Kids Vision Family Day Care Pty Ltd and Secretary, Department of Education and Training

[2018] AATA 4121

Kids Vision Family Day Care Pty Ltd and Secretary, Department of Education and Training [2018] AATA 4121 (1 November 2018)

Division:GENERAL DIVISION

File Number(s):      2017/5688

Re:Kids Vision Family Day Care Pty Ltd

APPLICANT

AndSecretary, Department of Education and Training

RESPONDENT

DECISION

Tribunal:Senior Member D. J. Morris

Date:1 November 2018

Place:Melbourne

The Tribunal affirms the decision under review.

................[sgd]........................................................

Senior Member D. J. Morris

Catchwords

CHILD CARE – BENEFITS AND REBATES – cancellation of Applicant’s approval as a child care service – Applicant no longer eligible for child care benefit or child care rebate – substantial non-compliance with regulatory framework – what sanction should be applied – decision affirmed

Legislation

A New Tax System (Family Assistance) Act 1999 (Cth)
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth)
Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Determination 2000 (Cth) (rep)
Child Care Benefit (Breach Conditions for Continued Approval) Determination 2000 (Cth) (rep)

Secondary Materials

Child Care Service Handbook 2013-2014, Department of Education and Training

REASONS FOR DECISION

Senior Member D. J. Morris

1 November 2018

1. Kids Vision Family Day Care Pty Ltd (Kids Vision) has brought to the Tribunal an application to review the merits of a decision (the reviewable decision) of the Secretary of the Department of Education and Training (the Department) dated 18 August 2017. The reviewable decision affirmed an earlier decision dated 15 May 2017 made pursuant to section 200(1)(e) of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the Act) to cancel the approval of the Applicant as an operator of an approved child care service.

2. The hearing was held on 30 July 2018.  Kids Vision was represented by Mr David Carlile of Counsel, instructed by Unite Legal.  The Respondent was represented by Mr Ben Dubé of Sparke Helmore Lawyers. Mr Kennedy Weldemariam and Mr Amdom Worres gave evidence and were cross-examined.

3. The Tribunal took into evidence two volumes of documents (T-documents) lodged under section 37 of the Administrative Appeals Tribunal Act 1975 (Cth). Each party submitted a Statement of Facts, Issues and Contentions, the Applicant’s dated 9 May 2018 and the Respondent’s dated 11 June 2018. The Tribunal also took into evidence a witness statement from Mr Weldemariam with annexures KW1 to KW4; and a witness statement from Mr Worres with annexures AW1 to AW15.

   THE LEGISLATIVE FRAMEWORK

4. At the time of the reviewable decision, the Act, together with the A New Tax System (Family Assistance) Act 1999 (Cth) provided a framework for the delivery of a range of financial assistance to families, including the child care benefit (CCB) and the child care rebate (CCR). CCB and CCR defray the cost of approved child care to eligible persons by reducing the fees required to be paid to the approved child care service provider (the provider). CCB and CCR can be paid directly to a provider as a fee reduction or directly to parents. If parents choose the first option, the provider must pass on the relevant reduction in fees within fourteen days of being notified of the amount calculated in accordance with sections 219B and 219EA of the Act.

5. For eligibility for CCB and CCR to be triggered, a child must be attending an ‘approved child care service’ as defined in section 3 of the Act.  A childcare service is also regulated by a legislative regime in the State or Territory where it is located, and separate approvals are required to be met by the provider to the relevant State or Territory authority.  This approval process is independent of the Commonwealth statutory framework but, importantly, approval under the Act is required for payment of CCB and CCR.

6. At the time the reviewable decision relating to Kids Vision was made, the relevant legislative instrument setting out eligibility was the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Determination 2000 (Cth) (the Eligibility Determination), made under sections 196 and 205 of the Act.

7. Under section 200 of the Act at the time (since repealed and remade), if the Secretary of the Department, or an authorised delegate exercising the relevant powers of the Secretary, is satisfied that a provider has not complied, or is not complying, with any condition for the continued approval of the service, the Secretary may impose one or more of a range of sanctions:

   200  Consequences of breach of conditions for continued approval

   Sanctions

   (1)  If the Secretary is satisfied that an approved child care service has not complied, or is not complying, with a condition for the continued approval of the service, the Secretary may do one or more of the following:

   (a)  vary the conditions for the continued approval of the service imposed under subsection 199(2);

   (b)  impose additional conditions for the continued approval of the service under subsection 199(2);

   (c)  reduce the number of any child care places allocated to the service under section 207;

   (d)  suspend the service’s approval;

   (e)  cancel the service’s approval;

   (f)  withhold the payment of enrolment advances to the service under section 219RA;

   (g)  require the remittal to the Secretary of enrolment advances paid to the service under section 219RA;

   (h)  suspend, for a maximum of 3 weeks, payment under section 219Q or subsection 219QA(2) in respect of fee reduction;

   (i)  suspend, for a maximum of 3 weeks, payment under section 219QC or subsection 219QD(2) in respect of child care rebate.

8. When deciding about whether to impose a sanction and, if so, which sanction, the Secretary had at the time to have regard to the Child Care Benefit (Breach of Conditions for Continued Approval) Determination 2000 (Cth) (the Breach Determination), made under section 200 of the Act. The Respondent pointed out, in written submissions, that a sanction, including a decision to cancel approval, does not necessarily mean that the business cannot operate but it does mean that CCB and CCR is not payable to parents or guardians for child care given by the provider.

   KIDS VISION – HISTORY

9. Kids Vision was approved as a provider in July 2012.  On 10 November 2016 the Respondent gave a Notice of Intention to Cancel the Service’s Approval (Notice of Intention) to Kids Vision, under section 201 of the Act, on the basis that Kids Vision had not complied with, and continued not to comply with, conditions for it to have continued approval.  On 30 November 2016 the legal representatives of Kids Vision provided a response to the Notice of Intention.

10. On 15 May 2017 a delegate of the Secretary decided, under section 200(1)(e) of the Act, to cancel the approval of Kids Vision as an approved child care service provider with an effective date of 22 May 2017. Kids Vision sought internal review of the decision and another delegate of the Respondent, not involved in the original decision and acting in the capacity of an Authorised Review Officer, affirmed the decision to cancel. It is this decision which the Tribunal reviewed.

    THE HEARING

    The Respondent’s contentions

11. The Secretary contended that Kids Vision’s lack of compliance come under three broad headings: 1. Conditions relating to the accuracy of attendance reports submitted in accordance with section 219N of the Act and overpayments of child care fee assistance that were made as a result of that misreporting.  2. Conditions relating to the suitability of the operator to operate a child care service having regard to the compliance requirements in the Eligibility Determination.  3. Conditions arising from obligations to the State regulatory authorities.

12. The Respondent contended that Kids Vision submitted attendance records for dates when the educators named were in fact overseas, and that Kids Vision also submitted attendance records for dates when the named children were overseas.  The Respondent contended it had identified more than 3,900 breaches by the Applicant.

13. The Respondent submitted that, because the operator of Kids Vision had provided attendance records asserting that care was provided by educators who were not registered as educators with Kids Vision, and may therefore not have held adequate checks or qualifications, the person operating the service (as provided in section 195A of the Act) is not a suitable person to operate a child care service.

    The Applicant’s contentions

14. Mr Weldemariam came to the Tribunal making a number of admissions.  The key admission was made at paragraph [10] of his Witness Statement (Exhibit A1):

    10.After running the service for a period, the educators raised with the service that they were unable to continue their business if they had to go overseas.  I directed the then staff to find out more and investigate.  The deputy manager Gebru discovered and recommended a system which is incorporated in other family day care services called relief educators.  The deputy manager told us that he had contacted the Department to find out more about the system and they said it was “okay” to implement the relief educators’ system.  The then nominated supervisor Abeba approved and implemented the system and so I took their advice considering the Department’s approval.

15. Mr Weldemariam went on to explain that contracts were organised between parents and educators, between the educator and the relief educator, and between the parent and the relief educator, and he provided copies of those contracts.

16. The person described as ‘Gebru’ in the extract from Mr Weldemariam’s Witness Statement is Mr Gebru Selassie, who left the employment of Kids Vision in 2015.  The person described as ‘Abeba’ is Ms Abeba Michael, who was the original supervisor who, Mr Weldemariam told the Tribunal in evidence, left Kids Vision in 2016.

17. Mr Weldemariam went on in his Witness Statement to say, at [13]:

    13.The implementation of the Relief Educator was done to ensure that there was a proper agreement in place and all parties are aware of the arrangement.  I have now understood that there was no proper basis to do so.

18. In 2015 Mr Weldemariam employed Mr Amdom Worres to work for Kids Vision.  Mr Worres has a legal background.  Mr Weldemariam’s statement goes on, at [17]:

    17.In late 2015, Amdom raised his concerns to me that the relief educator system did not have any regulatory or statutory basis.  I immediately asked him to investigate further. 

    18.After the assessment done by Amdom, he then advised that there is no standing to implement the relief educator system.

    Mr Weldemariam’s oral evidence

19. Mr Weldemariam told the Tribunal that he is a practising accountant and Director of Kids Vision.  He said that Mr Selassie was employed at the end of 2011 and left in January or February 2015.  The Tribunal asked Mr Weldemariam why the original supervisor, Ms Michael, left in 2016, and he replied that she ‘wasn’t strong enough to stand up to Gebru on the relief educators.  The main reason she resigned was her relationship with the educators.’

20. Under cross-examination, Mr Weldemariam agreed that he was familiar with his obligations as a provider of an approved child care service and was particularly drawn to the ‘Information for Applicants’ section of the Application for approval under the family assistance law form (the application form) provided by the Department when he applied to be an operator (T3, p 79 of the T-documents).  Mr Weldemariam said he was aware, as the application form states, that he has ‘final responsibility’ for the obligations set out.

21. Mr Weldemariam agreed that he was required to maintain accurate records and stated that Kids Vision did maintain all the documents required by the terms of the approval except in relation to relief educators.  He said that the records of attendance of individual children were accurate, to the best of his knowledge.

22. Mr Weldemariam also agreed under cross-examination that he was familiar with the Child Care Service Handbook, a publication of the Department; and that an educator must be registered before that person can provide care.  When asked whether he was aware that educators not registered on the system were providing care, the witness said he was not aware of that.

23. Mr Dubé asked Mr Weldemariam what his understanding was about the problem with the relief educator system, and his response was ‘the system doesn’t allow it’.  He was asked whether he was aware that every educator needs to be given an identifying number and must be registered, and Mr Weldemariam said he became aware of this in 2016 but was not aware of this requirement in 2012.  He said he had a lack of understanding of the Eligibility Determination but that he was not ‘running away from my responsibility’.

24. The Tribunal asked Mr Weldemariam whether he believed Mr Selassie had actually spoken to the Department about the ‘relief educators’ system.  Mr Weldemariam said he honestly believed Mr Selassie had done so, but he had no record of the conversation between Mr Selassie and the Department other than a verbal discussion he remembered with Mr Selassie at the time.

    Mr Worres’ oral evidence

25. Mr Worres gave evidence to the Tribunal that he joined the staff of Kids Vision in April 2015.  He has a background in law and informed the Tribunal that he had been a judge for some four or five years in the second-highest court in Ethiopia, dealing with both civil and criminal cases and that, after emigrating to Australia, he went on to undertake postgraduate studies in law at the University of Sydney.

26. He said in his Witness Statement (Exhibit A2) that he spent the first five months learning the system to ensure Kids Vision was compliant with the Act and the State requirements.  He wrote that in September 2015 he became concerned about the ‘relief educator’ system and whether it was compliant with the legislation and raised his concerns with Mr Weldemariam and Ms Michael.

27. Mr Worres said he was aware that Mr Selassie had told Mr Weldemariam in the past that the Department had ‘approved’ the relief educator system.  Mr Worres telephoned the Department and asked if there was any provision for relief educators in the regulatory framework and was told, in his words, ‘there was no basis to implement [sic] the relief educator system.’

28. Mr Worres gave evidence that he could find references to assistant educators, but no reference to a ‘relief educator’ in the documentation he had.  He said he asked Ms Michael, who was on maternity leave, and she told him that Mr Selassie had got this information from the Department, but Mr Worres said that did not satisfy him, because there was no reference to a ‘relief educator’ in the regulatory framework.

29. Mr Worres said he telephoned the Department in November or December 2015 and, as a result of that conversation, told Mr Weldemariam that Kids Vision must ‘stick to the law’ because there was no foundation for engagement of ‘relief educators.’  When asked whether, having decided what Kids Vision was doing was wrong, whether he wrote to the Department or asked Mr Weldemariam to write, Mr Worres responded, ‘Our understanding was that Gebru had this understanding.  We decided to rectify it and keep going.’

30. Mr Carlile submitted that Kids Vision accepted issues relating to non-compliance and that remedies have been put in place and changes to the governance of this provider.  Mr Carlile said that Mr Worres was clear about the need for Kids Vision to comply with the rules and that he had diligently followed through matters.

31. Mr Carlile submitted that there is provision for assistant educators who could undertake four hours a day on behalf of a registered educator and that confusion about that provision may be a possible explanation for what occurred.  He submitted that Mr Weldemariam had ‘no reason not to accept’ what he was told by Mr Selassie.  He said that the Applicant accepts that there is clearly no legislative provision for ‘relief educators’ but that Kids Vision had shut down this system before the Department became involved and that there have been no breaches from February to November 2016.

    CONSIDERATION – THE BREACHES

32. Fundamentally, the lack of compliance by Kids Vision falls into two categories, the employment of ‘relief educators’ and the inaccuracy of records regarding the attendance of children and registered educators on numbers of occasions.

    The ‘relief educator’ system

33. There was absolutely no basis in the legislative framework for Kids Vision to engage relief educators.  It is greatly troubling to the Tribunal that Mr Weldemariam relied on an apparent telephone conversation which Mr Selassie said he had with the Department, and which he didn’t witness, as some sort of approval for this arrangement.  To put the point as plainly as the Tribunal can: the ‘relief educator’ system was a complete fiction.  The Tribunal cannot say whether there was a genuine misunderstanding between Mr Selassie and the officer of the Department to whom he allegedly spoke and which, apparently, formed the basis on which he decided that he could create this system, because neither the Applicant nor the Respondent had any record of such a conversation. Mr Selassie did not provide any evidence. He is no longer an employee of Kids Vision and is now employed by an international agency in Africa. 

34. However, Mr Weldemariam readily admitted to the Tribunal that he knew about his obligations as the operator, as set out in the application form, and that he was familiar with the contents of the Child Care Service Handbook.  The Tribunal does not conclude that Mr Weldemariam was deliberate in condoning the fiction of the relief educator system, but finds that his lack of commitment to his legal obligations amounts to recklessness.  At the very least, when Mr Selassie told him that the Department had apparently given the green light  for the engagement of ‘relief educators’, Mr Weldemariam, being a person who stated he was familiar with his obligations, should have required some written verification of this alleged advice from the Department.  Proceeding down this path on oral advice of an undocumented telephone call is simply is not good enough; especially when it directly relates to payments of Commonwealth monies.  It shows Kids Vision had a very weak governance structure.

35. It is to Mr Worres’ credit that, some months after he came to work at Kids Vision, he came to the realisation that the relief educator system had, in his words, ‘no foundation’; but the proper course of action at that time would have been to write to the Department, setting out in detail the background and the misapprehension under which Kids Vision had been operating.  But that disclosure did not occur, on the evidence of Mr Weldemariam and Mr Worres.  Kids Vision simply abandoned the ‘relief educator’ system and continued on. 

    Accuracy of attendance records

36. At T7 p 131 of the T-documents, in the reasons to consider cancelling Kids Vision’s CCB approval, an officer of the Department wrote:

    As part of a recent review of the service’s compliance with its obligations under the family assistance law, the department undertook a search of the Centrelink mainframe system in order to identify educators who were engaged by the service, and children who were enrolled at the service, who had been recorded in the system as having travelled overseas since 1 January 2015 through Immigration Advised Movements.

    This information was then compared against section 219N reports submitted by the service through the Child Care Management System (CCMS).  The reconciliation of the Centrelink data with attendance reports submitted by the service identified numerous serious discrepancies which are detailed in Table 1 below.

    [Here followed a table – Attendance reports submitted for dates when educators were overseas.]

    In summary, the department identified 3,204 sessions of care reported by the service which attributed the provision of care to particular educators, for dates when those educators were overseas.  It is not possible for an educator to physically provide a session of care to a child in Australia while that educator is not present in Australia.

    The department’s review also identified 765 sessions of care reported by the service since 1 January 2015 for children who were in fact overseas, as detailed in Table 2 below.

    [Here followed a table – Attendance reports submitted for dates when children were overseas.  That table had a total number of sessions of care hours of 3,268.50.]

1. At the hearing, Mr Dubé took the witnesses and the Tribunal to several attendance sheets where it was clear on the evidence matching movement records provided by the Immigration authorities, that either the named child, or, in some cases, several children in a family, were absent overseas at the time it was asserted they were being provided care by Kids Vision.  The Tribunal was also taken to other specific examples where movement records showed that a named registered educator was absent overseas, and someone else, in some cases a ‘relief educator’, was named in the attendance records as standing in for them.

2. This practice completely undermines the framework under which parents were eligible for CCB or CCR.  What is especially troubling to the Tribunal is that the parents involved were delivering their children into the care of Kids Vision in good faith, with the reasonable expectation that the legislative and regulatory requirements for that care (and, therefore, for them to receive the financial defrayment), were being met.  Evidence was given by the Applicant that the ‘relief educators’ were persons who had Working with Children Checks and, in some cases, childcare qualifications, and the Tribunal does not conclude that improper persons were employed in these roles, but factually they were not registered educators or assistant educators.  Accordingly, the basis of trust that is fundamental in an arrangement where a parent or guardian is entrusting their child into safe and appropriate care was fatally compromised.

   Is cancellation the appropriate sanction?

3. The Secretary was required, at the time of the reviewable decision, under section 4 of the Breach Determination, to have regard to the following matters when applying a sanction:

   The following factors are to be taken into account by the Secretary in considering whether to impose sanctions on a child care service provider under subsection 200(1) of the Act (consequences of breach of conditions for continued approval) and if so, which sanctions to impose:

   (a)whether, in the opinion of the Secretary, the breach of conditions for continued approval is minor or serious;

   (b)whether the service has breached any conditions of continued approval before, and if so, how often; and

   (c)whether the breach may threaten the safety of children for whom care is provided.

4. In terms of the ‘seriousness’ of the breaches, the Respondent submitted that misreporting of 3,969 sessions of care is an extremely serious matter leading to ‘over $70,000 in overpayments, none of which have been remitted’, and ‘over 3,900 sessions of care where either the educator or the child was overseas’.  The Respondent submitted that the breaches are not just in one aspect of the service provided and ‘demonstrate lack of care and compliance with a number of eligibility requirements for approval’.

5. In terms of ‘repetitiveness’, the Respondent submitted that the scale and instances of the misreporting is significant and frequent.

6. The Respondent also submitted that the Department has concerns that, should the Applicant continue to provide child care, ‘there is a risk that any children actually in care may not be appropriately cared for given the systemic failure of the operator to oversee the child care that it held approval to provide’.

7. In terms of the ‘relief educator’ system, the Applicant contended that, given it had identified the problem and fixed it internally prior to any involvement of the Department, and it had not recurred, Kids Vision ‘has shown itself to be capable of ongoing compliance with its reporting obligations’.

8. In terms of occasions where children were absent, the Applicant cited Fact Sheet 9 – Absences from Child Care (attached to Exhibit A1) (Fact Sheet 9), which relevantly states:

   What is an absence day?

   You can receive get CCB, CCR and JETCCFA for 42 absence days per child each financial year.  These can be for any reason and will not require proof and include public holidays.

9. The Applicant submitted that no further sanction should be required because it has been prevented from providing child care services since May 2017 owing to the cancellation decision.

   CONSIDERATION – THE APPROPRIATE SANCTION

10. In terms of the seriousness of the breaches, the Tribunal finds that the breaches by Kids Vision were at the higher end of a scale of seriousness.  Whether the ‘relief educator’ system was set up under an honest misunderstanding is, to the Tribunal, a highly dubious conclusion to draw.  But the fact that it continued for such lengthy period weighs in favour of a heavy sanction.  Most importantly to the Tribunal, the fact that when Mr Worres  realised that Kids Vision had been operating outside the regulatory framework, this fiction was quietly abandoned, and the Applicant failed to notify the Department, strongly supports the strongest sanction available.

11. If the Tribunal accepts the Applicant’s argument that Fact Sheet 9 might be said to provide some basis for claiming of benefits when a child is temporarily overseas, that does not support the evidence before the Tribunal of frequent listing of children who were not present, and the regular listing of persons who were not registered educators as providing care.  The Applicant contended that he could not always know if a child’s name was recorded who was not present, and the Tribunal agrees with that and that the Department should allow a small amount of discrepancy in reporting to account for honest mistake.  But, allowing for this, this does not address the magnitude of the documented misreported sessions of care, evidenced in the T-documents and the scale of which is referred to above.

12. The Tribunal does not conclude, on the evidence available, that the safety of children was threatened by the breaches. There was some evidence provided of frequent field visits to locations where Kids Vision was providing child care, which the Tribunal accepts.  However, this is about the only point that the Tribunal is able to say goes in favour of Kids Vision’s governance structure in this consideration.

13. The Tribunal cannot reasonably conclude that, as the Applicant contended, Kids Vision has shown itself to be capable of ongoing compliance with its reporting obligations, given it had ‘self-identified the problem and fixed it internally’; what Kids Vision actually did was realise that it had been operating wrongly for several years and stopped the practice, hoping the regulator would not notice.  This conduct is far below what is expected of a provider of child care services.

14. The Tribunal concludes that the cancellation of Kids Vision as a provider for multiple breaches of compliance was the correct decision in law, and that the exercise of the discretion to apply the sanction to cancel the approval of Kids Vision as an approved child care service provider was the preferable decision.

    DECISION

15. The Tribunal affirms the decision under review.

I certify that the preceding 51 (fifty-one) paragraphs are a true copy of the written reasons for the decision herein of Senior Member D. J. Morris

...[sgd]......................................

Associate

Dated: 1 November 2018

Date(s) of hearing:	30 July 2018
Advocate for the Applicant:	Mr David Carlile
Solicitors for the Applicant:	United Legal
Advocate for the Respondent:	Mr Ben Dubé
Solicitors for the Respondent:	Sparke Helmore Lawyers