Profits soar on public funds

Sue Simpson
Research Officer

Taxpayer funds are contributing to high profits for the new corporate private training providers, a new report conducted by the University of Sydney Business School shows.

The Capture of Public Wealth by the For-Profit VET Sector report, commissioned by the Australian Education Union, calls for policy-makers to consider prohibiting for-profit businesses from gaining public funding.

For-profit businesses are not allowed to access any government funding for primary and secondary schools. The vocational education and training sector is marked by inadequate and underfunded regulatory regimes. This is in contrast to the high level of regulation of early childhood, school and university education.

An examination of three ASX-listed private providers (Vocation, Australian Careers Network and Ashley Institute of Training) revealed profit margins in 2013 from 21 per cent for Vocation to 51 per cent for Australian Careers Network.

The returns well exceed benchmark norms for industries such as childcare. A focus on training that attracts the highest subsidy at the lowest cost is just one source of these high profits with government VET FEE-HELP being dominated by private providers.

The report found that disadvantaged students are under-represented in private for-profit providers enrolments while TAFE continues to enrol most early school leavers, regional students and students with a disability. The private for-profit providers focus on high volume, high profit areas like business studies and avoid courses in skill shortage areas such as the trades.

Companies can subcontract delivery, provide only online delivery and allow students to complete qualifications in less than a quarter of the nominal duration. The business models have scant regard for educational standards. The consequence is that confidence is being undermined in the quality of vocational qualifications and government funds are being wasted.

The report recommends minimum hours for the delivery of courses; capping funding to private providers to ensure TAFE survives; banning unregistered providers from subcontracting; better regulation of private providers’ recruitment practices and business models, and proper support for the publicly funded and accountable TAFE system.

The report can be accessed here.

Funding forfeited, now CEO goes

The chief executive officer of the private training company which forfeited almost $20 million in Victorian government funding last year following an audit is to resign.

Mark Hutchinson will step down from Vocation after a replacement is found, a January 28 announcement to the Australian Stock Exchange (ASX) states.

The Victorian Department of Education and Early Childhood Development review into three qualifications offered by two of Vocation’s registered training organisations found there were inadequate controls in place to manage the performance of third parties delivering training and assessment, resulting in some students experiencing substandard training that was inadequate for their job-seeking needs.

The company expects a net profit after tax loss of $27 million for the six months to December 31, 2014, the announcement to the ASX states.

It reports the company’s settlement with the Victorian education department “has had some knock-on effects to student enrolments and the enterprise business”.

Vocation continues its voluntary suspension of trading on the ASX.