Audit Report on Australian Vocational Student Loan Scheme

The Australian National Audit Office has issued a 68 page report on the Administration of the VET FEE-HELP Scheme (December 20, 2016). The Auditor found "The VFH scheme was not effectively designed or administered. Poor design and a lack of monitoring and control led to costs blowing out even though participation forecasts were not achieved and insufficient protection was provided to vulnerable students from some unscrupulous private training organisations." (page 8).

A new VET Student Loans scheme, designed to address deficiencies in the old one, starts1 January 2017. Unfortunately it took the government several years to act, resulting in billions of dollars wasted. It will be interesting to see if similar reforms are introduced to the university student loan scheme, which has some of the same deficiencies as the old VET scheme. In particular, education providers are permitted to offer university degree programs for which there are no jobs.

"Conclusion

7. The VFH scheme was not effectively designed or administered. Poor design and a lack of monitoring and control led to costs blowing out even though participation forecasts were not achieved and insufficient protection was provided to vulnerable students from some unscrupulous private training organisations.

8. The design of the expanded VFH scheme in 2012 was weighted heavily towards supporting growth in the VET sector, but an appropriate quality and accountability framework addressing identified risks was not put in place. As the responsible department, Education did not establish processes to ensure that all objectives, risks and consequences were managed in implementing the expanded scheme. In effect, the department’s focus on increasing participation overrode integrity and accountability considerations that would have been expected given the inherent risks. The department inadequately considered the implications of the changed incentives facing providers and students in the expanded scheme and its role in ensuring effective regulation in conjunction with other regulators—principally the Australian Skills Quality Authority and the Australian Competition and Consumer Commission. There was also a lack of data analytics capability in Education and little internal management reporting or analysis of the VFH scheme to identify emerging problems. The department did not develop measures to assess broader objectives of the scheme (beyond growth) including those related to value and quality in the VET sector. In redesigning the VFH scheme, insufficient regard was given to relevant experiences in other jurisdictions, particularly Victoria, and the risks identified in a Regulation Impact Statement.

9. The administration of the VFH scheme did not safeguard its operation, and did not support the achievement of objectives relating to integrity, quality, value and sustainability. Similar to the scheme’s design and implementation failures, there were weaknesses in Education’s administrative processes for: approving VFH providers; developing and undertaking risk, fraud and compliance activities; controlling payments to providers; making information readily available to students about their rights and obligations under the VFH scheme; and managing and resolving student complaints. While improvements were made to many of these processes in 2016, the initiatives were in place for a relatively short period of time prior to the cessation of the VFH scheme from 31 December 2016."

From  Administration of the VET FEE-HELP Scheme , page 8, Australian National Audit Office, December 20, 2016.