Government cuts pushed TAFE into risky ventures, IBAC hears

By David Donaldson

Friday June 30, 2017

State government cuts to Victoria’s training system pushed South West TAFE to pursue riskier ventures, including the contract now being investigated by the corruption watchdog, the third day of public examinations heard.

The Independent Broad-based Anti-corruption Commission is looking into deals between two TAFEs and the private training organisation Taytell, which received around $2.2 million in public funding for training ostensibly delivered in 2013, amid claims of people being enrolled by Taytell without their knowledge, training not being delivered, and forged documents.

Several witnesses have noted how desperate South West TAFE was at the time for new opportunities to help bring in extra funding.

The Liberal Napthine government implemented hundreds of millions of dollars in cuts to the TAFE system from 2012, causing acute financial problems and serious concerns for long term sustainability at many institutions. From a surplus of nearly $60 million in 2012, the sector fell to a deficit of $16 million in 2013. This worsened to a deficit of $84 million the next year.

This pushed institutions to make an attempt at being entrepreneurial, despite having no real experience in pursuing new business ventures, former South West TAFE CEO Peter Heilbuth told the IBAC hearing.

TAFEs had traditionally been run like schools, with students coming to them, but the new, competitive setup compelled them to go out and find business.

“There was a change of government policy, and the funding that was available for different courses was reduced significantly,” Heilbuth stated.

“And there was an increased policy environment of competition, and the overall reality for TAFEs were that we were relatively inexperienced bureaucratic organisations in that environment.”

South West TAFE received almost half a million dollars from the deal IBAC is investigating, for doing little more than entering data provided to it by Taytell, while the company was paid $1.8 million in public funds.

The inquiry has heard that there was no meaningful oversight of the agreement. The contract with Taytell was overseen almost solely by TAFE executive Maurice Molan, who made no attempts to verify the information provided by the company. This included student enrolments and training hours delivered — information required for Taytell to qualify for millions of dollars in state money. Problems such as allegedly forged documents and a lack of documentation for assessment were only unearthed as audits began to be undertaken. There were also no policies in place to handle the negotiation and management of third-party contracts, the hearing has been told.

A new way of doing business

The TAFE used third-party contracting to deliver training between 2011 and 2013, said Heilbuth’s successor as CEO, Mark Fidge. It ceased using them after details of the Taytell agreement came to light.

“It was a different way of doing business for us,” said Fidge, who was chief financial officer at the time.

“I guess it opened up the market for us to be able to explore opportunities outside of just regional Victoria, but also it was another opportunity to bring in additional students under the South West TAFE banner, and as a result of that, the financial opportunities were also quite good as well for us in regards to being able to assist with our institute’s financial operations,” he told the inquiry.

Jane Ponting said she became concerned about irregularities in the agreement after taking on Molan’s job as executive manager of education while he was on extended leave. These concerns were heightened by her understanding of “the importance of the contract for the cash flow of the TAFE”.

“It was made clear during executive meetings that it was an important contract,” she said.

Country TAFEs a soft target

Ponting said that when she arrived she found it strange that South West TAFE would deliver training to a company — Zinfra — based in Melbourne’s eastern suburbs, about four hours away, suggesting some see rural institutions as soft targets.

“There was a little bit of a sense of, why pick that TAFE?” she said.

“I think I’m a little bit cynical, and if something looks a bit too good to be true, you have to ask why.

“When I was at South West TAFE I had a company come with a proposal for the TAFE to do some training based in Melbourne’s western suburbs, and it really was, you know, a deal that was too good to be true.

“We wouldn’t have to do anything and there would be quite a return on it, and I refused the offer and the TAFE didn’t have any problems with that. But I really wanted to know why come to South West TAFE, whether it was a bit of a sense that in the regions, you know, they mightn’t be as up to scratch or as knowledgeable around Melbourne industry.

“It just might be easier to pull the wool over the eyes of a smaller TAFE.”

Asked whether she believed that was what happened, Ponting responded: “I think that could well be the case.”

Is there a place for third-party contracting?

Ponting, who introduced policies and processes to deal with contracting, was asked whether she believes third-party contracting should be used in vocational education.

There’s absolutely a place for third-party contracts, particularly for reaching regional areas,” she responded.

“Our regional students across the state — probably nationally — would be really deprived of opportunities for training without such contracts,” Ponting argued. They can be useful for teaching subjects such as agriculture, where there might not be a critical mass of students in one area. In this case, the local TAFE could contract with another TAFE to combine their respective cohorts, for example.

“The critical thing is looking at how they’re managed so that they provide an equivalent experience … in terms of quality, as if the TAFE were delivering itself, and looking at its reputation for delivering high-quality training. It has to meet that standard.”

Maurice Molan was also interviewed on Thursday. After taking extended leave while audits were being undertaken, he was fired for gross impropriety after it emerged that he had approved the training certification of Taytell owner Rebecca Taylor, despite a review having found she was not competent to hold it.

“I was not a rogue,” Molan told the hearing.

The public examination is continuing.

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