The Group of Eight (Go8) represents Australia’s leading research-intensive universities. Go8 members deliver Australia 100,000 quality graduates each year. As Go8 Chief Executive I am writing to provide a brief submission in response to the Cost Recovery Implementation Statement (CRIS) the Department has prepared to accompany the Higher Education Support Amendment (Cost Recovery) Bill 2018 and the Higher Education Support (Charges) Bill 2018 (the Bills).
In summary we do not support this proposed tax on teaching and learning.
I am sure you are familiar with the Go8 submission to the Senate Standing Committee on Education and Employment which is examining these Bills.
The perspectives of the Go8 on the CRIS in many ways mirror those that were expressed in our submission to the Senate Committee. This is particularly the case with respect to the lack of consultation and the poor design of the tax.
Since the Government’s announcement of its decision to apply a tax on the facility of a student seeking access to the income-contingent loans scheme for higher education, we have been promised there would be engagement and consultation on this policy. While I very much appreciate the constraints you and the Department are operating under, there has been none.
The sole attempt at ‘consultation’ is this CRIS, which is confirmed in the Departments response to Questions on Notice from Senator Faruqi in the context of the Senate Inquiry into the Bills.
Rather than seeking to engage the sector in how costs might be reduced and efficiencies realised in respect of the Loan Program, we have been presented with a fait accompli for charging. This is not a helpful way to work with stakeholders.
On the specifics of the CRIS, the Go8 offers feedback and makes recommendations as outlined below.
Quantum of the Charge
The Go8 queries the quantum of the Charge forecasted in the CRIS, versus the Budget projections. More specifically, how the quantum expected to be raised by the combination of the Charge and the Application Fee has reduced so significantly between the Budget forecast (and presumably the New Policy Proposal work that informed it, which will have included the costings).
The 2018 Budget papers shows the forecast revenue for this measure as follows:
|Higher Education Loan Program – partial cost recovery||2019-20||2020-21||2021-2022||Total|
|$ 000||$ 000||$ 000||$ 000|
|Administered revenue||$ 9,806||$ 10,230||$ 10,665||$ 30,701|
Source: Department of Education and Training Budget Statements 2018-2019, p16
Yet, the CRIS shows the combined revenue that will be raised by the combined Charge and Fee (for initial registration as a FEE-HELP provider) will be:
|Higher Education Loan Program – partial cost recovery||2019-20||2020-21||2021-2022||Total|
|$ 000||$ 000||$ 000||$ 000|
|Administered revenue||$ 3,620||$ 3,740||$ 3,850||$ 11,210|
Source: Department of Education and Training Draft Cost Recovery Implementation Statement, 31 October 2018
- The total from the CRIS does not include $500,000 expected to be raised through the registration fee in 2019 from providers seeking to offer FEE-HELP.
This is confirmed in the Department’s Question on Notice to response to Senator Faruqi also. How is the Department expecting to raise just over one-third in November what it expected to raise in May?
As the Charge is aligned to the cost of the program, does this mean that the cost of the Program has been reduced by approximately 60% in the intervening six months since the Budget? If that is the case, in what areas were the cost reductions realised?
Financial viability checks.
The CRIS states that among the ongoing regulatory activities for which providers – including Table A universities – will be charged, are financial viability checks. Under the Higher Education Support Act 2003 (HESA), there are two areas this might relate to, although it is not immediately clear from the CRIS to which the actual charging relates.
First, Division 19 of HESA establishes the quality and accountability requirements for all higher education providers. Subdivision 19-B includes the requirement that a provider be financially viable and be likely to remain so. In implementing this requirement, the Subdivision requires providers to give the Minister an annual financial statement and that the Minister is to have regard to that information in determining financial viability. In assisting providers to meet these requirements, the Department has a ‘Financial viability checklist for approved HEPs’ available on its website.
This is a simple, streamlined checklist. Using the costing provided in the CRIS and applying broad averages for Table A and Table B universities, it would cost one week’s time (including on-costs) for each of a Senior Administrative Officer and Junior Executive Officer to look at the checklists for these institutions each year.
At best, it is a significant challenge to understand how two officers at these levels each need five full working days to examine a checklist and read financial statements in an annual report. At worst, it might be suggested it is a gross inflation, and it could be that a thorough examination of effective use of Commonwealth resources might be timely.
Second, HESA includes robust compliance requirements under Subdivision 19-80 for a higher education provider to be audited as to their compliance with any of the quality and accountability requirements listed. This includes the financial viability requirements in Subdivision 19-B mentioned above. Crucially, all Table A universities are exempt from the application of Subdivision 19-80.
Given that the Department is seeking to charge for what appears to amount to looking at a template checklist and reading financial statements in university annual reports, it not clear that this activity warrants a charge commensurate with the time of two officers for each Table A and Table university, each year. It is also unclear how this activity – cursory as it seems – can reasonably be described as a ‘financial viability check’ in any meaningful sense.
The CRIS states that the “department regulates higher education providers who can offer courses under HECS‑HELP and FEE-HELP, to ensure that providers are financially viable, making available required information to current and new students and complying with reporting obligations and legislative requirements.” (emphasis added).
In Senate Estimates hearings on 25 October 2018, however, the Department gave evidence that financial viability requirements are assessed by ‘external experts’ and, crucially, are only applied to non-university providers. So, this leads to the assumption that Table A universities would, under the Department’s proposed charging framework, be charged for activities from which they are either exempted or charged at a higher rate than other providers for something that at best has a miniscule impact on Departmental resourcing and which is in fact totally outsourced.
On that basis alone, the Go8 would expect the design of the Charge to be revisited and Table A universities exempted from this element.
The CRIS does not seem to align with or support the existing regulatory architecture. Clarity of purpose in the regulatory and quality assurance architecture underscores the enduring robustness of Australia’s higher education sector. This framework is underpinned by the clarity of purpose among the key institutions within it, including the sector regulatory bodies as well as the regulated entities.
It appears the cost recovery proposal under the Charges Bill will result in the Department seeking to charge regulated entities for regulatory activity that is undertaken by the Tertiary Education and Quality Standards Agency (TEQSA).
For example, one of the three themes of the annual risk assessment work undertaken by TEQSA is financial viability and sustainability where it is the core element of annual risk assessments. As TEQSA states very clearly, the Higher Education Standards Framework 2015 ‘…specifically requires providers to have the financial resources and management capacity to keep operating.’
In addition to its statutory responsibilities under the TEQSA Act, it is clear TEQSA undertakes work in support of the Government’s responsibilities under HESA. This is similar to the work TEQSA undertakes as an ESOS agency in support of the Education Services for Overseas Students Act 2000 (ESOS Act) and associated framework.
As is the case with TEQSA’s work as an ESOS agency under the ESOS Act, however, which is also run on a cost recovery basis, a regulated entity cannot be charged for the same activity by two different regulatory bodies. Critically, when registering a provider under the ESOS Act, TEQSA is able to use information already in its possession (on financial viability and in relation to the fit and proper person test as examples) so that information does not have to be supplied more than once. Reducing this regulatory overlap, relatively recent though it has been, is welcome and it has meant that the regulatory activity, and hence the charging for it, are greatly streamlined.
If the Department is suggesting that it is undertaking a regulatory function it may not have the legislative authority to undertake or is unnecessary to undertake as it is already undertaken by another regulatory entity, perhaps for legacy reasons, now might be an opportune time to revisit those internal activities through improved arrangements with TEQSA.
This issue was specifically considered in the context of the 2013 Review of Higher Education Regulation:
Recommendation 6: The Government must reduce duplication across within the regulatory architecture by requiring specific consideration of how any matter in question…aligns with its other regulatory components and partners. This could be enacted through structured MoU and letters of arrangements between TEQSA, the department and other regulatory bodies to cover such items as:
- Financial viability assessments for providers approved under HESA…Recommendation 10: The Government engage with TEQSA to agree where duplication, reporting or otherwise, can be addressed immediately.The CRIS states the Department undertakes reviews of provider policies and procedures in a number of areas including, but not limited to, fair treatment and equal opportunity procedures, student grievance procedures, student refund and review processes, and personal information procedures. These are all areas under the regulatory and quality assurance domain of TEQSA as articulated across Domains 1 – 7 in TEQSA’s regulatory model for the Higher Education Standards Framework. If the Department were to seek to recover the cost of undertaking activities from the same entities as TEQSA when the Department has simultaneously provided evidence that it relies on the regulatory work of TEQSA in this area, it would have serious ramifications for the efficacy of Australia’s higher education regulatory framework. It is no small thing that issues of regulatory role confusion were serious defects in the design of the VET-FEE HELP scheme. ExemptionsAlthough the Charge will be calculated based on component parts, including the amounts per university and amounts per registered student for the provider, there is no capacity for a provider or class of providers to be exempted from inclusion in one of those component parts.
- This is a critical issue in light of the issues raised above especially in the context of financial viability assessments where:
- In submitting to the Senate Committee inquiry, the Go8 indicated that the Charges Bill could be amended to enable exemptions for classes of higher education from elements of the annual Charge. This would enable retention of a Charge similar in structure to that currently proposed by the Department. The Go8 is hopeful of being engaged in meaningful consultation on these issues in the near future.
- Designing cost recovery in the way outlined in the CRIS appears to amount to ‘double-dipping’, resulting in the Government taxing higher education providers twice for the same thing. The Go8 suggests these issues would not have arisen had there been an opportunity to consult far earlier in the process.
- Importantly, these are functions for which TEQSA already levies cost recovery charges from providers and for which TEQSA will be increasing these charges as it moves to a full cost recovery model.
- In the context of the proposed charging arrangements presented in the CRIS, it is not apparent that in the five intervening years since the Review was handed down, the Department has taken any concrete action in response to these recommendations.
- These are undertaken by TEQSA already; and
- All Table A providers are exempted from these assessments under Subdivision 19-80; and
The proposed charging regime outlined in the CRIS shows the costs for regulatory activities, including for financial viability checks. Applying a broad average, this reveals that it costs the Department on average $1,596.76 each year to perform a financial viability check on a NUHEP or Table C provider. Using the same broad averaging, it costs the Department $7,194.79 each year to perform the same checks on Table A and B universities.
Taking account of the suggestions above, and that it appears inappropriate to tax Table A universities for this activity to begin with, it seems that the Regulations could be designed to ensure more effective method of differential and risk-based charging that that proposed in the CRIS.
Span of activities
There are other aspects in the current design of the Charge that the Go8 considers are not reasonable to be within the scope of activities for the proposed Charge.
For example, the cost or managing the annual higher education provider workshops are included as a cost recoverable activity. Some of these workshops relate directly to the implementation and administration of cost recoverable aspects of the HELP scheme. Other aspects to these workshops are clearly outside those bounds and neither do those activities fall within might be termed ‘data collection and compliance’.
From the 2018 workshops, topics such as VET Student Loans Ombudsman Best Practice complaint handling, an update on the Australian Qualifications Framework review, and updates on the MySkills website and Rural and Regional Enterprise Scholarships scheme all appear to be elements of the workshops whose costs should be excised from the cost recovery process. The session on tuition assurance obligations under HESA is not one that relates to Table A providers as they are exempted from this requirement and this adds weight to the suggestion for differential charging in the Regulations.
I look forward to the opportunity to discuss this submission with you.
 COST RECOVERY IMPLEMENTATION STATEMENT: Cost recovery activities for HECS-HELP and FEE-HELP programs; Financial Year 2018-2019; DRAFT FOR Consultation; Department of Education and training, October 2018, p4
 Ibid, p.8
 TEQSA Budget Statements 2018-19