter. The Tribunal commends both parties for the practical and constructive approach they have adopted in doing so.
The applicant’s submissions included material concessions with respect to a number of allegations of non-compliance with the family assistance law. Those concessions can be summarised as follows:
(i)the applicant concedes 40 breaches of section 204B(1) of the Administration Act in respect of inaccurate reporting of sessions of care where children were overseas;
(ii)the applicant concedes 313 breaches of section 219N(5) of the Pre-Administration Act in respect of the late attendance reporting;
(iii)the applicant concedes 266 breaches of section 219(AB) of the Pre- Administration Act in respect of late enrolment reporting;
(iv)the applicant concedes 32 breaches of section 10(1A)(h) of the Eligibility Rules in respect of reporting care without providing Centrelink customer reference numbers.
The Tribunal accepts that these concessions are appropriate.
In their written submissions the applicant maintains its denial with respect to the following further allegations:
(i)637 alleged breaches of sections 219N(1) or (2) of the Pre-Amendment Administration Act in respect of inaccurate reporting of sessions of care where the educators were overseas. In respect of these alleged breaches the applicant concedes that it submitted reports containing factual errors in that the educators were overseas and no care took place. However, the applicant contends that there were mitigating circumstances including that the applicant did not know that the educators were overseas and that the reports were submitted in good faith.
On the basis of the applicant’s concession the Tribunal is satisfied that the breaches are made out. In the Tribunal’s view it is incumbent on the applicant to ensure the accuracy of the reports as well as putting appropriate arrangements in place to ensure the accuracy of timesheets submitted by educators and more rigour in compliance procedures to more readily identify false or misleading conduct by an educator. The Tribunal accepts however on the basis of the evidence before it that the applicant had not intentionally submitted inaccurate reports in these instances, that the applicant took steps to terminate a number of educators for non-compliance; and that the applicant has repaid the monies overpaid. The Tribunal accepts that these factors are relevant in the Tribunal’s consideration of the appropriate sanction in respect of the non-compliance;
(ii)208 alleged breaches of section 219N (1) or (2) of the Pre-Administration Act in respect of inaccurate reporting sessions of care where the children were overseas. Again, in respect of these alleged breaches the applicant concedes that it submitted reports containing factual errors in that the children were overseas and no care took place. The applicant contends that there were mitigating circumstances including that the applicant did not know that the children were overseas and that the reports were submitted in good faith.
On the basis of the applicant’s concession the Tribunal is satisfied that the breaches are made out. In the Tribunal’s view it is incumbent on the applicant to ensure the accuracy of the reports as well as putting appropriate arrangements in place to ensure rigour in compliance procedures to more readily identify false or misleading information. The Tribunal accepts however on the basis of the evidence before it that the applicant had not intentionally submitted inaccurate reports in these instances, that the applicant took steps to improve their procedures for compliance, including in respect of home visits, that the applicant has refused to accept families who were known to be involved in inappropriately claiming subsidies, and that the applicant has repaid all of the subsidies overpaid;
(iii)614 alleged breaches of section 219N (1) or (2) of the Pre-Administration Act in respect of inaccurate reporting sessions of care where there was no entitlement to claim subsidies because the parent works as an educator in another service. The applicant concedes that reports were submitted for childcare sessions in circumstances where there was no entitlement to the subsidy because the parents of the relevant children were working as educators at other childcare services (in respect of 532 alleged external breaches) or where the reports otherwise contained errors as a result of administrative issues when transposing timesheet data onto the Harmony system (in respect of 82 alleged internal breaches).
The applicant concedes that there was a breach of the child swapping rules in section 8 of the Child Care Benefit (Children in respect of who no-one is eligible) Determination 2015 (No-one is eligible Determination) in relation to the external breaches. In the Tribunal’s view, the applicant’s concession with respect to section 8 of the No-one is eligible Determination is also appropriate.
However, the applicant does not concede that any of the errors contained in its reports constitutes a breach sections 219N(1) or (2) of the Pre-Administration Act nor does it concede that there has been a breach of section 10A of the Eligibility Rules[3]. The applicant claims that it had appropriate policies in place and took reasonable steps to ensure compliance with its policies including asking the relevant information from educators.
The applicant claims that the educators involved in the internal child swapping allegations were asked if they were educators or proposed to become educators in the future and that they each said no and had agreed to inform the applicant if that circumstance changed. Ms Miller in the course of giving her evidence was taken through the relevant enrolment forms for 2015 and 2018 in relation to each of the six parents relevant to the external allegations and agreed that each of the forms requested the relevant information and that in each instance the parents had confirmed that they were not working as educators and that they would advise the applicant if that changed. This is consistent with Ms Samater’s evidence.
Ms Miller also conceded when taken to examples of the forms in respect of the relevant parents that they have in each instance indicated on the relevant forms that neither they nor their partner are working as a family day care educator and that they are not likely to. In addition, in each instance Ms Miller accepted that the parent had signed a parent agreement committing to advising the applicant in the event that either they or their partner became an educator. The applicant claims that there was no reasonable basis for the applicant to suspect that the parents were educators and that there was no readily available method for detecting that child swapping was occurring. In addition, Ms Miller conceded in cross-examination that there was no evidence that the applicant was aware that the parents involved in external child swapping worked as educators.
It is also clear from Ms Miller’s evidence that she had conceded that in respect of the external child swapping allegations there had been no breach of section 10A of the Eligibility Rules on the basis that the applicant had complied with its obligations to obtain information from the relevant parents. The Tribunal considers Ms Miller’s concession in this respect to be appropriate although it does also accept Ms Miller’s point that there remained the potential for further improvement in the applicant’s policies and procedures in obtaining such information in order to ensure that the applicant was operating consistently with best practice and that this is especially the case in the context of its own educators.
The Tribunal notes that Ms Miller’s concessions in these respects were appropriate and reflective of the very professional and constructive way in which she engaged with the Tribunal through the course of giving her evidence. More broadly, the Tribunal found Ms Miller to be an extremely well prepared and credible witness.
In respect of the claims of internal child swapping, the Tribunal accepts Ms Samater’s evidence that there had been an error in transferring timesheet data onto the Harmony system rather than an actual child swapping breach. The Tribunal does not, however, accept the applicant’s contentions regarding the alleged breaches of sections 219N(1) and (2) of the Pre-Administration Act in respect of the reporting errors. In the Tribunal’s view those breaches are made out although the Tribunal would concede that there are significant mitigating circumstances in respect of the breaches particularly in light of the of the concessions made by Ms Miller in her evidence on this issue as well as the Tribunal’s acceptance that in submitting the reports the applicant did not intend to in any way mislead and that all of the overpaid subsidies have been repaid;
(iv)22 alleged breaches of section 204B of the Administration Act in respect of the late attendance reporting. The applicant claims that the relevant reports were submitted on time but that there was a Harmony systems failure that resulted in the reports not being registered until after the due date. Further, the applicant claims to have taken prompt steps to rectify the issue since it became aware of the problem. Ms Miller in her evidence denied that there was evidence of a broad systems failure of any kind that affected the submission of data on third-party software and that there had been no advice from Harmony of a sector wide issue. However, in cross examination Ms Miller conceded that she was not in a position to be certain that a specific issue involving the applicant’s software and the respondent’s system had not in fact occurred. Having considered the evidence, the Tribunal accepts the applicant’s claims and, as a consequence, is not satisfied that the 22 alleged breaches of section 204B of the Administration Act in respect of the late attendance reporting are made out;
(v)48 alleged breaches of sections 219N(1) or (2) of the Pre-Administration Act and regulation 124 of the National Regulations in respect of inaccurate reporting of educated to child ratios. The applicant concedes that its reports were inaccurate but claims that it was due to administrative error and denies that it should be considered in breach on the basis that it is entitled to withdraw the reports. The Tribunal rejects the applicant’s contentions with respect to its claimed statutory construction and is satisfied that the 48 alleged breaches of sections 219N(1) and (2) of the Pre-Administration Act and regulation 124 of the National Regulations are made out. However, the Tribunal accepts the applicant’s evidence that the breaches were due to administrative error;
(vi)11 alleged breaches of sections 219N(1) or (2) of the Pre-Administration Act and regulation 124 of the National Regulations in respect of inaccurate reporting of reporting absences after care had ceased. The applicant concedes that its reports were in error in that there was no entitlement to claim subsidies for the sessions of care because the care had ceased. However, the applicant again claims that it was entitled to withdraw the reports and that it should not be considered to be in breach of the sections for that reason. The Tribunal again rejects the applicant’s contentions with respect to its claimed statutory construction and is satisfied that the 11 alleged breaches of sections 219N(1) or (2) of the Pre-Administration Act and regulation 124 of the National Regulations are made out. However, the Tribunal accepts that the applicant was not aware that the children had stopped attending the service despite having run audits through Harmony and that the applicant did not intend to mislead. The applicant has also committed to repay any amounts deemed owing to the Commonwealth in respect of the reporting errors;
[3] As well as in respect of the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Amendment Determination 2015.
In addition, the applicant contends that it has not failed to comply with the suitable person provisions in the Eligibility Rules or that it is no longer a fit and proper person under the Act. The Tribunal accepts this contention. While there is no doubt in the Tribunal’s mind that the applicant has engaged in multiple instances of non-compliance with the family assistance law over an extended period, the Tribunal is not satisfied on the evidence before it that the applicant’s record of non-compliance amounts to a systemic failure or is reflective of a serious disregard or recklessness towards its compliance obligations but rather is a consequence of inadequate record-keeping, knowledge gaps or misunderstandings with respect to legal obligations, administrative error, systems issues and policies and procedures that were, in some respects, short of best practice or not effectively implemented thereby increasing the risk of non-compliance.
The respondent contends that the evidence of Ms Samater, both in her affidavit material and also in her oral evidence before the Tribunal, regarding the applicant’s governance arrangements and policies and procedures was “at times evasive and confused”. The Tribunal does not accept this contention. The Tribunal accepts that there were some inconsistencies between Ms Samater’s affidavit material and her oral evidence. For example, the Tribunal accepts that Ms Samater overstated the frequency of home visits in both her February and June 2019 affidavits and also in relation to the apparent failure to obtain international movement records as was identified in her February 2019 affidavit as being a risk mitigation strategy against educators travelling overseas without notice. However, while these inconsistencies may represent an example of the applicant’s poor record-keeping or a stated policy not effectively implemented, the Tribunal is satisfied they are not an example of a deliberate intention to mislead in any way nor were they so material that the credibility and reliability of Ms Samater’s evidence is brought into question more broadly.
The respondent also made criticism of Ms Samater’s evidence in relation to the engagement of an expert to review the applicant’s policies and procedures. The respondent contends that Ms Samater’s March 2021 affidavit could be read as suggesting that the engagement of the childcare expert was in part for the purpose of reviewing the applicant’s policies and procedures in relation to the family assistance law and that this did not happen and that only became apparent through Ms Samater’s cross-examination. The Tribunal rejects this criticism. In the Tribunal’s view, it is clear from the content of Ms Samater’s affidavit that the expert was a childcare expert and was intended to review the applicant’s policies and procedures from that perspective. The Tribunal is satisfied that Ms Samater did not intend to mislead in any way in respect of this evidence. The Tribunal is also satisfied that the engagement of the childcare expert to undertake a review of the applicant’s childcare policies and procedures should reasonably be viewed as being reflective of a genuine commitment on the part of the applicant to improve its compliance outcomes.
The Tribunal found Ms Samater to be a truthful witness who was doing her best to answer the questions put to her and who demonstrated a level of knowledge of the family assistance law framework and the applicant’s policies and procedures reasonably expected of a senior officer of a registered service provider. The Tribunal accepts that there were some specific examples of gaps in Ms Samater’s knowledge of specific legislative requirements but given the complexity of the framework, in the Tribunal’s view, some examples of gaps in knowledge is not unreasonable nor unexpected.
The Tribunal is satisfied that the applicant retains a genuine commitment to continued improvement with respect to compliance including a commitment to the regular review and update of policies and procedures to reflect policy and rule changes or to effectively address non-compliance issues as they become aware of them. There was evidence before the Tribunal that the applicant had altered policies, forms and processes in response to rule changes or compliance issues that have been identified. An example of this was the applicant adjusting the 2018 enrolment form to include an additional statutory declaration for parents to sign in order to guard against child swapping or parents claiming subsidies when travelling overseas as set out in Ms Samater’s affidavit of February 2019. The respondent contends, that while there are examples of the applicant having changed policies and procedures, the evidence suggests that in many instances these changes have been reactionary to issues raised by the respondent. The respondent also contended that there are multiple examples of where having made changes to its policies and procedures, insufficient effort has been placed on ensuring that they are effectively implemented or that there is adequate record-keeping to demonstrate compliance. The Tribunal accepts that there has been some level of reactionary response but also that the applicant has made efforts to improve compliance of its own initiative. There are also some examples of ineffective implementation of policies and procedure but the Tribunal is nonetheless satisfied that the applicant has demonstrated a genuine commitment to improving outcomes in this respect.
The Tribunal accepts Ms Samater’s evidence that the applicant undertook audits in order to identify errors in reports that were submitted to the respondent and to update or correct information where errors were identified, although it accepts the respondent’s criticism that the applicant’s record-keeping of this process was effectively non-existent. The respondent also maintains criticism of the applicant in respect of its monitoring procedures and in particular its practice of home visits as well as, again, the inadequacy of record-keeping in respect of such visits.
The Tribunal is satisfied that there is a basis for some of these criticisms. There is no question that there remains room for further improvement on the part of the applicant in respect of monitoring and home visits as well as in respect of the applicant’s record-keeping more broadly. The Tribunal also accepts that there was some evidence of the applicant failing to report previous non-compliance, including during the course of these proceedings. However, the Tribunal is satisfied that the applicant is now well and truly on notice in relation to the importance of ensuring it has robust compliance monitoring and reporting arrangements in place as well as more comprehensive record-keeping and is satisfied that the applicant has a genuine commitment to improving its practices in this respect.
The Tribunal also accepts that the applicant has been operating the service since 2010 and that there is no evidence that would support a finding that the applicant has not provided a reasonable quality of childcare service over that period. The Tribunal accepts the applicant’s contention that the applicant met the National Quality Standards when assessed under the National Quality Framework in August 2017 and was rated as exceeding in one quality area as noted in Ms Samater’s statutory declaration of October 2018.
The Tribunal accepts the applicant’s contention that there are mitigating circumstances relevant to some of the applicant’s compliance breaches that reduced to some degree the applicant’s level of culpability for those breaches. This is not to suggest that the applicant is not ultimately responsible for its compliance nor that the applicant has attempted to deflect responsibility for deficiencies in its compliance regime. The Tribunal also accepts on the evidence before it that some examples of the applicant’s non-compliance are attributable to educator/parent collusion rather than a direct consequence of material compliance or monitoring failures on the part of the applicant.
The Tribunal accepts that some non-compliance was due to honest misunderstandings about the precise obligations which were reasonable misunderstandings when viewed in context. That context includes the challenges associated with compliance in a very complex and highly regulated legislative framework. It would certainly be unreasonable to expect any provider to have a perfect compliance record given the level of complexity involved. The Tribunal accepts that in her evidence Ms Miller acknowledged that when compared to the total number of sessions reported, the applicant’s non-compliance was approximately less than 1% of the total. Ms Miller in giving her evidence acknowledged that, in her view, while there were a number of compliance breaches involved in this matter the number and types of breaches involved in the cancellation decision were not such that they could be described as systemic. The Tribunal considers this concession to be appropriate and again acknowledges Ms Miller’s professionalism and objectivity in making the concession.
In the Tribunal’s view, when considered in context, the applicant’s record of non-compliance is not at a level that would demonstrate a serious disregard for its compliance obligations, rather the applicant’s compliance breaches are more reflective of a service provider with a genuine commitment to compliance but who, due to a combination of factors including the complexity of the legislative framework, inadequate record-keeping and some failures in the implementation of its policies and procedures, has fallen short. Again, the Tribunal is satisfied that the applicant recognises these inadequacies and has already taken steps and continues to take steps to effectively address them.
The Tribunal is also not aware of any criminal allegation or fraud that has been raised against the applicant and Ms Miller accepted in her evidence that the respondent was not alleging fraud or dishonesty against the applicant.
For these reasons, the Tribunal is satisfied that the evidence does not support a conclusion that the applicant is, or has at any time during the period of its registration, failed to be a suitable person under the Eligibility Rules or a fit and proper person under either the Pre-Amendment Act or the Act.
In its written submissions dated 11 March 2022 the respondent has conceded that in all of the circumstances it would be inappropriate to impose a sanction of cancellation against the applicant in respect of its compliance breaches in this matter. The Tribunal agrees. The Tribunal reaches this view having regard to the circumstances of the case as well as the considerations required by section 52(3) of the Minister’s Rules.
The respondent contends that it would instead be appropriate in all of the circumstances for conditions to be imposed on the applicant for continued approval pursuant to section 195F of the Administration Act. The respondent contends that to do so is within the jurisdiction of the Tribunal as it is a power available to the original decisionmaker and therefore to a decisionmaker on review citing Lees v Comcare (1999) 56 ALD 84. Again, the Tribunal agrees.
The respondent proposes two conditions as being appropriate having regard to the evidence before the Tribunal namely:
(a)a limit of 40 educators; and
(b)within three months of the date of the Tribunal’s decision the applicant implement an electronic payment and receipt system through which any gap fees owed by a family are paid directly to the applicant rather than to the educator.
The respondent contends that the imposition of such conditions would reflect the apparent need for further improvement in the applicant’s monitoring and compliance in the context where, during the course of the stay, the applicant has been limited to a maximum of 20 educators. The respondent contends that the capping of educators to a maximum of 40 would allow the applicant a period of continued improvement without overextending its ability to comply with the family assistance law and risk further breaches.
The respondent also contends that the imposition of a condition requiring the adoption of an electronic payment system whereby the gap fee is paid by the family to the applicant first, would be a demonstration of a step towards best practice and would be reflective of a service provider’s obligation to take reasonable steps to ensure that parents pay the gap fee, particularly in the context of a history of some educators engaging in fraudulent or collusive behaviour.
In its reply submissions the applicant rejects the respondent’s proposed conditions. With respect to the proposal to require the applicant to adopt a new electronic payment system through which any gap fees are paid to the provider rather than the educator, the applicant contends that the implementation of such a system is not required by law and there is otherwise no evidence before the Tribunal with respect to the efficacy of such a system.
The Tribunal accepts these contentions. This is not to suggest that the proposal has no merit. The Tribunal certainly has sympathy for the policy objective that would be achieved through such an approach. However, in circumstances where the payment system is not required by law and in the absence of more detailed evidence regarding the pros and cons of such a system it would, in the Tribunal’s view, be inappropriate for the Tribunal to impose a requirement on the applicant to adopt such a system as a condition of continued approval.
The Tribunal also accepts the applicant’s contentions with respect to a condition imposing the maximum number of educators. The applicant has proposed an alternative maximum of 60 educators noting that that number is fewer than those it had in place at the time of the Intentions Notice. In the Tribunal’s view, a cap of that number would still achieve the stated purpose of the cap proposal in allowing the applicant an opportunity to consolidate its compliance governance arrangements with a smaller number of educators than were previously in place. For these reasons, the Tribunal is satisfied that it is appropriate in all the circumstances to impose a cap of 60 educators as a condition for continued approval.
DECISION
The decision under review is set aside. In substitution the Tribunal decides that pursuant to section 195F(2)(a) of the A New Tax System (Family Assistance) (Administration) Act 1999, the following condition be imposed on the applicant as a condition for continued approval:
(i)the applicant can engage at any time no more than 60 educators.
I certify that the preceding 62 (sixty two) paragraphs are a true copy of the reasons for the decision herein of The Hon. Matthew Groom, Senior Member
....[sgn]....................................................................
Associate
Dated: 28 June 2023
Date(s) of hearing: 7-10 December 2021
Counsel for the Applicant: Natalie Blok Counsel for the Respondent: Ben Dube
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