Sweet Melon Family Day Care Pty Ltd and Secretary, Department of Education and Training

Sweet Melon Family Day Care Pty Ltd and Secretary, Department of Education and Training [2018] AATA 1862 (8 June 2018)
Division:GENERAL DIVISION
File Number: 2017/2570
Re:Sweet Melon Family Day Care Pty Ltd
APPLICANT

AndSecretary, Department of Education and Training
RESPONDENT

DECISION
Tribunal:Senior Member A. Nikolic AM CSC
Date:8 June 2018
Place:Melbourne

The Tribunal affirms the decision under review
........................................................................
Senior Member A. Nikolic AM CSC
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 - appropriate sanction under A New Tax System (Family Assistance) (Administration) Act 1999 – decision affirmed
Legislation
A New Tax System (Family Assistance) Act 1999 (Cth)
A New Tax System (Family Administration) Act 1999 (Cth)
Administrative Appeals Tribunal Act 1975
Education and Care Services National Regulations 2011 (Cth)
Education and Care Services National Law Act 2010 (Vic)
Administrative Appeals Tribunal Regulations 1976
Administrative Appeals Tribunal Regulation 2015
Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Determination 2000 (Cth)
Child Care Benefit (Breach Conditions for Continues Approval) Determination 2000 (Cth)
REASONS FOR DECISION
Senior Member A. Nikolic AM CSC
8 June 2018

The Applicant, Sweet Melon Family Day Care Pty Ltd (SMFDC), has asked the Tribunal to review a decision by the Department of Education and Training (the Department), on 21 December 2016, to cancel its approval as a child care service under section 200(1)(e) of the A New Tax System (Family Assistance) (Administration) Act 1999 (Administration Act). The consequence of the cancellation decision is that children cared for by SMFDC are no longer eligible for child care benefit (CCB) or child care rebate (CCR) in respect of that care.
The hearing was held on 26 February 2018. SMFDC was represented by Mr Mahir Qureshi of Starnet Legal. The Respondent was represented by Mr Ian Temby of Maddocks. No witnesses gave oral evidence at the hearing.
For the reasons that follow, the decision under review is affirmed.
RELEVANT LEGISLATION AND AUTHORITIES
The Administration Act, together with the A New Tax System (Family Assistance) Act 1999 (Cth) (Assistance Act), establish a regime for the provision of a range of government assistance to families, including:
(a)CCB under Part 3, Division 4 of the Assistance Act; and
(b)CCR under Part 3, Division 4AA of the Assistance Act.
CCB and CCR help cover the cost of approved child care for eligible individuals, by reducing the fees required to be paid to the child care service provider. Payments of CCB and CCR can be made to an approved child care service provider as a fee reduction, or directly to parents. Most parents choose the former, with the approved child care service required to pass on the relevant reduction in fees within 14 days of being notified of the amount calculated in accordance with sections 219B and 219EA of the Administration Act.
To be eligible for CCB and CCR, a child must, amongst other things, be attending an ‘approved child care service,’ which is defined at section 3 of the Administration Act as:
"approved child care service " means:
(a) an approved centre based long day care service; or
(b) an approved family day care service; or
(ba) an approved in-home care service; or
(c) an approved occasional care service; or
(d) an approved outside school hours care service.
Regulation of childcare services is primarily undertaken at the State and Territory level, whereas the Commonwealth is the principal funder. A child care service may also be approved under State or Territory law, irrespective of whether it holds an approval under the Administration Act, but approval under the Administration Act is an essential pre-requisite for the payment of CCB and CCR. The regulatory regime within which childcare services operate includes the Education and Care Services National Regulations 2011 (Cth) (National Regulations), which apply to most long day care, family day care and preschools (or kindergartens) and outside school hours care services in Australia. The Education and Care Services National Law Act 2010 (Vic) (National Law) was developed by all jurisdictions and enacted by Victoria on 12 October 2010. Regulations 121-124 within the National Regulations prescribe the minimum number of educators required to educate and care for children at an education and care service, which is also called the educator to child ratio. For example, Regulation 124 outlines the ratio for family day care services of one educator to seven children, with no more than four children under preschool age. The regulation provides some flexibility in exceptional circumstances, including in relation to siblings from the same family.
Part 8 of the Administration Act provides for the approval of child care services, setting out amongst other things conditions relating to: applications; approvals; obligations for continued approval; consequences of non-compliance; and cancellation of approval.
Approved child care services must comply with certain conditions for continued approval as provided for at section 196 of the Administration Act:
Conditions for continued approval--compliance with rules and laws
Eligibility requirements
(1) It is a condition for the continued approval of an approved child care service that the service satisfies any eligibility rules that are from time to time applicable to the service under paragraph 205(1)(b).
Compliance with family assistance law
(2) It is a condition for the continued approval of an approved child care service that the service not contravene an obligation imposed on the service by the family assistance law (whether or not such a contravention constitutes an offence or is of a civil penalty provision).
Note: Enforcement under this Division of this and other conditions is not limited or affected by other compliance measures in this Act (for example, infringement notices, proceedings for civil penalty orders and prosecutions).
(2A) It is a condition for the continued approval of an approved child care service that the service cooperate with a person exercising powers under sections 219K, 219KA, 219L and 219LA.
(2B) It is a condition for the continued approval of an approved child care service that the operator of the service cooperate with a person exercising powers under section 219KA.
Compliance with Commonwealth, State and Territory laws
(3) It is a condition for the continued approval of an approved child care service that:
(a) the operation of the service; and
(b) the provision of care by the service; and
(c) the construction of the premises of the service; and
(d) the equipment at the premises of the service;
comply with all applicable requirements imposed by a law of the Commonwealth or a law of the State or Territory in which the service operates.
Section 205 of the Administration Act provides that the Minister may, by legislative instrument, determine rules relating to the eligibility of child care services to become approved for the purposes of family assistance law, and to continue to be so approved. Those eligibility rules enable the Minister to make any number of rules and attendant requirements that are:
(a) to be met by the operators and staff of services, including requirements relating to individual suitability to provide child care; and
(b) to be met by the operator of a service if the operation of the service is proposed to be transferred from one operator to another.
Section 195A of the Administration Act provides that an obligation imposed by law on an approved child care service, it is taken to be imposed on the person operating the service.
The instrument in force at the time of the decision to cancel the approval of SMFDC and during the Department’s review of the original decision, was the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Determination 2000 (Cth) (2000 Eligibility Determination). This has since been repealed and replaced by the Child Care Benefit (Eligibility of Child Care Services for Approval and Continued Approval) Rules 2017 (Cth), which encompasses the same substantive approval conditions. The relevant instrument to be applied in this matter is the 2000 Eligibility Determination, which prescribes a number of conditions for continued approval, including section 16(1) requiring an operator of a child care service to be ‘a suitable person to operate the service.’ In determining whether the operator is a ‘suitable person,’ section 7(2) of the 2000 Eligibility Determination provides that regard may be had for:
Matters relevant to management of child care services
(a)   the applicant’s expertise and experience in providing child care;
(b)   the applicant’s ability to meet and provide the appropriate quality of child care;
(c)   the applicant’s governance arrangements, including:
(i)   any arrangements with other persons for the management or supervision of the child care service; and
(ii)  any arrangements to ensure compliance by the applicant, or any person the applicant is, or will be, responsible for managing, with the laws and standards mentioned in paragraphs (d) through to (f);
Matters relevant to capacity to comply with all laws and standards
(d)   the applicant’s understanding of obligations that would apply to it under the family assistance law, and commitment to complying with these obligations;
(e)   the applicant’s record of compliance with any laws of the Commonwealth or a State or Territory;
(f)   the applicant’s record of compliance with any quality standards relating to child care services;
Matters relevant to management of financial affairs
(g)     the applicant’s record of financial management, including:
(i)    any instances of bankruptcy, insolvency or external administration involving the applicant; and
(ii)   any debts due to the Commonwealth by the applicant (whether or not the debt has been discharged);
(iii) the applicant’s record of administering of Commonwealth, State or Territory funds;
Matters relevant to previous conduct, charges and convictions etc.
(h)     any relevant criminal charges against the applicant;
(i)      any proceedings currently before a court or tribunal that involve the applicant;
(j)      any order for the applicant to pay a pecuniary penalty for the contravention of a civil penalty provision of a law of the Commonwealth or a State or Territory;
(k)     any decision under a law of the Commonwealth or a State or Territory relating to child care which adversely affects the applicant;
(l) subject to Part VIIC of the Crimes Act 1914, any conviction or finding of guilt against the applicant for an offence against a law of the Commonwealth or a State or Territory (including an offence against children, or relating to dishonesty or violence);
(m)   any act of the applicant involving fraud or dishonesty;
Other matters
(n)     any other matter relevant to the suitability of the applicant.
(3)   In making the assessment for subsection (1), the Secretary may also consider the matters mentioned in subsection (2) in relation to the following persons:
(a)   any of the applicant’s previous, current or proposed key personnel; and
(b)   any person connected with the applicant, who affects, or is likely to affect, the operation of the service by the applicant; and
(c)   any person connected with any of the applicant’s previous, current or proposed key personnel, who affects, or is likely to affect, the operation of the service by the applicant.
Examples
In assessing whether an applicant is a suitable person to operate a child care service, the Secretary may consider such matters as:
(a)   criminal convictions of the applicant’s key personnel;
(b)  the record of financial management of the holding company of the applicant, or the bankruptcy of a proposed director of the applicant;
(c)   the record of compliance with the family assistance law of a body corporate a director of which is one of the applicant’s key personnel.
(4)   For the purposes of subsection (3), the reference to ‘person’ includes a reference to a partnership or an unincorporated body.
Relevantly in this matter, an approved child care service is obliged under section 219N of the Administration Act to provide reports to the Secretary for each week in which a session of care is provided to a child in relation to whom an enrolment has been made. This information is entered in the form required by the Secretary and entered into the Department’s Child Care Management System (CCMS). This process enables the determination of CCB or CCR payments. The accuracy of information entered into CCMS is therefore vital in ensuring the proper use of Commonwealth funds.
Part 6, Division 3 of the Administration Act relates to false statements, offences, penalties and related procedural matters. Section 174 is contravened if:
(a) the person makes a statement or presents a document to an officer or an approved child care service exercising powers, or performing duties or functions, under the family assistance law; and
(b) the statement or document is false in any particular; and
(c) the person is reckless as to whether the statement or document is false in any particular.
(2) For the purposes of an offence against section 177 that relates to a contravention of subsection (1) of this section, strict liability applies to the element of the offence that a power, duty or function is a power, duty or function under the family assistance law.
Section 176(3) of the Administration Act provides for circumstances when payment or fee reductions are obtained by fraud:
(3) A person contravenes this subsection if:
(a) the person makes a statement; and
(b) the statement is false or misleading; and
(c) the person is reckless as to whether the statement is false or misleading; and
(d) as a result the person obtains:
(i) …; or
(ii) …; or
(iii) in the case of an approved child care service--an amount is paid under section 219Q or subsection 219QA(2) in respect of fee reduction, under section 219QC or subsection 219QD(2) in respect of child care rebate or under section 219RA as an enrolment advance; or
iv. ….
Under section 177 of the Administration Act, a person who contravenes Subdivision B commits an offence punishable on conviction by imprisonment for a term not exceeding 12 months. In respect of the continued approval of a child care service, section 196(2) imposes a condition that the service must not contravene an obligation imposed on it by the family assistance law (whether or not such a contravention constitutes an offence or is of a civil penalty provision).
Section 200(1) of the Administration Act provides that the Secretary may impose one or more of a number of sanctions, if satisfied that an approved child care service has not complied, or is not complying, with any condition placed on its continued approval. These include:
‘(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.’
The procedure for imposing a sanction on an approved child care service is provided for at section 201(1) of the Administration Act. It requires that the Secretary gives the child care service a notice that:
(a) states that the Secretary is considering doing the thing; and
(b) sets out the grounds for doing the thing; and
(c) summarises the evidence and other material on which those grounds are based; and
(d) summarises the effect of the doing of the thing (including the review process provided for under this Act) on a person's entitlement to child care benefit in respect of child care provided by the service; and
(e) invites the service to make written submissions to the Secretary, within 28 days, stating why the thing should not be done.
The Secretary must have regard to any submissions made by the service as mentioned in paragraph (1)(e) and the factors set out in the Child Care Benefit (Breach Conditions for Continues Approval) Determination 2000 (Cth) (Breach Determination). Although this has now been replaced by the Child Care Benefit (Breach of Conditions for Continued Approval) Determination 2017 (Cth), the current Determination is substantially the same as its predecessor and applies to decisions made from 1 October 2017. Clause 4 of the Breach Determination requires the Secretary to have regard for:
(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.
THE ISSUES
The issues to be determined in this application are whether SMFDC has breached its conditions for continued approval as a child care service, and if so, whether cancellation of approval is the correct or preferable decision.
EVIDENCE
Applicant
A Hearing Certificate was lodged with the Tribunal on 9 November 2017, stating that Ms Immaculee Abbas, the operator of SMFDC, would appear as a witness. Neither Ms Abbas nor any other office holders of SMFDC attended the hearing. No witness statements were lodged by the Applicant as provided for under Tribunal Directions dated 21 June 2017 and 24 August 2017. There was consequently no opportunity to directly put to Ms Abbas, or other office holders, the evidence upon which the Respondent relied in contradiction of SMFDC’s submissions, or hear any counter arguments directly from Ms Abbas or other office holders.
Mr Qureshi appeared for SMFDC and provided submissions on the Applicant’s behalf. I advised Mr Qureshi that his submissions alone constituted a sparse evidentiary basis on which to consider the findings I was being invited to make. Mr Qureshi acknowledged the difficulties arising from the absence of any witnesses or witness statements. His submissions were based on SMFDC’s previous responses to the Department, although he was able to receive instructions from the Applicant during the conduct of the hearing.
Mr Qureshi did not deny that SMFDC had on several occasions breached its obligations as an approved child care service, but submitted that:
(a)the Department ‘has not had full regard for SMFDC’s…innovative strategies’ developed to address identified non-compliances;
(b)the operators of SMFDC and its educators were not collocated, which made it difficult to monitor the provision of services;
(c)SMFDC was entitled to rely on the timesheets submitted to it by its educators;[1]
[1] Exhibit R1, pp.91-92.
(d)there was a ‘difference of opinion about the frequency, nature and number of contraventions that has occurred,’ which were insufficient to warrant ‘heavy-handed’ cancellation of SMFDC’s approval as a child care service, instead of another sanction available under section 200 of the Administration Act. Mr Qureshi submitted that the total number of contraventions relied upon by the Respondent were only a relatively small percentage of the total sessions of care provided by SMFDC. Moreover:
(i)non-compliances identified by the Respondent related to only 9 out of a total of 27 educators engaged by the Applicant;
(ii)immediately upon receiving the Respondent’s Notice of Intention to Cancel its approval in October 2016, SMFDC wrote ‘show cause notices’ the next day to the nine educators seeking their explanation; and
(iii)5 of the 9 educators in question had apologised and agreed to repay any money incorrectly received.[2]
[2] Exhibit R1, p.90; pp.107-111.
(e)although SMFDC ‘accepts ultimate responsibility for wrong reporting,’ educators and parents had acted in a conspiratorial fashion, ‘concocting a story to defraud the Department.’ When I asked Mr Qureshi what evidence he relied upon in this regard, he replied ‘we don’t have concrete evidence of a conspiracy – we have time sheets signed by both parties – the service provider only now in hindsight knows this may have been an issue;’
(f)each of the educators who responded to the show cause notices ‘accepted their wrongdoing’, and ‘none of the educators attempt to shift blame to’ SMFDC other than to state ‘they were not aware of the overseas requirements.’ Mr Qureshi submitted this claim was untrue because SMFDC had ensured ‘all educators were well-informed, trained and told their exact responsibilities pertaining to the Act;’[3]
[3] SMFDC’s written submission on this point is at Exhibit R1, p.90.
(g)in the three years of SMFDC’s operation, a previous audit had been conducted but ‘no warnings’ were provided. Mr Qureshi submitted that the Respondent had provided ‘very few guidelines for the industry,’ and notwithstanding Ms Abbas’ decade-long experience in the industry, earlier information about the contraventions should have been provided by the Respondent. In that respect, SMFDC ‘didn’t knowingly or recklessly mislead’ and cancellation of its approval as a childcare service was consequently ‘quite harsh’;
(h)the operators of SMFDC had only become aware of the contraventions when issued with a Notice of Intention to Cancel their approval as a child care service on 21 October 2016. SMFDC did not have access to the interagency (passport / travel) information available to the Respondent, to enable cross-checking of overseas absences by educators and children with the dates that sessions of care were claimed;[4]
[4] Exhibit R1, pp.88.
(i)SMFDC’s ability to detect the absence of educators overseas when sessions of care were claimed would have been complicated by the fact that passports do not necessarily record all overseas travel. This would have prevented effective compliance checks even if passports had been reviewed. Moreover, the parents of the relevant children did not inform SMFDC of the absences;[5]
[5] Exhibit R1, p.89.
(j)many of the instances when children were purportedly provided with care whilst overseas were, in fact, recorded in SMFDC attendance records as the child being absent, and the allegations concerning instances when children were overseas therefore contain a number of ‘anomalies.’ Mr Qureshi further submitted there were ‘lots of absences recorded on the Attendance Forms and were then entered into the system – the educators have done what they were meant to be doing – our client has trained them to do that…the educators…have done the right thing.’
(k)SMFDC’s usual practice was to undertake monthly home visits to educators, which was generally accepted practice for monitoring compliance with the relevant regulatory framework. There were occasions when the educator was not at home or didn’t answer the door, requiring the monthly inspection visit to be re-scheduled;[6]
[6] Exhibit R1, p.88.
(l)there was a possibility the alleged conspiracy went undetected due to the predictable nature of SMFDC’s monthly inspection regime, which could easily miss overseas travel of short duration. In this regard, Mr Qureshi submitted SMFDC was at a disadvantage, compared to the Department’s ability to easily access travel information data. Given that most of the educators had been overseas for less than a month, it was also possible they took advantage of the predictable inspection regime, and it was therefore unfair to say the Applicant ‘knowingly or wilfully misled the Department;’
(m)there was ‘somewhat of a responsibility on the Respondent to involve itself in governance.’ When I asked Mr Qureshi what authority he relied upon regarding this governance responsibility, he did not rely on any legislation or regulation, but submitted there is ‘some onus’ on the Respondent, who had communicated no set guidelines for how monthly home visits should be conducted. He said that in the three years of SMFDC’s operation, it had never been suggested that governance arrangements were insufficient;
(n)SMFDC had undertaken to ‘repay all sums’ and cancel the offending care sessions, but had not been able to fully act on that repayment intention after losing its CCMS privileges once its approval as a child care service was cancelled;
(o)SMFDC undertook to file proceedings in court if the educators in question did not reimburse the occasions they received CCR and CCB when not entitled to. In response to my question as to how many of the nine educators involved in the alleged conspiracy still worked for SMFDC, Mr Qureshi said five had apologised and continued to work for SMFDC. After seeking further instructions from the Applicant, however, Mr Qureshi later corrected that advice to the effect that none of the nine continued to work for SMFDC. In any event, no evidence in the form of employment records was provided and I am unable to make any reliable conclusions in this regard;
(p)In relation to factors the Respondent should have considered that were relevant to the sanction determination decision, Mr Qureshi submitted that:
(i)the severity of the failure was insufficient to warrant cancellation and section 219N(7) of the Administration Act provided for mistakes to be corrected by a service if notified of any errors. Mr Qureshi contended that instead of cancellation, the circumstances of this case were such that the Respondent could have selected one of the other six sanction options available at section 200(1) of the Administration Act;
(ii)in terms of SMFDC breaching its conditions of continued approval, Mr Qureshi repeated the submission that the Applicant was simply unaware of the conspiratorial behaviour of its educators, which resulted in the contraventions identified by the Respondent; and
(iii)there is no question that any of the breaches identified by the Respondent ‘threaten the safety of children for whom care is provided.’
(q)In light of the conspiracy entered into by some educators and parents, SMFDC had responded by developing ‘innovative strategies’ to more effectively monitor compliance with the Department’s requirements. This encompassed regular phone calls and access to the online passport details of educators to enable checking of immigration records.[7] Mr Qureshi submitted ‘these mechanisms would be sufficient to prevent further non-compliance from occurring…they are measures that will guarantee no future contraventions;’ and
(r)While Ms Abbas acknowledged her responsibility as the operator of SMFDC to enter data on CCMS, her instructions were that the data entry task was often delegated and that ‘anyone can input information.’ The Tribunal did not have the benefit of Ms Abbas’ direct evidence in this regard and no objective, independent evidence was provided as to who specifically had this delegated responsibility for data entry.
[7] Exhibit R1, pp.94-95.

Mr Qureshi elaborated upon SMFDC’s difficulties in undertaking inspection visits because educators were sometimes not at home or did not answer the door. He said on these occasions the visit had to be re-scheduled. In response to my questions, Mr Qureshi agreed that SMFDC had access to information regarding when sessions of care were scheduled into the future, which could have been used to more reliably plan the date and time of monthly inspections to coincide with those sessions of care.
In response to my question whether the conspiracy alleged by SMFDC meant that the number of contraventions could be higher, Mr Qureshi agreed it ‘quite possibly could be many more than that.’ But he submitted that if SMFDC had received earlier and more comprehensive information from the Respondent, it ‘could have taken action earlier.’ He contends that SMFDC ‘relied on its contractors to be truthful’ and ‘took attendance forms on good faith,’ because there was nothing over three years of SMFDC’s operation ‘to suggest contraventions were occurring.’
Respondent
The Respondent was given leave prior to the hearing to lodge a USB with the Tribunal containing approximately 30,000KB / 880 pages of Excel spreadsheets. The Applicant did not object to the tendering of the USB[8] and a number of spreadsheets were displayed on a computer monitor during the hearing to detail the basis for a number of contentions. A statement from Ms Teresa Mathers, a Compliance Officer in the Department’s Early Childhood and Child Care Section, was also tendered by the Respondent without objection.[9] The Applicant did not require Ms Mathers for cross-examination. Finally, the Respondent tendered a flow chart detailing the process used to implement provisions of the Administration Act as they related to SMFDC, which was accepted into evidence without objection.[10]
[8] Exhibit R3.
[9] Exhibit R5.
[10] Exhibit R4.
The Respondent highlighted routine compliance activities undertaken to monitor the accuracy of attendance reports provided by child care services under section 219N of the Administration Act. This includes comparison of submitted data with the departure and return dates of persons providing child care services, or children enrolled in childcare services. In reconciling the information provided by SMFDC in 2016, with overseas travel data, the Respondent claimed to have identified:
(a)1,186 instances, between 23 January 2015 and 11 July 2016, in which SMFDC had reported sessions of care provided to children by a carer during a period when the carer was overseas; [11] and
(b)351 instances, between 12 December 2014 and 19 September 2016, in which SMFDC had reported sessions of care provided to a child by a carer during a period when the child was overseas.[12]
[11] Respondent’s Statement of Facts, Issues and Contentions (RSFIC) dated 20 October 2017, paragraph 4.3.1.
[12] RSFIC, paragraph 4.3.2.
Consequently, the Department issued SMFDC with a notice of intention to cancel their approval on 21 October 2016 under section 201 of the Administration Act, because:
(a)a significant pattern of non-compliance had been detected;
(b)as a result of that non-compliance, the Department was of the view that the Applicant had:
(i)failed to comply with its obligations to provide accurate information to the Department concerning sessions of child care under section 219N of the Administration Act between 1 January 2015 and 19 September 2016;
(ii)made, in the section 219N reports, ‘false statements in respect of at least 1,477 sessions of care’, and had been ‘reckless as to whether those statements were false’, in contravention of section 174 of the Administration Act;
(iii)received payments as a result of its false statements in the section 219N reports, in circumstances where the Applicant was reckless as to whether those statements were false, in contravention of section 176(3) of the Administration Act; and
(iv)not demonstrated continuing compliance with section 16(1) of the Eligibility Determination, in circumstances where ‘the volume and ongoing nature of the inaccurate reports and false statements represent a significant failure of governance’, indicated the Applicant was ‘not a suitable person to operate a child care service’ for the purposes of the Eligibility Determination.
(c)‘sanctions other than cancellation do not reflect the seriousness of the service’s non-compliance’; and
(d)in circumstances where the ‘extent and pattern of the service’s non-compliance’ does not give the Department confidence that any remedial action will be adequate and timely, ‘the imposition of other available sanctions would simply place further taxpayers funds at risk’.[13]
[13] Ibid, pp.6-7.
Mr Temby for the Respondent made the following oral submissions:
(a)The Applicant’s submissions about failing to be properly informed by the Respondent (via audit outcomes) about shortcomings in its governance and business practices, misconstrued its role as a child care operator. It was the Applicant’s responsibility to competently discharge its legal responsibilities and not rely on audit outcomes to identify failures within its business practices and governance. Moreover, the Commonwealth is the funder of child care services, whereas state governments undertake audits of child care centres. The Respondent understood that a state government audit had previously been conducted in 2016, but no evidence was tendered to the Tribunal in this regard;
(b)The Respondent had conducted a routine compliance check in 2016 of information provided by SMFDC (through CCMS) with respect to sessions of care, which revealed frequent, serious breaches of its obligations as a child care operator. Mr Temby submitted that the seriousness of those breaches is where most weight should be placed, and which justified cancellation as the most appropriate sanction. He further submitted that in light of the extensive, protracted and serious nature of the contraventions identified, the remedial actions proposed by SMFDC were manifestly insufficient;
(c)Although SMFDC had only provided a small number of documents relative to the approximately 169,000 sessions of care during the two year period in question, it was nevertheless possible to discern serious breaches, including:
(i)SMFDC failed to report absences and made claims for the provision of child care services, when either a child or an educator to whom the claim applied was absent overseas.[14] Importantly, this includes sessions of care claimed by SMFDC, despite the educator’s timesheets and attendance records for those children clearly noting the children were absent.[15] Of the cumulative 169,420 sessions of care reported by SMFDC between 12 January 2015 and 21 December 2016, 4,036 sessions were reported on days where the educator or child was overseas.[16] As no care could have been provided on those days, Mr Temby contends that those sessions of care were incorrectly reported, and approximately $70,000 was paid as CCB and CCR in respect of sessions of care where educators or children were identified as being overseas;
[14] By way of example, the Tribunal was referred to Exhibit R1, p.217, where days of care were claimed for Fofogafetalai Pule and Paialua Aleni, two of SMFDC’s educators, while both were overseas. Similarly Exhibit R1, p.218-219, and spreadsheets displayed in the hearing room, were used to demonstrate when sessions of care were claimed when certain children were overseas.
[15] Data at pages 218-219 of Exhibit R1 were cross-referenced with Attendance Records completed by SMFDC educators at Exhibit R1, pp.155-158; 160-162; and 167-169.
[16] Exhibit R5, paragraph 13.
(ii)Out of almost 135,000 sessions of care reported by SMFDC on CCMS as having been provided between 12 January 2015 and 10 July 2016, not one absence had been recorded by SMFDC. The Tribunal was taken through the CCMS process as to how an absence was recorded, for example when a child was ill or overseas, noting that a positive confirmation was required by the operator on CCMS to either record or not to record an absence. For every session of care during this period, SMFDC recorded an attendance instead of an absence. The Tribunal was taken through spreadsheets encompassing the period 11 July 2016 – 21 December 2016, reflecting a further 34,485 sessions of care, noting that an election was also made on CCMS by SMFDC to record 100% attendance and no absences. Even after receiving a notice regarding cancellation of its approval as a child care service, Mr Temby notes that SMFDC continued to claim 13,626 sessions of care without a single absence being recorded. In this regard, Mr Temby submitted it was common practice for SMFDC to record sessions of care as having been provided, irrespective of information to the contrary – including from its own educators. Mr Temby contended that the accurate recording of absences by operators of child care centres is essential to the accurate funding of services and there is nothing in the relevant policy stating that absences don’t need to be recorded. He submitted that not a single absence had been reported by SMFDC out of almost 135,000 entries, reflecting a serious level of negligence. Mr Temby estimated there were 4036 identified breaches or misreporting in the data, each of which constituted an individual breach of section 219 of the Administration Act;
(iii)On numerous occasions, educators at SMFDC had more than seven children in their care, which is contrary to the requirement at Regulation 124(3) of the National Regulations, which states:
‘No more than 7 children can be educated and cared for as part of a family day care service at a family day care residence or an approved family day care venue at any one time.’
In this regard the Tribunal was taken through a spreadsheet for the period 1 January 2016 – 30 Jun 2016 and paragraph 21 of Ms Mather’s statement.[17] These were used to identify where claims were made for the provision of care with more than seven children present. The data showed this occurred on 141 days and involved seven different educators. Importantly, the Tribunal notes that SMFDC did receive time sheets from its educators, showing on occasion that more than seven children were being cared for. Despite this being inconsistent with SMFDC’s obligations as a child care service, SMFDC nevertheless claimed for these sessions of care. Mr Temby submitted this was further evidence that Ms Abbas was failing in her obligations as operator of SMFDC;
(d)While the operator of SMFDC purported to accept responsibility for failures to comply with its obligations as a child care service, its submissions sought to place the blame on service providers;
(e)SMFDC had expressed an intention to fully reimburse the Commonwealth for the fraudulent activities of certain educators and parents, however there was no evidence of reimbursement in December 2016 when the Department cancelled its approval as a child care service. Moreover, Mr Temby submitted that despite SMFDC advising the Department through its legal representative that the false sessions of care would be cancelled or amended, Departmental enquiries in March 2016 revealed that only 774 entries had been corrected out of 4036 sessions of care where an educator or child had been outside of Australia. Mr Qureshi said in reply that the remaining sessions had not been cancelled because SMFDC had lost its CCMS privileges;[18]
[17] Exhibit R5.
[18] Exhibit R1, p.456.
CONSIDERATION
I accept that the day-to-day management requirements of a child service provider’s statutory obligations have the potential to result in administrative errors. But the evidence before me in this matter reflects a prolonged, repetitive and serious pattern of non-compliance by SMFDC with its statutory obligations. While there is no evidence that the safety of children was at risk as a result of these non-compliances, I am satisfied that:
(a)the identified non-compliances relate to services provided by approximately a third of SMFDC’s educators at the time of the Respondent’s compliance check in 2016;
(b)the number of breaches of section 219N of the Administration Act is potentially much higher, which follows from Mr Qureshi’s concession that the scope of the conspiracy alleged against some of SMFDC’s educators and parents of children under care is unknown to the Applicant;
(c)the Applicant’s contention about ‘sophisticated scheming’ by educators and parents is unsupported by independent, objective evidence. This cuts across the Applicant’s contention that SMFDC ‘accepts ultimate responsibility for wrong reporting;’
(d)the repeated failure to report absences on CCMS, even when SMFDC’s own educators explicitly noted and advised such absences via timesheet records, demonstrates that deficiencies in SMFDC’s operations arose from other than the conspiratorial conduct alleged by some educators and parents;
(e)the circumstances of Ms Abbas’ role as a child care operator of approximately 10 years’ experience, is such that she should have been aware of the scope, seriousness and prolonged nature of SMFDC’s contraventions of its statutory obligations;
(f)the scope, seriousness and prolonged nature of the contraventions reflects systemic deficiencies in SMFDC’s governance and risk mitigation practices, and an inadequate understanding of SMFDC’s obligations under the relevant Acts. I am satisfied, for example, that SMFDC:
(i)regularly failed to report absences and made claims for the provision of child care services, when either a child or an educator to whom the claim applied was absent overseas. This demonstrates there were insufficient measures in place to ensure sessions of care had been provided;
(ii)regularly claimed for sessions of care even when the educator’s timesheets and attendance records explicitly noted children were absent;
(iii)did not record a single absence on CCMS relating to almost 135,000 sessions of care between 12 January 2015 and 10 July 2016 (resulting, for example, from a child’s absence through illness or overseas travel);
(iv)continued to record 100% attendance even after receiving a notice regarding cancellation of its approval as a child care service; and
(i)submitted claims for sessions of care on at least 141 days, where it was clear from the records provided by its own educators that more than seven children were being cared for by a single educator, in clear breach of SMFDC’s obligations as a child care operator.
I am not persuaded by Mr Qureshi’s submissions that SMFDC’s culpability is diminished by the alleged conspiracy of some educators and parents, or that others with access to CCMS entered inaccurate data that went undetected by the Applicant’s governance arrangements. For the reasons previously adduced, the evidence reflects a systemic failure by SMFDC to comply with its obligations as an approved child care service.
Having regard for the scope, seriousness and prolonged nature of SMFDC’s breaches of its obligations as a child care service, I find that cancellation is the most appropriate sanction, in preference to other available sanctions under section 200 of the Administration Act.
CONCLUSION
Section 195A of the Administration Act provides that when an obligation is imposed or permissions conferred on an approved child care service, it is taken to be imposed or conferred on the person operating the service. Given the evidence raised about prolonged and repeated failures of management and governance at SMFDC, it is regrettable that Ms Abbas and other office holders did not attend the hearing. Because of this, the Tribunal could not directly put to Ms Abbas or other office holders the evidence upon which the Respondent relied, or hear counter arguments directly from Ms Abbas or other office holders.
SMFDC does not deny it breached its obligations as an approved child care service, but cavils in relation to the number and nature of contraventions. Moreover SMFDC contends it was deceived by the conspiratorial conduct of some educators and parents, but has since implemented ‘innovative strategies’ to address any non-compliance. The limited nature of records available from SMFDC, however, inhibits an accurate assessment of how many sessions of care may have been inappropriately claimed. Mr Qureshi concedes the number of fraudulent claims submitted could be much higher, because the precise scope of the alleged conspiracy is not known to the Applicant. That only heightens my concerns and reduces the force of the Applicant’s submission that the extent to which SMFDC may have breached its obligations is not as serious as the Respondent claims. But the evidence shows that even after receiving a notice about the cancellation of its approval as a child care service, SMFDC continued to claim for sessions of care without recording a single absence on CCMS. This supports a finding that major shortcomings in SMFDC’s compliance with its statutory obligations, arose from other than the alleged conspiracy it relies upon.
I do not accept that others at SMFDC with delegated access to the CCMS account are responsible for failures to correctly record absences or for the inappropriate lodgment of claims. As operator of SMFDC, Ms Abbas remains responsible in accordance with the provisions of section 195A of the Administration Act. In any event, it is frankly implausible to the Tribunal that it escaped Ms Abbas’ attention that almost 135,000 entries were made on CCMS without a single absence being recorded – irrespective of who may have entered those sessions of care.
It is clear from the evidence that SMFDC has not complied with all applicable statutory requirements imposed on it as an approved child care service. The scale, repetitive nature and seriousness of non-compliances can only be described as reckless breaches of SMFDC’s approval under section 196 of the Administration Act. Recklessness is evident from the fact that sessions of care were claimed by SMFDC even when its educators cleary reported children were absent, or when the information available to SMFDC showed that the number of children in care exceeded the permissible limit in the National Regulations. In these circumstances, cancellation of SMFDC’s approval is the preferable sanction.
DECISION
It therefore follows that the decision under review is affirmed.

38. I certify that the preceding 37 (thirty-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member A. Nikolic AM CSC

.......[sgd].................................................................
Associate
Dated: 8 June 2018

Date of hearing: 26 February 2018

Advocate for the Applicant: Mr Mahir Qureshi

Solicitors for the Applicant Starnet Legal Pty Ltd

Advocate for the Respondent: Mr Ian Temby

Solicitors for the Respondent: Maddocks

[2018] AATA 1862

8 June 2018

Key Legal Topics

Areas of Law

Administrative Law

Employment Law

Legal Concepts

Judicial Review

Procedural Fairness

Breach

Negligence

Standing

Statutory Construction

Date of hearing:	26 February 2018
Advocate for the Applicant:	Mr Mahir Qureshi
Solicitors for the Applicant	Starnet Legal Pty Ltd
Advocate for the Respondent:	Mr Ian Temby
Solicitors for the Respondent:	Maddocks