Can ASQA Lawfully Reject a Financial Viability Assessment Made by an Accountant? By Zmarak Zhouand, Principal Solicitor

Introduction

Financial viability is an essential criterion for any organisation seeking to become or remain a Registered Training Organisation (RTO) in Australia. Under the National Vocational Education and Training Regulator Act 2011 (Cth) (NVR Act), the Australian Skills Quality Authority (ASQA) is responsible for ensuring that RTOs meet the legal conditions of registration. One of these conditions is that providers must demonstrate and maintain adequate financial viability. This requirement is intended to protect both students and the broader vocational education and training (VET) sector.

Despite the apparent clarity of this requirement, there is debate as to whether ASQA can lawfully reject or overturn a financial viability assessment made by a qualified external accountant. This article examines the key legislative provisions and any relevant Australian case law, aiming to clarify whether ASQA’s powers include the authority to dismiss or question an otherwise validly prepared financial viability assessment.

Legislative Framework

1. NVR Act

   • The NVR Act provides the foundation for the regulation of RTOs. Section 24 of the Act states that registration or continued registration as an RTO is subject to satisfying the Financial Viability Risk Assessment Requirements.

   • Section 158 requires ASQA to make a legislative instrument outlining these Financial Viability Risk Assessment Requirements. The NVR Act specifies that an RTO (or applicant for registration) must comply with any such legislative instrument.

     
     

2. Standards for RTOs 2015

   • Under the Standards for Registered Training Organisations (RTOs) 2015 (often referred to as the “RTO Standards”), Clause 7.2 confirms that the RTO must satisfy the financial viability risk assessment requirements.

     
     

3. Standards for VET Regulators 2015

   
   

   • In parallel, the Standards for VET Regulators 2015 guide how ASQA must perform its regulatory functions. Among other principles, these standards require ASQA to act fairly, consistently, and in a risk-responsive manner. They do not, however, detail specific powers to override professional financial audits.

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Together, these instruments establish that financial viability assessments are obligatory for RTOs and that ASQA is vested with broad enforcement powers if those assessments do not demonstrate adequate capacity.

Financial Viability Assessments

The Financial Viability Risk Assessment Requirements (FVRAR) are made by legislative instrument under Section 158. Under these requirements, an independent accountant—typically a Chartered Accountant (CA) or Certified Practising Accountant (CPA)—must evaluate the RTO’s capacity to carry on delivering training sustainably. This process involves the accountant examining:

• the RTO’s financial statements,

• projected cash flow and profit-and-loss scenarios,

• relevant organisational structures,

• business plans and forecasts, and

• any other factor that the auditor deems pertinent to assessing solvency and risk.

Upon completing this process, the qualified accountant issues a report or certification indicating whether the provider meets the financial viability thresholds set out in the FVRAR. In most cases, this assessment is then provided to ASQA as part of an RTO’s application or ongoing compliance obligations.

ASQA’s Powers and the Question of Rejecting an Accountant’s Report

There is no express provision in the NVR Act granting ASQA the authority to override an accountant’s independent evaluation if it meets all statutory requirements. Rather, ASQA’s role is to ensure compliance with the FVRAR. If a financial viability report is properly prepared by an appropriately qualified professional, the question arises: can ASQA still reject that assessment?

1. Prescriptive vs. Discretionary Powers

   • Under the NVR Act, ASQA has discretion to grant or refuse registration if it is not satisfied that the provider meets the relevant standards and requirements.

   • The FVRAR stipulates who can conduct a viability assessment (typically an independent auditor/accountant with specific qualifications). Provided the RTO follows the mandated process, the independent assessor’s evaluation should, in theory, be the definitive statement on the provider’s financial soundness.

     
     

2. Validity of the Assessment

   • If ASQA discovers that the accountant’s report was based on incomplete, misleading, or false data, it can deem that the RTO has not actually met its obligation to demonstrate viability. In that scenario, ASQA is not simply overriding the assessor’s professional judgment; rather, it is concluding that the foundation for that judgment was flawed.

   • If the accountant has not followed the FVRAR procedure—for example, by omitting required indicators or not using the required format—ASQA may assert that the RTO has failed to comply with Section 24 of the NVR Act.

     
     

3. Residual Risk-Based Assessment

   • Even when an accountant’s assessment is ostensibly thorough, ASQA often undertakes a separate risk analysis. ASQA may identify external factors—such as pending legal action against the provider, significant changes in enrolments, or evidence of insolvency risk—that the accountant’s report did not account for.

   • In such circumstances, ASQA can argue that the RTO does not meet the standard of financial viability risk required by law, irrespective of the auditor’s conclusion. Again, the distinction is between disagreeing with the report on the merits and concluding that the provider cannot be considered viable in light of additional evidence.

     
     

Relevant Case Law

While there is limited case law on the precise question of whether ASQA may lawfully “reject” a financial viability assessment, some general principles can be gleaned from tribunal and court decisions addressing ASQA’s refusal or cancellation of registration.

1. Administrative Appeals Tribunal (AAT) Decisions

   • The AAT has authority to conduct merits reviews of certain ASQA decisions. In reviewing these matters, the Tribunal may examine all evidence about an RTO’s financial viability, including any reports from accountants.

   • If the AAT concludes that the accountant’s report is reliable, and there is insufficient contrary evidence, it may overturn ASQA’s decision to refuse or cancel registration. Conversely, if the AAT finds the RTO’s business model is unsustainable or the accountant’s report fails to address material financial risks, it may affirm ASQA’s stance.

   • Thus, the question typically turns on whether the accountant’s assessment reflects the reality of the provider’s finances.

     
     

2. Federal Court Judicial Reviews

   • Judicial review proceedings consider whether ASQA acted within its powers and followed due legal process. If ASQA were to categorically ignore or reject a valid financial viability report without lawful justification, that action could be challenged as ultra vires (beyond power) or otherwise legally unreasonable.

   • To date, no published Federal Court judgment has directly tackled the scenario of ASQA rejecting a compliant accountant’s assessment solely because it disagrees with the conclusion. However, given general administrative law principles, ASQA must ground any refusal in evidence or legitimate concerns about the assessment’s integrity.

Legal Analysis

Under the NVR Act and related standards, independent auditors hold a legislated role in determining whether RTOs meet the FVRAR. Consequently, if an RTO obtains a valid report from a suitably qualified professional, the RTO appears to satisfy Section 24 of the Act—unless ASQA finds that the process was flawed or that subsequent evidence indicates a lack of viability.

• Ultra Vires Risk: ASQA may risk acting beyond its statutory authority if it simply sets aside the independent auditor’s assessment based on a preference for its own in-house evaluation. The FVRAR entrusts the viability assessment to external professionals, not ASQA staff.

• Regulatory Mandate: At the same time, ASQA is obliged to ensure that all registered RTOs genuinely meet the standards. If serious contradictions or new evidence call the accountant’s assessment into question, ASQA can justify further scrutiny.

In essence, while the law does not grant ASQA a blanket power to reject an auditor’s legitimate finding of viability, ASQA retains the power to examine the foundations of that finding. If the accountant’s report is deemed incomplete or unreliable, or the RTO’s situation has changed significantly, ASQA can lawfully conclude that the FVRAR is not met.

Practical Implications

1. For Providers:

   • Engage an accountant who is fully conversant with the FVRAR and ensure their report is consistent with all prescribed indicators and formats.

   • Provide comprehensive financial data and proactively address potential red flags.

   • Keep in mind that ASQA will likely exercise a residual oversight role: the best defence is a thoroughly prepared, evidence-based assessment.

2. For ASQA:

   • While committed to a risk-based regulatory approach, ASQA must be mindful of the statutory boundaries. If an accountant’s assessment has been lawfully conducted, ASQA’s power to reject it is constrained to issues of integrity, accuracy, or subsequent changes in circumstances.

   • The Standards for VET Regulators 2015 require procedural fairness and proportional responses. Arbitrary rejection of a valid financial assessment could breach these principles.

3. For Legal Practitioners:

   • If representing RTOs, scrutinise whether the FVRAR assessment fully complies with legislative requirements. If so, query the legal basis on which ASQA is refusing to accept that assessment.

   • If advising ASQA, carefully document any reasons to doubt the accountant’s findings, ensuring that any refusal to accept the report can be defended on evidence-based grounds.

Conclusion

Within the current legislative framework, there is no explicit provision granting ASQA a blanket right to override a properly completed, compliant financial viability assessment by a licensed accountant. However, ASQA does have a responsibility to confirm that the assessment is valid, accurate, and not contradicted by other material evidence. Where inconsistencies or new financial concerns emerge, ASQA can legitimately question whether the RTO truly satisfies the Financial Viability Risk Assessment Requirements. Ultimately, each situation will turn on whether the accountant’s report and the RTO’s broader financial evidence demonstrate compliance under the NVR Act.

Disclaimer: This article contains general legal information based on Australian law. It is not legal advice. You should consult a qualified lawyer for advice specific to your circumstances.

Zmarak Zhouand, Principal Solicitor