Training chain Careers Australia failed to mention a regulatory crackdown, which had forced it to repay at least $44 million in improperly obtained federal student loans, when it issued financial documents assuring shareholders that its federal funding was not under threat.
And top-flight accounting firm Ernst & Young signed off on the assurance, even though it was separately investigating rorts of the same loan scheme.
New details have emerged about Careers Australia, one of five training firms to go bust during the past 20 months after amassing almost $1.3 billion in funding through the fatally flawed VET FEE-HELP loans scheme in just three years.
Their failure contributed to the government decision to write off $2bn in VET FEE-HELP debt, as revealed by The Australian last week. It also left about 50,000 students struggling to complete courses despite having accrued debts to cover their tuition fees.
In May last year, the Australian Competition & Consumer Commission revealed that Careers Australia had admitted to enrolling students who had been misled about its courses and lured with free iPads and computers. The ACCC said it had forced the company to repay at least $44.3m to the commonwealth and cancelled enrolments that ultimately could have netted it $300m in VET FEE-HELP loans.
Careers Australia’s financial results for 2015-16 included no mention of the ACCC action, despite acknowledging that federal contracts were “critical” to its ongoing operations and claiming they were “unlikely to be discontinued in the foreseeable future”.
Ernst & Young partner Brad Tozer declared the report gave “a true and fair view of the company’s and consolidated entity’s financial positions” in the report, which is dated October 4 last year.
The following day, Education Minister Simon Birmingham announced that VET FEE-HELP would be replaced by the far less lucrative VET Student Loans.
Asked why EY had endorsed Careers Australia’s financial results, a spokeswoman for the firm said “we don’t comment on client matters”.
EY also secured five Education Department contracts to investigate VET FEE-HELP in 2015 and 2016, netting it about $315,000. The department said the work had included several compliance audits and “some student survey investigative work on nominated VET FEE-HELP providers”.
In September last year, The Australian reported that EY was one of four firms that had been contracted by the department to conduct a forensic investigation of 19 colleges whose VET FEE-HELP payments had been suspended. The department did not say whether Careers Australia was among the 19 providers but it said EY had not directly investigated Careers Australia. It did not say whether EY remained one of its preferred suppliers.
Careers Australia’s collapse in May this year left about 15,000 students stranded mid-course. Creditors are owed $204m, most of which is unlikely to be repaid.
The company is being investigated for possibly trading while it was insolvent. Administrator PPB Advisory is pursuing former managing director Patrick McKendry to repay a $1.3m loan he received from a subsidiary to buy shares in the group.
Careers Australia also sent about $60m to overseas private equity owners, via its parent company in a Caribbean tax haven, although much of this money was returned when the company’s financial troubles became clear.
Craig Robertson, head of the peak TAFE body that is in dispute with the Education Department over who should reimburse the students, said Canberra’s efforts to bring dodgy training companies to account were “like trying to clean up a swamp with a teacup”.
Assistant Skills Minister Karen Andrews said the government’s priority was students’ welfare. “My department continues to pursue a vigorous compliance program to investigate providers that have failed to meet their responsibilities with respect to VET FEE-HELP,” she said, adding that the government did not comment on ongoing investigations for fear of prejudicing them.