Interview: ACA’s Paul Mondo cites CCS transition a “qualified success”

The transition to the new child care subsidy (CCS) has been fraught with challenges, particularly those to do with the level of preparedness of the different third-party software providers servicing childcare providers, but the introduction of the CCS should be seen as a “qualified success” Australian Childcare Alliance (ACA) National President Paul Mondo told The Sector Founder Jason Roberts in a recent interview.

 

Interviewee: Paul Mondo

Organisation: Australian Childcare Alliance

Date: 15 August 2018

Topic: CCS transition

 

Jason: Hi Paul, thanks very much for joining me this morning for a discussion on the CCS. So, to kick off, from the perspective of the ACA how has the transition been?

 

Paul: Thanks Jason. I think from my perspective the transition has been very much influenced by the third-party software provider services used. One of the things that the government should be commended on is that there has been no systemic failure at all in relation to the IT infrastructure and its build. But we know that some software providers have succeeded better than others at delivering a product for their users. The question is, who was responsible for ensuring that those software providers were ready for the 2 July? I think that a debatable topic. I think obviously as commercial entities they have a responsibility to their customers to have been prepared. But unfortunately some of them were not in a great position at the ‘go live’ date and that in turn has created reputational challenges for some of our members.

 

Jason: I see.

 

Paul: And, what has happened? So, despite what has systemically worked quite well, the frustration is actually at the coal face with a service-nominated supervisor who’s administering the CCS in that service, on a day-to-day basis. And their challenges have been such that they’ve needed to understand how to access, how to administer the system, and put different practices in place to ensure that they comply with new laws. And there was a palpable sense of frustration, probably in the three or four weeks leading into 2 July, and the four weeks immediately after that when everybody in Australia was learning something new, and couldn’t get the support they needed because the services to access that support – be that the government helpline or the software provider support services – were completely inundated with calls and did not have the capacity to be able to give people the answers they needed.

 

Jason: I understand.

 

Paul: So, that sense of frustration didn’t mean that the systems weren’t working. In many cases, they were. It just meant that directors did not know what they were supposed to do in order to complete a particular task. The by-product of that, or the extension of that, is that those nominated supervisors spent a lot of time dealing with the consequences of their missteps. This was most felt in and around the billing to parents. As a result families were, in many cases, left out of pocket because of these missteps and because they couldn’t be resolved in a timely enough manner. This heightened the sense of urgency and emotion the centre manager had to deal with.

 

Jason: Ah, I see. So just to be clear, the consequence of the directors not necessarily knowing what to do and when to do it meant that for some families they either did not get billed correctly or did not receive their CCS at all. And as a result of that, families were coming in looking for answers, and in situations when they had not received any CCS were finding they were, in some cases, expected to pay full fee.

 

Paul: That’s correct.

 

Jason: And therefore, the mum and dad would need to pay that extra amount?

 

Paul: Well, two things actually happened, either services charged families the full fee for a period of time and the families therefore had to find that extra money. Or services did not charge the extra fee, instead bearing the cost themselves on the basis that the CCS would eventually come and they would be paid back.

 

Jason: Okay, yes, I see. So that is an example of centres going above and beyond but the consequences of that would have been a spike in debtors.

 

Paul: Absolutely. And that might not have been a lot of families in the service; it might have been a handful of families. Or in some services where the software provider wasn’t ready, that might have been everybody, because they couldn’t estimate the correct fee.

 

Jason: For those services not impacted by the software provider do you have a sense of the split between those that offered this option?

 

Paul: I think it’s more common than what anybody would appreciate. I think that there is a lot of circumstances where most service providers deem what we do as a community service and do not want families to be out of pocket if they can at all avoid it. 

 

“I think that there is a lot of circumstances where most service providers deem what we do as a community service and do not want families to be out of pocket if they can at all avoid it.”

 

Jason: And for those that were impacted by the software provider issues?

 

Paul: Where the software provider wasn’t ready, that might have been everybody, because they couldn’t estimate the correct fee and had no interface with the government. So, the invoicing was conflicted and no CCS was flowing in.

 

Jason: Very challenging. Am I right in thinking that these problems were experienced mostly at the smaller software providers?

 

Paul: Yes. So, I think that when families can’t be invoiced accurately, or at all, or if they couldn’t lodge a session to receive the subsidy component from the government directly, that there was some severe financial stress on the provider and/or emotional stress with the person liaising with the parent directly. As of now [August 2018], these issues are slowly disappearing but they’re not completely over the line just yet.  

 

Jason: And the way around that would have been, I guess better planning?

 

Paul: Yes. I think what we did have, was from the time the legislation passed to implementation date, 15 months.

 

Jason: That’s it, yes, that’s right.

 

Paul: And so it was an enormous legislative change, IT infrastructure change, something that’s really unheralded. There have been very few attempts by government to have such a significant change around how something is subsidised, and the IT infrastructure to support that ever. And 15 months is a really short lead time to try to make that happen. In an ideal world, it would have taken an extra 12 months to make sure that things were ready.

 

“There have been very few attempts by government to have such a significant change around how something is subsidised, and the IT infrastructure to support that ever. And 15 months is a really short lead time to try to make that happen.”

 

Jason: You would have liked an extra 12 months.

 

Paul: Exactly. And the flip side of that is that the additional support for families was needed as quick as possible. So, what’s happened is the service provider is in the middle here and having to do the work of making sure that they were ready, which some would have succeeded better at than others, and then working with how this stuff changes from there.

 

Jason: Yes. And I guess, you touched on this earlier, just how anxiety-ridden the time would have been, would’ve been dependent on which third-party software provider you’re with.

 

Paul: Look, it certainly had an impact, and that’s reflected in the results of a survey the ACA sent to our members following the CCS implementation. It’s really clear that the number one issue for transition, for the respondents to our survey, was third-party software providers. So, that even superseded any perceived problem with government feedback, or government information. Third-party software provider related concerns weres clearly the number one issue that impacted services. The other part of that is that services played a very significant role on behalf of government in supporting families’ transition to CCS and undertaking the parent call to action. 

 

Jason: I see. I wonder if the government planned for that,ie. expecting the sector to do the heavy lifting for them in this area.

 

Paul: Look, the government certainly invested in educating families that they needed to do something. Some families did it straight away. And like anything, you have earlier adopters, and you have those who leave it to the last minute. Some left it to the last minute, and as a result those families were left out-of-pocket.

 

Jason: I understand.

 

Paul: But along the journey, there was certainly a request from government to get services on board in helping families transition. And that occupied a lot of time for service providers. This was time that busy administrators in service don’t have, and they spent hours and hours upon hours on it. In some cases, services set up computers to help families to be able to come in and support them. And it was really about helping achieve, helping the family achieve that. There was nothing in it for the service, other than helping a family get across the line. And so, as that investment in resourcing, human resourcing, to actually help facilitate that on top of understanding the legislative and compliance requirements of the new law, it was extremely intensive in a very short period of time for service providers.

 

Jason: Yes understood.   

 

Paul: That being said, one must note for a large majority of families, the process was straightforward. But there are cohorts of families that for whatever reason that was difficult or it just didn’t work. Technically something went wrong, and the data didn’t engage from the service back to the servers.

 

Jason: But they’re the exception though.

 

Paul: Yeah. Look, it was common enough for it to be a significant enough problem. I would say 20 per cent of families would have had some difficulty, whatever that may be, in doing this, possibly a little more.

 

Jason: I see.

 

Paul: That’s correct. Now the part of this that frustrated both service providers and families was actually Centrelink. So, whilst the Department of Education were doing their darndest to make sure that transition worked effectively…

 

Jason: From a system perspective.

 

Paul: From a system perspective, yes. One of the challenges that parents and service providers had, particularly those parents who were having difficulties for whatever reason, is that it essentially involved engagement with Centrelink to try to resolve the issue. And from about three weeks before the end of June, before that they had resourced the call center well enough that wait times were not particularly long in any way. Then because it was the end of financial year anyway, Centrelink core staff are already under pressure at that point in time for all of their payment processes. These families who were having their enrolments not confirmed at the service, or couldn’t understand how to claim an exemption, or the ones fit around the edges there, the service provider was saying “Look, you probably need to call Centrelink to resolve this.” So they would try Centrelink. Well you couldn’t get them, because you couldn’t get through on the phone, or you’d have to wait for two hours, or have to try multiple times. And then Centrelink would actually say to the parent, “Look, this is something that the service must fix.” So, you were having this back and forth, back and forth. And the parent was yo-yoing in the middle between Centrelink and the service. And in most cases, the service provider was actually correct. And it was the Centrelink call staff who were misinformed and did not understand enough about the nuances of the legislation. And that has been highly problematic. So, at the Centrelink call staff level, there has been a failure for them to understand enough of the nuances of package, to support families sufficiently.

 

“…at the Centrelink call staff level, there has been a failure for them to understand enough of the nuances of package, to support families sufficiently.”

 

Jason: I got you.

 

Paul: And that would be okay, if you could get onto Centrelink in a five minute phone call. But it’s not okay when you’ve got an hour or two hour to wait every single time you do that. So, that part has been really significant. And one of those nuances which has caused the most problem, has been the preschool exemption.

 

Jason: Please share about that.

 

Paul: The preschool exemption applies to children the year before school to access a preschool program delivered by an early childhood teacher in one of their services. So, for 36 hours a fortnight, families who do not meet the activity test will be able to access the 36 hours a fortnight, which they wouldn’t normally get to access in that year. The challenge is that it impacts about 30,000 families around the country.

 

Jason: That’s material.

 

Paul: The challenge was that, firstly, there was no clear way for families to know whether they qualified for that exemption in terms of any correspondence they received after they’ve completed an assessment.

 

Jason: Which compares to everybody else, who got a letter saying, you get ‘x’ percentage and ‘x’ hours.

 

Paul: That’s correct. So the hours for that preschool exemption were not evident on the letter that they receive.

 

Jason: I see.

 

Paul: And that caused mass confusion in the sector and for those families. But despite not having formal letters we come to realise that if the service performed a certain task in the software, the payment would automatically flow for those children anyway. But that realisation came later. In the first fortnight from 2 July, the payments didn’t flow.

 

Jason: Okay. Do you know why?

 

Paul: It was a glitch which was recognised and a patch has been applied as a fix. But until that was completed families were theoretically expected to pay full fees. 

 

Jason: And if they have got no activity in the first place I guess these families are the ones that are least able to cover those fees anyway.

 

Paul: Absolutely. You are talking about either low-income families or a family with stay-at-home parents, single income, and that single income. So that preschool exemption continues to cause some concern. Considering its 30,000 out of 1.1 million families it has been one of the most significant queries that have been raised through us. So you know we are thankful there was recognition immediately that there was a problem.

 

Jason: I see.

 

Paul: Yes, that’s right. So these are still being resolved but payments do now work for families. But there is a lot of clarity for family and services on this space as to how and when children qualify. It should be relatively simple. And quite frankly, this is a really positive part of this policy is this preschool exemption. So this is a real positive thing and it should be there for children to access because it is an important part of their early education to be able to access that in the year before school. But accessing it has posed concerns and problems along the way. Whilst a large part of it has been resolved there is still some fixes that I know will unfold over the coming weeks to be able to ensure all has been rectified there. And one way or the other, I suppose that leads to another decision that I think from a service level was found to be a little odd with previous recommendations from the productivity commission. So with the CCS all subsidies are paid directly to a service. The family has no choice anymore like they had previously around how that subsidy was paid. But under CCS families who are backdated in any payment, that back pay goes directly to the family. And in the case where services have actually had to wear some of the cost, ie: only charge the family the gap in lieu of receiving the CCS later they have no visibility of when the repaid funds actually they went to the family.

 

Jason: I see.

 

Paul: The rationale is simply that the payment should go to the family as a reimbursement. But in practice it leaves the centre exposed. You could say, well, look we are happy to do this (only charge you gap) and once you get the repayment let’s fix it up at the end. But the flexibility of doing that actually is diminished by not knowing where something goes. So the only logical reason then is to charge families full fee for that time to ensure that you are protected from that exposure. And you know, I think it makes it very clinical and cold and takes out some of the potential for at least supporting families by not leaving them out of pocket with what could be a really significant fee. So I think that was curious and it’s something that I understand the legal rationale as to why it was paid, but I do think that it does change how a service provider might consider their options.

 

Jason: Understood. 

 

Paul: So when we talk about how everything is working systemically, I think that’s really important. But I think these operational issues that still present themselves are critical to the smooth functioning of a payment system. And when a family is impacted and is out of pocket regardless of whether it’s $1, $10 or $50 – that hurts a particular family quite significantly. And you know, we recognise that cost is an issue in our sector. And if you are spending $500 or $600 a week out of pocket, when you are expecting to spend $300 or $200 dollars out of your pocket, some families will find that hard. I think that’s where we are at with these operational issues and things that we should be trying to avoid if possible. So again, I have to give credit where credit’s due because where the issues have been raised, they are responding to them and dealing with them.

 

Jason: I see.

 

Paul: We have to give credit, appropriate credit in the right spot because I think that that’s really, really relevant.

 

Jason: Ok, noted. Around the administrative piece of the jigsaw. Is there a shift in the level of administration required by that centre manager or operator to comply with the new CCS rules? 

 

Paul: So, I think there is no doubt that the requirements of CCS, at a service level, increase administrative burden. There is no doubt about that. Now the question is what part of that is ongoing? And what part of that has to do with transition? So, one of the requirements of the complying written arrangement from an initial sign-on perspective at transition time was problematic in terms of trying to capture the correct data for all of your existing families. And that was facilitated in some cases by a software provider and in other cases not so much. What it causes at service level was a review of your own practices to ensure that when a family signs on, the information is there. But that’s a one-time process.

 

Jason: And probably not a bad thing in the long term.

 

Paul: You can accept that aspect thing. The issue of the Complying Written Arrangement (CWA) is not the initial enrolment process as a problem with capturing that data. It’s the need to ensure that it is updated every time a child permanently changes their arrangements, whether that is swapping a day or whether it is adding a day. And importantly remembering to ensure that you do that. Because the service provider didn’t have to do that before.

 

Jason: Please explain.

 

Paul: So the idea is that you need to have something in writing as evidence to prove that a child has increased their days. For example, going from two days to three days on a permanent basis. Not on a casual basis, on a permanent basis. What that means in practice is that often families call you, come to the office and say to you, “I need to pick up a Wednesday now on top of my Monday, Tuesday. Do you have space?” And you say, “Yep, I’ve got space.” In that sense, you will enter the booking and it’s done. Well now, you need to get them to sign off – you’d actually have to print a form for them to sign, to show that they have actually increased their days. Just in case, anyone ever comes to query that additional day.

 

Jason: Is it manual? Or do they do it through Centrelink?

 

Paul: No, the CWA is purely between the service provider and the parents. And it could be an email they send you as evidence. That’s sufficient. But that means that you are printing off emails making sure you are putting them enrolment record. And it’s a very inefficient way of doing that to make that work. So essentially most services have created some sort of form to help manage that process. Some may have had that already. Many didn’t because that informal interaction is enough. Because a parent generally knows if they are being charged incorrectly. So in that context, that ongoing change to a child’s booking is something that is in my perspective an unnecessary administrative requirement.

 

Jason: I see.

 

Paul: The other aspect to this is that when a family does enroll there is extra administration. So a family’s responsibility in the process is they apply for the CCS. They sign a CWA with a center. The center lodges that family’s data through the CCS software. The family then receives a notification through the myGov app to say that service has actually said that their child is going to be attending the center. And then the family needs to approve that enrolment before subsidies can flow. So that means the families have to do two process through Centrelink, and a process through the service before subsidies flow. That didn’t happen in the old system. So there is an increase of administration then for the family. And also for the service provider to check to make sure that the family actually approves the enrolment through the myGov app.

 

Jason: Ok noted. What do you think is behind that? You think the government are aware? Is it a security thing? Is it because money is involved?

 

Paul: I think the government’s rationale would be that there needs to be a legal contract. It’s part of the internal policy to ensure that parents are fully aware what they’re paying for. So the parents fully understand how they’re being charged, what they’re being charged for. And if they’re not happy with it to raise it with the service.

 

Jason: I see. Yes. So it’s about accountability. And to some degree, there must be a kind of taxpayer accountability ie: the government is using my tax dollars to fund your children’s education so we need to make sure that that money is being spent properly.

 

Paul: The other change that is relevant here is that what we do have is an enrolment process where under the third-party software provider model you would enrol and register those details through the Department of Human Services or Centrelink at the initial enrolment. As I suggested earlier, with the CWA every time there’s a permanent changing in booking pattern, it actually triggers a re-submission of the child’s enrolment to Centrelink to say that the child is going an extra day a week. So the CWA needs to be signed off. We need to have some written evidence, some evidence to say that the parents agreed to that change. The enrollment is re-submitted to Centrelink. The parent receives a notification to say that ‘service X’ has added this. The parent is not obligated to then tick a box to confirm that that’s accurate on the Centrelink app.

 

Jason: But they need to though in order to get the subsidy.

 

Paul: Not if it’s a change or if they’re already really booked at the service.

 

Jason: I see.

 

Paul: But they can dispute it at that point in time. 

 

Jason: I see.

 

Paul: Right? So they can say, “No, I didn’t agree to that,” and create some sort of dialogue between the service provider there.

 

Jason: I see. And that is a new dynamic?

 

Paul: Yes, it is. Now again, there’s a level of automation which can help this, but the efficiencies available are in direct correlation to the quality of the software product the service provider is using. 

 

Jason: I see. So the better the product, the less inefficiencies.

 

Paul: Yes. And when you’re dealing with a commercial vendor in software, they are the most critical aspect of ensuring efficiency in the system. My position is that it’s not a great idea for the sector to be solely reliant on independent vendors to ensure that things are efficient because that means that some are better than others, and it’s going to work more efficiently for some rather than others.

 

Jason: Yes. So to address that concern there would need to be minimum standards and a very clear framework stipulated by the state.

 

Paul: That’s right.

 

Jason: And as you shared earlier, that might not have been as clear as it could have been as we went into the transition. And so you get this multi-tier system.

 

Paul: Absolutely.

 

Jason: Have we therefore seen a migration of owners and operators moving away from the smaller third-party software providers to the larger ones?

 

Paul: I have no statistics on that at all, but the suggestion is that many are considering their options right now. 

 

Jason: I see.

 

Paul: I don’t know whether that’s good or bad. I don’t know if I can say that’s great because sometimes competition is healthy and monopolisation is never a great outcome in any space at the end of the day.

 

Jason: And what about the Department of Human Services’ PRODA digital access – the registration piece? Has that proved a challenge for any of your members?

 

Paul: The registration of individuals for PRODA is a one-off event for anyone administering the system. I don’t have a major concern with PRODA or in registration for individuals and for service. It’s far better than the alternative option of using AUSKEY which the government use for the inclusion support model. And that was far more problematic for service providers than PRODA registration. The provider entry-point software we use is really aimed at providing some clear functions for government interaction. Look that’s very rudimentary, but it works. 

 

Jason: Okay.

 

Paul: The challenge for service providers in that aspect is the additional step that they need to do when they’re employing somebody new to administer subsidies is that they need ASIC checks, they need police checks, they need a whole range of checks that weren’t required before under the old system. So those who are administering the system before were exempted from doing that. But any new service provider and nominated supervisor or anyone who has access to the CCS information has to undertake a series of tests to ensure that they’re of adequate character to administer the system. And look I’m not opposed to that in any way. We want to make sure that anyone interacting with this level of money or subsidy is of the right standard to be able to do that.

 

Jason: Absolutely. Okay. Lets now explore the families and how they have been impacted by the CCS.

 

Paul: So let’s take a step back. One of the things that the policy has forced providers to consider is whether they would vary any charging practices. And that is, whether they’re going to charge nine or ten hour a days. Some of the large providers have made very clear business decision that that’s what they will do. And so I think that’s interesting in terms of its impact on families. There are a large number of families who are considerably better off – I’d say 50 per cent of families are better off, and in many cases significantly better off on the cash flow perspective. Aroundt 20-30 per cent of families are about the same. And then I’d look at about 20 per cent of families who are worse off across the board for a range of different reasons. The sector has always advocated against this part of the policy: the lack of subsidy and subsidised hours for families who don’t make the activity test. And I think that there is no doubt that the sector will continue to push this. I, personally, will continue to push for ensuring a minimum level of access for all children regardless of activity for families.

 

Jason: Understood.

 

Paul: So if you are earning bellow $66,999 per annum you would receive 24 hours of care a fortnight. And if your income is above that and you don’t meet the activity test you will get zero subsidy.  So a family on $75,000 a year with a stay-at-home mum will get no subsidy at all to have their children access what is really critical part of a child’s education.

 

Jason: So how does one manage that in a supportive way? I mean if you are a centre manager and you’ve got these types of families how do you help them? 

 

Paul: For those who have no access to no level of subsidy, there is very little that you can do as a service provider because the cost of maintaining viability is reflected in daily price.

 

Jason: It’s so challenging. And those conversations between the center manager and the family must be very difficult.

 

Paul: Look, I think there was a huge challenge on 2 July for those families who couldn’t have their children in care anymore. So under the old system, if there was a stay-at-home parent they will be eligible for 24 hours a week or bear significantly reduced hourly rates than what CCS actually provides. Up to an income of about $145,000 to $150,000 was subsidised. But obviously there was an income test for that. So, families above $100,000 under the old system received a negligible amount of childcare benefit (CCB) to help offset the fee. For those families under $100,000, it was quite a significant impact on the affordability for children to be able to access care. So the old system did not give subsidy to everyone. It was not a universal minimum 24 hours a week. I think that’s a misnomer that has been put out there. It was income-tested and incurred at $150,000. I’m not saying that’s good, bad, or otherwise. But that’s the default system. And so when we talk about who’s worse off and who’s better off under the new system compared to the old system the families between $66,000 and $145,000 went from having some level of subsidy up to 24 hours a week to no subsidy whatsoever. That is, I think something that is problematic and part of our advocacy moving forward. The reduction of sessions or hours from 24 hours a week to 24 hours of fortnight for those families under $66,000 is where services potentially have considered changing their charging practice.

 

“…when we talk about who’s worse off and who’s better off under the new system compared to the old system the families between $66,000 and $145,000 went from having some level of subsidy up to 24 hours a week to no subsidy whatsoever. That is, I think something that is problematic and part of our advocacy moving forward.”

 

Jason: To shorter days so as to spread subsidy over more days.

 

Paul: But my experience, and I quite understand this, is that there is a minimum fee you must charge to make your service viable. So a child for six hours of the day is not merely half of a full-day rate – it would probably be more than that.

 

Jason: I see.

 

Paul: So the cost for charging for six hours is a relatively negligible difference to the charge for full days care.

 

Jason: I see.

 

Paul: The impact there is that the viability of charging those six-hour sessions for those families is not necessarily – it doesn’t make it viable for services to consider that option, ultimately. Granted some services are trying to make that happen and I think that the impact on the individual services at specific communities is going to be greater than others. So from what I understand there are about 8 per cent of families who were expecting not to make the activity test around the country. But in some services that representation might be 20 per cent and others it might be 3 per cent.

 

Jason: I understand.

 

Paul: So I think that understanding that piece is really critical there. The other component to how some families are impacted really deals with the subsidy being allocated across the fortnight rather than a week. And that’s caused confusion for families, particularly full-time families, because it can mean that in some cases a family uses 60 hours of subsidy in one fortnight and 40 hours in the next which has meant a significantly different gap phase for families from one week to the other.

 

Jason: I understand.

 

Paul: And that has been difficult to explain. In some cases services reverted to charging for 10-hour sessions a week rather than 12-hour sessions which is in-line with government intent, from my understanding, to help offset that. But that’s on the assumption that those children only attend that time. And I think one of the things we’ve got to consider in reality is if you’re living in one of the middle ring suburbs of any major city and you work in CBD, you likely have an hour travel time in each direction. You work eight hours a day. You have an hour lunch break. That’s 11 hours there. So to say that fits in within 10 hours a day is false. In many cases those families can’t access a 10-hour session because they consistently exceed that session. And I’m not sure why families should be penalised for that. It’s caused a lot of confusion for families who were claiming only childcare rebate (CCR) before because the Government said that most across the 12-month period will be better off under this new system, and in some cases considerably better off across the new system because the subsidy is not cut. They find it difficult to understand how they were paying 50 per cent of the out-of-pocket expenses before, and now they’re paying 50 per cent of a 100 hours plus a 5 per cent withholding deducted from that. So they receive their assessment notice at 50 per cent and thought that their out-of-pockets would be the same – and over a 12-month period they’re certainly better off but from a cash-flow perspective they’ve queried the whole range of things around that. That’s caused the confusion.

 

Jason: The 5 per cent withholding can you explain what that is?

 

Paul: In the old system, when CCB and CCR were paid, 15 per cent of the CCR was withheld by the government. And that was to do with the CCB being an income-based estimate to allow for any miscalculation to families were not penalised at the end of it because there’ll be a reconciliation process. And if they underestimated their income, they wouldn’t have a debt to pay to settle it. So, the CCR obviously wasn’t income tested before. And so families who under qualify for CCR were not aware of withholding as a result.

 

Jason: I see.

 

Paul: Initially when the new CCS policy was announced it was a 10 per cent withholding that is applied and to commend the government on actually listening to the sector they changed it to 5 per cent.

 

Jason: Yes. I see.

 

Paul: So the notion of withholding I think is sound because this subsidy is income tested. And there is always the capacity for families to get additional income than they originally estimated. And it’s a better outcome than having a debt at the end of any given financial year.

 

Jason: Understood.

 

Paul: But for a family who hadn’t experienced that before, the question is why. So they’re kind of looking at the system and say, “Well, I’m worse off” even though they are not.

 

Jason: I see.

 

Paul: So that part of it has been tricky.

 

Jason: And those families that are better off. They will be paying less gap. So that implies they’ve got savings in their pocket. Now, the question is are they using those savings to pay-off their credit card bill? Or are they using their savings to add days at your centres?

 

Paul: Yes. I don’t have any evidence to support increased utilisation as a result of that increased affordability. And I don’t have any data yet to reference on this. I think that that’s understandable because the sector has said that affordability is a concern and has been a concern for 10 years. There was no change in subsidy for 10 years yet we undertook the most significant regulatory change the sector has ever seen over the last six years driving up cost. So therefore–

 

Jason: The National Quality Framework you mean?  

 

Paul: Ratios, qualifications, administration yes. They have driven up the cost of delivering the service that has pushed up price in the sector. It is indisputable but that is the case.

 

Jason: I understand.

 

Paul: So with no real change in subsidy the gap is just growing. And the real challenge there is that those families who have been hurting rather than necessarily increasing utilisation are just using it to be able to live life a little more easily than what they were before.

 

Jason: I see.

 

Paul: And look, there are significant gains for families financially, some very significant gains. I have a single mum who has a child in three days a week at one of my centres, and she is going to be $160 better off per fortnight as a result of the change. That’s a lot of money. So we need to balance what isn’t working or what can be improved with what is successful. And we can never forget about those and that has to be a part of that work. But to say that the old system worked and that this system is terrible, it’s just wrong. It’s just an inherently wrong assessment. The old system had flaws. This system has flaws. Would it be nice to have some of these flaws not in the current system? Of course.

 

“…to say that the old system worked and that this system is terrible, it’s just wrong. It’s just an inherently wrong assessment. The old system had flaws. This system has flaws. Would it be nice to have some of these flaws not in the current system? Of course.”

 

Jason: Sure.

 

Paul: But the fact that there are families that are doing it easier is vital. ou can’t lose sight of that in the context of what hasn’t worked. I don’t think we can focus on what hasn’t worked too much. We need to focus on what has worked as well. And so balance, I think, is really important in any discussion around it. And I think that’s the key to seeing how that goes. Some families eventually may increase utilisation once they fully understand how much better off they are. It’s probably going to be offset by those that are worse off under the system. So from a utilisation perspective my view is it can be about the same overall.

 

Jason: Got you.

 

Paul: I don’t think that we can say that it will deliver a big increase because it really is a catch up on what should have been implemented five years ago.

 

Jason: I see. I think we’re quite close to the end now.

 

Paul: Okay. Just to reiterate, I think that one’s experience of the transition was really impacted by how your software provided performed. And I know of one childcare provider that manually calculated fees for the first five weeks of the CCS transition because their software provider was not accurately calculating. That would be a nightmare. And if that was me, I’d be saying, “This has been terrible,” if that was the case.

 

Jason: I understand.

 

Paul: In my own situation, that hasn’t been the case. And so I think that we need to look at it through a particular lens. We need to look at it as a systemic success.

 

Jason: Yes.

 

Paul: But we need to look at the fact that there are real families that have been out of pocket or real services that have been left out of pocket because there have been failings somewhere along the journey. And so a qualified success is probably how I would describe it.

 

Jason: Okay. Well, let’s wrap it up there Paul.

 

Paul: Thanks Jason.

 

 [ENDS]