Explanatory Statement
Financial Viability Risk Assessment Requirements 2011
Authority
This instrument is made under subsection 158(1) of the National Vocational Education and Training Regulator Act 2011 (the Act). That subsection requires the National VET Regulator, by legislative instrument, to make requirements relating to the financial viability of NVR registered training organisations. Subsection 158(2) of the Act provides that the requirements are to be known as the Financial Viability Risk Assessment Requirements (the Requirements).
Purpose and Operation
On 1 July 2011, the National VET Regulator assumed regulatory responsibility for functions that were previously performed by the states and territories in relation to the matters dealt with by the Act (Victoria and Western Australia retain regulatory responsibility for some organisations residing within their jurisdictions).
The Requirements form part of the VET Quality Framework. As defined in section 3 of the Act, the VET Quality Framework is comprised of the Standards for NVR Registered Training Organisations, the Australian Qualifications Framework, the Fit and Proper Person Requirements, the Financial Viability Risk Assessment Requirements and the Data Provision Requirements.
The Requirements apply to all NVR registered training organisations from 1 July 2011 (the National Vocational Education and Training Regulator (Transitional Provisions) Act 2011 sets out the dates from which state and territory registered training organisations are taken to be NVR registered training organisations for the purposes of the Act). NVR registered training organisations must comply with the Requirements as a condition of registration under the Act (see section 24 of the Act).
Further, the National VET Regulator is required to consider whether an applicant for registration under the Act complies with the Requirements in deciding whether to grant their application (see subsection 17(2) of the Act).
Description of the provisions
Parts 1 and 2 of the Requirements set out preliminary matters, and the context and intent of the Requirements.
Part 3 of the Requirements requires an organisation seeking registration with the National VET Regulator to submit to an assessment of financial viability risk as part of the assessment of the application for registration, and requires an NVR registered training organisation to submit to an assessment at a time determined by the National VET Regulator. It also sets out the circumstances in which the National VET Regulator may waive the requirement for a financial viability risk assessment, and other matters relating to the obligation to submit to an assessment.
Part 4 of the Requirements sets out the form and content of financial viability risk assessments. An assessment of financial viability is required to provide an indication of whether an organisation will remain viable in the short to medium term. Financial viability is defined in the Requirements as the ability of an organisation to generate sufficient income to meet operating payments, debt commitments and, where applicable, to allow growth while delivering quality training and assessment services and outcomes. In addition to an analysis of the financial data, the assessment will consider qualitative factors that can impact upon the organisation’s financial health (eg. business plans, changes in ownership, pending legal action etc.).
Commencement
The Requirements commence on 1st July 2011 or the day after they are registered on the Federal Register of Legislative Instrument s – whichever is the later.
Consultation
Before the National VET Regulator made the Requirements, consultation was undertaken as follows:
Meetings with:
- Victorian Registration and Qualifications Authority
- Department of Education, Employment and Workplace Relations - Financial Viability and Debt Team
- VET Fee-Help Financial & Payments Team
- Grant Thornton Australia Limited
Further discussions with:
- Kingsway Financial Assessments P/L
- State and Territory regulators (QLD, NSW, WA)
- Tertiary Education Quality and Standards Agency
- PricewaterhouseCoopers Australia
> On 21 April 2011 a consultation meeting was held with key industry stakeholders to include discussion of a draft version of the Requirements. Representatives from the following industry bodies were present at this meeting:
- Australian Council for Private Education and Training
- Enterprise RTO Association
- Victorian Automobile Chamber of Commerce
- Australian Chamber of Commerce and Industry
- Construction, Forestry, Mining and Energy Union
- Master Builders Association
- National Centre for Vocational Education Research
- TAFE Directors Association
- State and Territory VET Regulators.
> The Requirements have been discussed at joint meetings held with State and Territory representatives.
Overview
The Financial Viability Risk Assessment Requirements 2011, enacted under the National Vocational Education and Training Regulator Act 2011, was introduced to address the need for assessing the financial stability of registered training organisations (RTOs) within the vocational education and training sector in Australia. This legislation was developed to ensure that RTOs are financially viable, thereby maintaining the quality of training and assessment services provided to students. The National Vocational Education and Training Regulator Act 2011 was passed by the Parliament of Australia to establish the National VET Regulator, which took over the regulatory responsibilities from the states and territories on 1 July 2011, except for Victoria and Western Australia, which retained some regulatory functions. The Financial Viability Risk Assessment Requirements are part of the VET Quality Framework and aim to assess the ability of RTOs to generate sufficient income to meet their financial obligations while delivering quality training and assessment services.
Scope and Application
The Financial Viability Risk Assessment Requirements 2011 applies to all National VET Regulator (NVR) registered training organisations, which includes those state and territory registered training organisations that are deemed to be NVR registered training organisations as outlined in the National Vocational Education and Training Regulator (Transitional Provisions) Act 2011. These organisations must comply with the Requirements as a condition of registration under the National Vocational Education and Training Regulator Act 2011. The Requirements also influence the National VET Regulator's decision when considering applications for registration by determining whether an applicant complies with the stipulated financial viability risk assessment criteria. The Act has a national jurisdictional reach, with Victoria and Western Australia retaining regulatory responsibility for some organisations within their jurisdictions. The Requirements mandate that NVR registered training organisations undergo a financial viability risk assessment, which involves an analysis of financial data and qualitative factors that might impact the organisation's financial health. This assessment is intended to indicate whether the organisation will remain viable in the short to medium term. The Act may extend or restrict its application through subordinate instruments, but no such instruments are specified in the explanatory statement.
Key Provisions
The Financial Viability Risk Assessment Requirements 2011 (the Requirements) comprise several key provisions, primarily outlined in Part 3, which governs the financial viability risk assessment process for NVR registered training organisations. Section 13 of the Requirements mandates that organisations seeking registration must submit to a financial viability risk assessment as part of their application for registration. Furthermore, registered training organisations must undergo such assessments at intervals determined by the National VET Regulator. The National VET Regulator can waive the requirement for a financial viability risk assessment under certain circumstances, as detailed in section 14. Part 4 elaborates on the form and content of these assessments, ensuring they provide a comprehensive evaluation of an organisation's ability to generate sufficient income to meet its financial obligations and sustain quality training services.
The Requirements impose specific obligations on NVR registered training organisations. Primarily, these organisations must comply with the financial viability risk assessment requirements as a condition of registration under the Act (section 24). This includes providing the necessary financial and qualitative data for assessment, such as business plans, changes in ownership, and pending legal actions, as outlined in section 16. Additionally, section 17(2) requires the National VET Regulator to consider compliance with these requirements when deciding whether to grant an application for registration. Furthermore, the organisation must ensure that the financial viability risk assessments are conducted by qualified professionals and that the results are accurately reported to the Regulator.
Breach of the Financial Viability Risk Assessment Requirements can result in various consequences, both civil and criminal. Although the Requirements themselves do not explicitly state penalties for non-compliance, failure to adhere to these provisions could lead to actions under the broader National Vocational Education and Training Regulator Act 2011. For instance, under section 158(3) of the Act, the Regulator may impose administrative penalties, including fines, for non-compliance with legislative instruments made under the Act. Additionally, serious breaches could potentially lead to legal actions under other relevant legislation, such as the Corporations Act 2001, where applicable. The National VET Regulator retains the authority to take appropriate action to ensure compliance, including the potential revocation of registration for organisations that persistently fail to meet these requirements.