This chapter recommends making the ECEC Regulator independent, increasing the intensity of its unannounced visits to services to at least annually, ensuring it has contemporary risk assessment capability and tools, and a change to National Law to increase the penalties it can apply to services that do the wrong thing.
5.1 An independent ECEC Regulator
Effective regulation is an important feature of monitoring, intervening and improving quality and safety in the sector.
The Review has taken care not to examine or jeopardise ongoing investigations into live criminal matters as well as regulatory investigations by the ECEC Regulator. However, the Review was asked to highlight priorities to support regulatory activity and reform and to identify improvements to interactions between regulatory schemes.
The current ECEC Regulator, Quality Assessment and Regulation Division (QARD) is located within the Department of Education. The Review heard that the department has measures and protocols in place to allow QARD to operate with independence from the broader department.
However, this year, the Department of Education is becoming a provider of early learning and childcare through the new Early Learning Victoria service that will run up to 50 centres. Through the Victorian Government’s Best Start, Best Life reforms, the department also funds kindergarten programs and services across the state, which are regulated by the ECEC Regulator. This increases the risk (or the perception) of conflicts of interest, as the ECEC Regulator will sit within a department it is required to regulate. The recent Wheeler Review of the New South Wales ECEC Regulator recommended that it be moved from the Department of Education to become an independent entity.
The Review considers it prudent that the ECEC Regulator be made independent of the Department of Education. There are a range of administrative and legislative models that can achieve this. The Review has not formed a view on which should be adopted; however, the model chosen should support the ECEC Regulator to take independent decisions regardless of the service provider they are dealing with—government, not-for-profit, or for-profit.
Recommendation 9: An independent ECEC Regulator The ECEC Regulator should be made independent of the Department of Education, to avoid conflicts of interest, and should be strengthened to regulate an increasingly complex ECEC system. |
5.2 Stronger oversight of services
The Review heard the National Quality Framework is highly regarded internationally as a leading approach to ECEC regulation. It provides a strong foundation for the system, but needs to be applied and overseen rigorously, and be responsive to changes in the system.
Visits to ECEC services are a key regulatory tool used by the ECEC Regulator’s Authorised Officers that enable them to perform their functions under the National Quality Framework. Authorised Officers visit services before granting approval to begin operation, during a service’s first year of operation, where there has been a change in the approved provider, for assessment and rating against the National Quality Standard, in response to notifications, and for monitoring and compliance purposes.
These visits will also be critical to the success of the Commonwealth Government’s recent legislation to strengthen funding levers, which will rely heavily on the intelligence of state and territory regulators to inform which poor quality services should have their funding removed. Visits also allow regulators to monitor whether services subject to Commonwealth Government compliance actions have made the required improvements needed to meet Commonwealth Government funding standards.
Unannounced compliance visits are a particularly important way to gauge the everyday practices of services—not just the polished performance that may be put on for more planned visits. Visiting unexpectedly promotes healthy vigilance within services to be consistent in their compliance. Given their effectiveness, the number of unannounced visits should be increased. Having visits too infrequently reduces visibility over the sector and can create complacency in providers.
The number of visits by the ECEC Regulator to services is a Victorian Budget performance measure. In 2024–25 the Regulator conducted 4,729 visits, exceeding the 4,000 visit target. While this shows volume, there is no current target for the frequency of visits.
Currently, the ECEC Regulator conducts unannounced visits at an average of once every 2 years per service. In New South Wales, the Ministerial Statement of Expectations specifies targets around visits, including that 100 per cent of services will receive a monitoring and compliance visit at least every 18 months.
Given the importance of visits, the Review recommends that Victoria introduce the most rigorous inspection regime in Australia—with unannounced visits to every service occurring at least once every 12 months.
The ECEC Regulator is responsible for assessing and rating ECEC services at regular intervals. Providers with higher ratings have longer between assessments under an ‘earned autonomy model’.
The Review heard that the average time between visits for assessments and ratings can be too long, currently at an average 3.5 years between visits for services.
Allowing too much time to pass between assessments and ratings can make quality ratings misleading and outdated. If the time between visits is too long, there is a risk the quality of a service may have dropped but a service still holds a positive rating. It can also delay recognition of improvements made by services that would merit an uplift to their rating. Services that persistently hold a ‘Working Towards’ rating are a concern, so reducing time between visits will help to address non-compliance. It is important that families can rely on ratings to give them an accurate indication of the quality of a service.
The Review recommends that the average time between ratings is reduced through more frequent assessment and ratings visits. The Review also heard there are benefits in setting particular ‘themes’ to regulatory activity (including unannounced visits) to encourage services to address specific compliance requirements the regulator is concerned about.
Recommendation 10: Most rigorous inspection regime in the country The ECEC Regulator should conduct more visits to services each year, to: a) increase the volume and frequency of unannounced compliance visits to a nation-leading standard of at least once per service every 12 months; and b) reduce the average time between Assessment and Rating visits. |
The Review recognises this will require more Authorised Officers, which needs funding and time to recruit and train.
Commonwealth Government funding for state and territory ECEC regulators ceased in 2018. Since then, the sector has grown rapidly, with increasingly complex models of ownership. The Commonwealth Government should resume funding for state and territory ECEC regulators, including the cost of Authorised Officers who oversee quality and safety in services.
5.2.1 Quality and consistency of risk assessment
The ECEC Regulator advised that it relies on a risk-based regulatory model, by focusing its resources where non-compliance is detected or suspected, or where broader sector trends point to higher risks of non-compliance (for example, services with a higher proportion of children with disability or additional learning needs). Decisions about enforcement action are based on the risk to children’s safety, health and wellbeing, the type of non-compliance detected and the number of non-compliances at the service. Stronger action is taken where non-compliance is more serious, or a service continually fails to comply.
The Review has heard that the ECEC Regulator has dedicated staff and Authorised Officers, who receive training aligned to a national training protocol set by Australian Children’s Education and Care Quality Authority as well as specific training for the Victorian context. However, some providers shared frustration at what they considered to be differing interpretations adopted by different Authorised Officers, which created uncertainty and inconsistency.
The ECEC Regulator also has limited scope to regulate individual workers, beyond issuing prohibition notices that exclude them from a service or the sector more broadly. The ECEC Regulator issued 11 of these in 2024.[1] At the moment, the focus of the ECEC Regulator’s regulation is primarily geared towards providers rather than individuals. With the introduction of a register (see Recommendation 4), the ECEC Regulator should have also have greater power to regulate individuals, to receive and share information relating to the Reportable Conduct and Working with Children Check schemes, and ensure unsafe and unsuitable workers are quickly identified and removed from the sector. This will be a significant undertaking in a sector with high workforce attrition rates, significant use of casuals and labour hire, and a large number of staff in services still working towards qualifications.
The Review recommends that the ECEC Regulator’s capability is bolstered through a modernised risk assessment framework and training for Authorised Officers. This work should start with a Capability Review being undertaken for the ECEC Regulator to help it have the capabilities necessary for a changing regulatory environment. This will need to be supported by training and development that keeps pace with emerging evidence and risks.
In regulating nearly 5,000 services under a detailed National Law, the ECEC Regulator seeks, receives, generates, holds, and reviews a high volume of information about approved providers. While trained Authorised Officers need to use their professional judgement to make regulatory decisions, they should have access to analysis that identifies key risks and trends found in this high volume of information, including trends across time and across providers. This task could be supported by using Artificial Intelligence tools within its data systems, and the Review recommends that the ECEC Regulator explore this as part of modernising its risk assessment approach. This should be done in accordance with Victorian Government data security standards, with privacy and security of information a primary consideration.
5.2.1.1 Regulating complex for-profit providers, and the ‘fit and proper person’ test
The work of regulators is becoming increasingly complex. Some ECEC providers are operating under increasingly large and complex business models—sometimes with overseas ownership and corporate shareholders. The Review was told that some lower-quality providers are entering the market to quickly maximise profits and selling, or collapsing and folding, only to re-emerge under a different business model or entity name as a ‘new’ provider. The complexity of the system and the links between separate approved providers can obscure the history of a provider, or the unethical or illegal behaviours of individuals involved in them.
The National Law applies a ‘fit and proper person test’ to determining whether someone is suitable to be an approved provider, nominated supervisor or hold other positions of responsibility in an ECEC service. Regulatory authorities need to be equipped and empowered to enforce the ‘fit and proper person test’ in the National Law to prevent dishonest and disreputable people from entering or remaining in the sector.
The Review recommends the Commonwealth Government task the Australian Securities Investment Commission and the Australian Children’s Education and Care Quality Authority (ACECQA) with investigating ways to respond to this increasing corporate complexity. This will support state and territory regulators to be able to look behind the complicated legal and business arrangements of some providers, more clearly understand how they operate and uncover whether they have prior history in the sector.
Recommendation 11: Capability Review and modern risk assessment for a complex and growing sector 11.1 A Capability Review for the ECEC Regulator should be initiated as a priority. This should support the ECEC Regulator to modernise its risk assessment framework, tools, and training for Authorised Officers to: address complex for-profit approved providers, associated entities and corporate relationships; improve consistency of Authorised Officer’s assessments; incorporate contemporary evidence on child sexual offending; regulate individual employees under the proposed National Register powers; and better utilise technology in assessing risk, including exploring safe use of Artificial Intelligence. 11.2 Call for the Commonwealth Government to commission the Australian Children’s Education and Care Quality Authority and the Australian Securities and Investments Commission to investigate ways to address the complex legal structures and arrangements being used in the ECEC sector, so Regulatory Authorities have the information, tools and powers to effectively regulate approved providers and the ‘fit and proper person test’ in the National Law. |
5.3 Increased penalties for non-compliance
The National Law contains a range of offences for non-compliance with regulatory requirements. Offences can relate to things such as inadequate supervision, breaches of staffing requirements and use of inappropriate discipline—including corporal punishment against a child in the service.
Penalties can apply to individuals as well as entities, with most severe penalties at around $11,000 for individuals and at $57,000 for providers. Penalties are automatically indexed on 1 July of each year. Current maximum penalties under the National Law do not reflect the seriousness of non-compliance, particularly for matters that directly harm children or place them at risk.
Strong penalties signal the seriousness of non-compliance and send a strong message about the need to uphold quality and safety. The Review recommends that the National Law is strengthened to increase the maximum penalty amounts to better reflect the seriousness of these offences and act as a strong deterrent for repeated breaches.
As this Review has outlined, some ECEC services are large entities with significant financial resources. Current penalty amounts are more likely to be absorbed financially without affecting operations and may therefore not materially change practices to avoid further breaches. Increasing penalty amounts will have a greater chance of improving practices in these services.
Recommendation 12: Increase penalties for offences Call for a material increase to the maximum penalty amounts for offences under the National Law to better align penalties with the seriousness of offences. |
5.4 Funding for effective regulation
For ECEC regulation to meet the increasing complexity of the sector, it needs to be appropriately resourced. Victoria’s ECEC Regulator has lower levels of resourcing compared to their regulatory counterparts in New South Wales and Queensland. The recent New South Wales Wheeler Review highlighted the significant variance in staffing numbers: New South Wales had 448 FTE, while Queensland had 250 FTE. In contrast, Victoria currently has 195 FTE, of which 117 are Authorised Officers who have the powers to inspect and make conditions on services.
The Commonwealth Government must also play its part. When the National Quality Framework was first introduced, regulation of ECEC was a shared endeavour between the Commonwealth and state and territory governments. Governments agreed a National Quality Agenda National Partnership Agreement, with the Commonwealth Government contributing to the cost of the Regulatory Authorities, and the states and territories contributing to the cost of operating ACECQA, which oversees the National Quality Framework. This Agreement expired in mid-2018, and the Commonwealth Government has not entered into a new agreement. This gives it little control or influence over the regulation of a sector it currently spends more than $15 billion per year on. In the final year of the Agreement (2017–18), the total payments to states and territories were $20.33 million. This represented just 0.22 per cent of the $8.9 billion the Commonwealth Government spent on child care services that year. Since then, the scale and complexity of the system has grown significantly.
The Commonwealth Government should resume contributing to the cost of regulating the ECEC sector, which could be through a refreshed and enhanced National Partnership Agreement on the National Quality Agenda.
This is consistent with the recent recommendation of the Productivity Commission, which recommended the Commonwealth Government ‘provide additional funding to the state and territory regulatory authorities that administer the National Quality Framework, to allow sufficient monitoring of quality and support for quality improvement’.
Recommendation 13: Funding for effective regulation 13.1 The ECEC Regulator should be appropriately funded to deliver its functions, including for the recommendations of this Review, and to make sure funding is in-line with number of services to be regulated. 13.2 Call for the Commonwealth Government to reinstate funding for state and territory ECEC regulators and increase it to recognise the significant growth in the ECEC system. Funding should enable Victoria to meet its obligations in national arrangements, including as host jurisdiction of the National Law for early childhood education and care. |
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