Child Care Provision In Australia

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Child Care ProvisionIn Australia
The Impact of the Collapse of a Large Provider
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Background
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Child Care in Australia

• Child care provision exist in Australia has a
  strong emphasis on provision by
  private-for-profit providers. In 2004-05 of all
  child care services
• 71 for profit were privately managed
• 26 were community managed or not for profit
• 3 were Government
• More than half the child care services in
  Australia are operated by small providers who
  have between 1 and 3 centres/services.
• Government subsidies are largely in the form of
  fee reimbursements to parents (available to
  services that meet quality assurance
  requirements).

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Significant Expansion in Child Care Places
1989 2008 change
Child Care Places 114390 700314 612
Child Care Centres 2340 11595 496
Female workforce participation 3.1 million 4.8 million 157
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The Growth of a Major Corporate Provider

• ABC Developmental Learning Centres was founded in
  1998 (mainly targeted long day care centres with
  children aged 0-5)
• ABC expanded over the next three years, reaching
  43 child care centres by June 30, 2001.
• By November 2005, it had 697 Early Childhood
  Education centres throughout Australia and New
  Zealand.
• By July 2007, it ran 1084 centres in Australia
  around 25 of all child care services.

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The Number of ABC Learning Child Care Centres in
Australia
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ABC at the Time of the Collapse

• 1037 child care centres in Australia
• 25 of Long Day Care market
• Over 100,000 children
• 16,000 staff
• 1.43 Billion debt
• 88.5 Million annually in Government Child Care
  Benefit
• 1,000 centres also in USA, 100 in UK and 100 in
  NZ

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What was Right with ABC?

• Accreditation standards
• Staff qualifications
• Support for staff
• Building standards
• Opening hours
• Services provided
• Value for money
• Brand recognition

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What was Wrong with ABC?

• Company financial records
• Lack of autonomy for centre staff
• Insular organisation
• Top heavy with administrative staff
• Contributed to oversupply of child care places
• Complicated and expensive lease/building
  arrangements
• Debt driven, ruthless acquisition policy
• Complex organisation and governance structure

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Chronology of Events

• March 2008 Reports Eddy Groves had sold almost
  all his stake in the company. ABCs share price
  plummets. Company enters voluntary trading halt.
• September 2008 Company cannot provide end of
  year results- leads to further drop in share
  price and trading halt extended.
• 24 September 2008 -Child Care Industry Taskforce
  (CCIT) established.
• 30 September 2008 - Eddy and Le Neve Groves
  resign all management and Board positions at ABC
  Learning
• 10 October 2008 - ABC Board acknowledge that
  their financial circumstances are far more
  serious than was previously apparent to them.
• 6 November 2008 - ABC Learning enters voluntary
  administration and a Receiver is appointed.

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Australian Government Response
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Why did the Government Need to Respond?

• Possible major social and economic disruption in
  many Australian communities.
• Employees were likely to have been terminated
  without their entitlements being paid.
• There was likely to have been extended confusion
  and chaos while the business issues were resolved.

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How Did the Government Respond?

• 7 November 2008 Government announces 24
  million support package to keep centres operating
  to 31 December 2008
• 10 December 2008 McGrathNicol announces that 55
  centres will close at the end of the year, 720
  will continue as ABC with the intention of
  selling as a single group.
• 10 December 200 Government announces a further
  34 million package to fund the remaining 262
  unviable centres (ABC 2) pending their sale.
• Remaining 262 unviable centres transferred to a
  new company (ABC2) placed in hands of Court
  Appointed Receiver.

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What did the CAR do?

• Undertook process for the sale of the unviable
  centres
• Negotiated the sale, transfer or closure of all
  the ABC2 centres
• Managed the contract with McGrathNicol to
  continue the day to day operation of the centres.
• Assisted families at closing centres to secure
  suitable alternative care.
• Assisted staff at closing centres to secure
  comparable employment

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The Court Appointed Receiver (CAR)

• Of the 262 ABC2 centres
• 34 centres were sold to 5 different
  not-for-profit operators.
• 202 centres were sold to for-profit operators
• 26 have been closed

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Establishment of Not-For-Profit Syndicate
GoodStart

• ABC Receiver, announce process for the sale of
  remaining 720 ABC centres on 31 August 2009.
• GoodStart (made up of four non-profit
  organisations) is established with philanthropic
  investment and loans from the Australian
  Government.
• A new level of collaboration and cooperation
  between the Government, the not-for-profit sector
  and private investors.
• GoodStart emphasis on quality, aims to create a
  vibrant, child-focussed early learning
  organisation.

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Final Outcome

• Of the ABC centres not transferred to the Court
  Appointed Receiver
• 16 centres were dealt with prior to the sale
  process, and 706 were offered for sale.
• 571 centres have been purchased by GoodStart.
• GoodStart is negotiating to purchase another 107
  centres.
• The Receiver has negotiated the sale of another
  24 centres.
• The Receiver was unable to secure purchasers for
  4 centres which have or will soon close.

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Post ABC Collapse

• Over 90 per cent (952 out of 1037) of the
  original ABC Learning Centres operating in
  Australia at the time of the collapse are still
  operating today.
• After the GoodStart sale the projected long day
  structure is
• Privately managed (64)
• Community managed or not for profit (34)
• Government (3)

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Lessons Learnt
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Reducing the risk of a similar corporate collapse

• New operators must demonstrate that they are
  suitable to operate a child care centre.
• Operators must give 42 days notice before they
  close a child care centre.
• Monitoring of child care centres has been
  strengthened.
• A new civil penalty regime has been introduced.
• In the 2009-10 Budget, the Government, subject to
  consultation, announced plans to
• The financial viability of large Long Day Care
  (LDC) providers will be assessed before they are
  approved for Child Care Benefit (CCB) and will be
  reassessed each year.
• The Minister for Education will have new powers
  to commission an independent, confidential
  investigation or audit.

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