In the case of Precious Family Day Care and Secretary, Department of Education, before the Australian Administrate Appeals Tribunal, the applicant sought review of a decision made by the Department (respondent) to refuse provider approval of Precious FDC under the family assistance law, pursuant to section 194B(6), A New Tax System (Family Assistance) (Administration) Act 1999 (Cwlth) (FAL). In this case Precious FDC was previously granted service approval under section 48, Education and Care Services National Law Act 2010 (Vic) as a Family Day Care provider. The main basis of the Department's decision to refuse CCS approval was that the provider nor the person in management and control were fit and proper persons. This was based on a number of grounds related to the application and the assessment process conducted by the Department (see paras. 13-14). The Tribunal agreed with the decision of the Department holding that (paras. 168-74, 177-82):
The FAL requires Ms Abdi [Director] to be conversant with multiple state and federal legislative requirements. Service providers such as Precious FDC must not only ensure they are providing quality, safe, secure and pedagogically sound childcare but also to accurately administer Commonwealth funds. Often this complex and varied administrative task can result in providers failing to meet their statutory obligations as a result of administrative, computer or human errors, and the willful non-compliance of educators and parents.
It also requires the Department to administer regular and complex reviews of all FDC services to ensure compliance, which is not straight forward given the observation of the Federal Court in Al-Huda Pty Limited v Secretary, Department of Education, Skills and Employment [2020] FCA 1613 at [1] that: “There is a myriad of complexity in the rules with which providers must comply under childcare subsidy arrangements”.
For the Tribunal to ascertain if Precious FDC has the capacity to comply with these complex obligations under the FAL, it must have demonstrated that it understands the compliant management systems, processes and procedures required to receive and administer Australian government payments on behalf of individuals eligible for child care fee assistance. Given Precious FDC is seeking registration of a new service, the Tribunal is guided primarily by the policy documents and procedures submitted, Ms Abdi’s demonstrated knowledge in the written assessment, and in this instance is assisted by her record as a director of an existing service.
The Tribunal concurs with the Department’s findings that there are significant deficiencies in the policies and procedures submitted by Precious FDC; noting Ms Abdi’s own evidence that “So according to the criticisms there was - there was a lot of criticisms, and they covered a lot of the policy”.
Upon reviewing Precious FDC’s governance documents, the Tribunal found the governance documents were still lacking detail about how the service proposed to ensure compliance with the FAL, in spite of the various iterations of the documents produced by the Applicant to respond to concerns raised by the Department. The Tribunal finds that Precious FDC’s governance documents are poorly designed, poorly presented, created uncertainty and confusion, and did not provide accessible or comprehendible guidance to staff, educators and/or parents.
The Tribunal appreciates that the documents represent Precious FDC’s aspirations to achieve operational compliance and excellence, however the documentation does not demonstrate that there are robust policies and procedures in place to ensure Precious FDC would comply with its obligations under the FAL.
The Tribunal, considering the current governance documentation submitted by Precious FDC in the course of the hearing, finds that they have not addressed the original concerns of the Department....
These policies and procedures were contradictory, and this was compounded by Ms Abdi’s contradictory evidence to the Tribunal. The Tribunal could not find one clear concise document to assist staff, educators and parents to comprehend their requirements under the FAL. The Tribunal finds this lack of clarity and understanding is sufficient enough to warrant the refusal of Precious FDC’s CCS approval, as it is this very lack of guidance to staff, educators and parents that leads to human error and fraudulent activity resulting in overpayments and subsequent debts to the Commonwealth.
The Tribunal concurs with the original decision maker’s determination that Precious FDC’s governance documents exhibit the same lack of detailed understanding of its FAL obligations that Ms Abdi demonstrated in her written assessment. The Tribunal was not persuaded by Precious FDC’s counsel that Ms Abdi had demonstrated sound knowledge of her obligations under FAL during her evidence in chief and her written assessment. Ms Abdi demonstrated an understanding at a basic level of the requirements of the day-to-day running of a family day care centre but was not able to persuade the Tribunal that she had sufficient knowledge for Precious FDC to be granted approval for CCS.
The Tribunal was concerned by Ms Abdi’s inability to clearly demonstrate her knowledge of the requirements of the FAL as she is and has been a co-director of an existing service for the past three years. Given Ms Abdi’s involvement at Little Beginners, the Tribunal considers that Ms Abdi should have had no difficulty in completing the written assessment, providing concise policies and procedures for Precious FDC, and demonstrating knowledge of FAL obligations in her evidence before the Tribunal. The Tribunal appreciates that the law has changed since Little Beginners was registered, however part of a provider’s obligation under the FAL is to be current with existing legislation.
The Tribunal finds that Ms Abdi did not demonstrate a sound knowledge and understanding of the FAL and this weighs against granting CCS approval to Precious FDC.
Fit and Proper Person
The Tribunal finds that Ms Abdi had a genuine desire to provide a much-needed child care service to the ethnically diverse, lower sociodemographic families within her community. The Tribunal finds that there is no evidence that Ms Abdi had been involved in any fraudulent activity or mismanagement in her role as a director of Little Beginnings.
The Tribunal accepts the Respondent’s contention that governance arrangements are of vital significance in determining whether a provider is a fit and proper person to be involved in the administration of CCS and ACCS. On this basis, as the Tribunal has found that Precious FDC’s governance arrangements are inadequate, this weighs heavily against a finding that Ms Abdi and Precious FDC are fit and proper persons to be involved in the administration of CCS and ACCS.
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