Can ASQA lawfully reject a financial assessment made by an accountant?
Updated: Apr 24, 2021
There is a view within the vocational education and training (“VET”) sector that the regulator, the Australian Skills Quality Authority (“ASQA”), might be using the financial viability requirements as a tool to limit entry into the sector, as well as a tool to reduce the overall number of providers.
Increasingly, we are seeing ASQA dismiss financial viability assessments certified by licensed accountants when ASQA rejects new applications, cancels existing registrations or rejects renewal applications.
In many instances, some may say, ASQA is being overly fastidious, difficult or worse. ASQA, in response, says that it is merely trying to manage risk as it is required to under the law.
Regardless of where you sit on this spectrum, the first question we need to ask is whether ASQA, our regulator and an agency of the Commonwealth of Australia, has the legal authority to reject or even question a financial viability assessment that has been certified by a licensed accountant.
The answer might surprise you!
There is no doubt that RTOs and those seeking to become RTO must demonstrate that they are financially viable.
Section 24 of the National Vocational Education and Training Regulator Act 2011 (the “NVR Act”) effectively states that a Registered Training Organisation (“RTO”) or a person seeking to become an RTO must satisfy the Financial Viability Risk Assessment Requirements.
The NVR Act defines Financial Viability Risk Assessment Requirements in subsection 158. Section 158 is as follows.
Financial Viability Risk Assessment Requirements
(1) The National VET Regulator must, by legislative instrument, make requirements relating to the financial viability of NVR registered training organisations.
(2) The requirements are to be known as the Financial Viability Risk Assessment Requirements.
Subsection 158(1) if the NVR Act requires ASQA, by legislative instrument, to create and implement the Financial Viability Risk Assessment Requirements. Once created, that legislative instrument becomes the Financial Viability Risk Assessment Requirements under the NVR Act.
Acting under the authority given to it by section 158 of the NVR Act, on about 1 July 2011, ASQA introduced and thereafter commenced implementing the Financial Viability Risk Assessment Requirements 2011 (FVRAR). The FVRAR is, in effect, law. It is binding on RTOs and, just as importantly, it is binding on ASQA.
FVRAR 6 states that an RTO must submit to an “assessment of financial viability risk”. This assessment is to be undertaken by an independent financial auditor nominated by ASQA, such as, for example, an Australian Chartered Accountant (“CA”) or an Australian Certified Practicing Accountant (“CPA”). It is important to note that under FVRAR 6, only independent financial auditors (for example, CPAs and CAs) are permitted to assess whether an RTO or an applicant satisfies the FVRAR. ASQA cannot make this assessment.
FVRAR Part 4 requires the assessment to be in required form, made against common indicators and is to have regard to relevant audit standards. ASQA has issued a prescribed form for this assessment which also contains all the common indicators set out in FVRAR Part 4. See: https://www.asqa.gov.au/resources/guides/financial-viability-risk-assessment-tool. The form is widely criticised as being overly complicated, confusing, and unnecessary. Many RTOs and their accountants despise working with it. Because of this, the form has, intentionally or unintentionally, resulted in fewer applications for registration, addition to scope applications and fewer challenges to ASQA rejection or cancellation decisions based on an alleged non-compliance clause 7.2.
Nonetheless, many other RTOs and aspiring RTOs have spent several hundred hours completing these forms, creating the numerous financial statements that need to be included with the forms, plans, bank statements and otherwise supplying the independent CA or CPA with sufficient information and re-assurances to enable them to certify that the RTO is financially viable.
Provided the RTO uses the prescribed form, the CA or CPA has assessed the RTOs financial viability against the common indicators required in that form, and the CA or CPA certifies that the RTO satisfies the FVRAR, the RTO is compliant with the FVRAR and is therefore deemed to be compliant with section 24 of the NVR Act. On a proper application of the law, the RTO should not be required to do more.
However, as stated above, ASQA frequently challenges these assessments. These challenges usually come from ASQA personnel who are not qualified accountants. However, even if they were accountants, that would not change the end result.
As stated above, under the FVRAR, only an independent qualified auditor (such as a CA or CPA) can assess whether an RTO satisfies the FVRAR. In making this assessment, the CA or CPA is in exercising a statutory authority.
ASQA does not have any statutory to assess compliance with the FVRAR or to reject or challenge a statutory assessment made by a CA or CPA under FVRAR 6. Those statutory determinations can only be made by independent persons such as licensed CAs or CPAs.
It is unlikely that ASQA will voluntarily change its practices. We are looking forward to an opportunity to test this issue in the Administrative Appeals Tribunal or the Federal Court.
For advice on your rights and assistance, speak with your lawyer.
Zmarak Zhouand, Principal Solicitor
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Disclaimer: This article has been based on Australian law and practices current as at the date of publication. Information contained in this article constitutes legal information and should not be viewed as legal advice. You should consult with a lawyer before you rely on this information.