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Childcare rorting estimated at billions but only five investigators nationwide

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McKenzie, Nick & Donelly, Beau
Publication Date: 
15 Oct 2016


The federal government has relied on fewer than five departmental investigators across Australia to probe child care fraud estimated to run into the billions of dollars.

As state and federal education ministers scramble to deal with the long-standing rorting of Family Day Care subsidies, a Fairfax Media investigation has found the national Child Care Fraud Investigations Team has been overwhelmed for months.

Earlier this year, the team had just four investigators – three based in Canberra and one based in Perth – examining suspected Family Day Care rorting worth millions of dollars. An additional two investigators in Sydney were unavailable because one was suffering from ill health and the second was rarely at work.

Sources within the department and law enforcement confirmed that while the investigation team's most serious criminal cases are, on rare occasions, picked up by an Australian Federal Police taskforce, dozens of important matters have not been adequately investigated.

It comes as government data reveals that more than a fifth of all family day care investigations in Victoria this year identified "high risk" operations – for example, where a child was left alone or corporal punishment was used.

Foundations Family Day Care director Kathi Hewitson said dodgy operators were reaping "massive amounts of money" due to government inaction. "The lack of oversight is astounding," she said.

"I have seen educators at other services just transporting children but not actually having them in care. I quit a service because the staff in the office were fabricating enrolment records, they were then fabricating attendance records and submitting them to the government."

In some cases, federal subsidies have been paid for children who are in school, or who are the children of the day care educators receiving the benefits. In Victoria, inspectors discovered one registered family day care provider was actually a rooming house, with no evidence care was being provided to children.

The number of family day care providers setting up in Victoria has surged in recent years, with concern increasing that the growth is driven in part by unscrupulous operators seeking easy access to federal money.

The western and northern metropolitan areas of Melbourne have seen the most growth. The western suburbs now account for half of the state's entire complement of more than 400 Family Day Care services.

And even though family day care makes up just 10 per cent of providers in the child care services sector, they represent the bulk of enforcement action. Since October 2015, the Victorian regulator has cancelled 62 FDC service approvals.

The state's Early Childhood Minister, Jenny Mikakos, said she was "horrified" by revelations of under resourcing of the federal department's investigation function.

"I am absolutely appalled by the lack of investigators and compliance checks by the Commonwealth," said Ms Mikakos, adding that for fraudsters, it was "a licence to print money".

Ms Mikakos said it was not Victoria's responsibility to assess a provider's likelihood of rorting federal subsidies. "The Commonwealth is expected to ensure its own payment system isn't taken advantage of," she said.

But federal Minister for Education and Training, Simon Birmingham, said the states and territories were the "gatekeepers", and that if a child care provider had been approved there was limited grounds for refusing federal subsidies.

"While investing heavily in subsidising childcare for families is our focus, it is the states and territories that are responsible for regulating the system," he said.

The federal government said a dedicated compliance unit of more than 100 staff – of which the fraud investigations team is a small part – had increased checks from 523 in 2012-13 to 3100 in 2015-16.

Mr Birmingham said action to clamp down on shonky child care providers had saved $421 million this year. The government has cancelled 49 licences in the day care sector over the past year, including 15 in Victoria and six in NSW, most of which are understood to be in family day care.

Successive federal governments have for years held grave concerns about the rorting of the Family Day Care scheme, and responded periodically by tightening laws and eligibility requirements.

The scale of the problem has been most recently illustrated by a federal police inquiry into allegations that millions of dollars rorted from the scheme by FDC providers in New South Wales may have been diverted to overseas extremist groups.

That inquiry was partly generated by the work of the Childcare Investigations Team. But an AFP investigation that led to several arrests of FDC providers in Melbourne last December crystallised concerns about the ease with which people are exploiting the scheme.

While the policing and regulation of the FDC industry relies on a mixture of state and federal compliance action and self-regulation by day care providers, the federal investigation team provides a vital frontline bulwark against cases of blatant fraud.

One source with intimate knowledge of the team's operations said it was failing to confront the problem and "at least 20 investigators" were needed to probe the most serious breaches.

"The resourcing has been hopeless and this has been going on for years," the source said. "The rorting is endemic."

Prosecutions of those involved in rorting were rare, the source said, with investigators struggling to overcome loopholes in the law. Providers who were shut down often re-birthed their operations or simply repaid stolen money and were allowed to continue operating.

Mrs Hewitson, who contracts 20 educators across Melbourne, said no new family day care approvals should be issued until rogue operations were stamped out, and called for a central register so that dodgy educators attempting to get a job with another service provider had a red flag against their name.

She gave the example of a recent home safety check for a potential educator who asked her to flout the law. "He was asking if he could have the children on the books and not actually have them in care, [which is] stealing money from the government," she said. "I turned him down on the spot."

-reprinted from The Age