Contents
Part 1 Preliminary 3
Division 1 Arrangements on commencement 3
FVRAR 1 Name
of standards 3
FVRAR 2 Commencement 3
FVRAR 3 Definitions 3
Part 2 Context and intent of
these requirements 5
FVRAR 4 Context 5
FVRAR 5 Intent 5
Part 3 Financial Viability Risk
Assessment Requirements 6
FVRAR 6 Obligation
to submit assessment at initial registration 6
FVRAR 7 Obligation
to submit to assessment at any time 6
FVRAR 8 NVR
may waive requirement where risk is considered low 6
PART 4 Form and content of
Financial Viability Risk Assessment 7
FVRAR 09 Assessment
to be in required form 7
FVRAR 10 Assessment
to be against common indicators 7
FVRAR 11 Reviews
to have regard to Standards 7
FVRAR 12 Information
to be assessed 7
FVRAR
13 Assessment to consider size and scope of operations
8
Preliminary Part 1
Part 1 Preliminary
Division
1 Arrangements on commencement
FVRAR 1 Name of standards
This
legislative instrument is the Financial Viability Risk Assessment Requirements
2011.
FVRAR 2 Commencement
This legislative instrument
commences as follows:
(a) on 1 July 2011 or the day after the
legislative instrument is registered on Federal Register of Legislative
Instruments – whichever is the later.
FVRAR 3 Definitions
In this legislative
instrument, unless the contrary intention appears:
Act means
the National Vocational Education and training Regulator Act 2011.
Financially viable means
the ability of an organisation to generate sufficient income to meet operating
payments, debt commitments and, where applicable, to allow growth while delivering
quality training and assessment services and outcomes.
Financial
viability risk is the assessed financial performance, operations, and
capacity of an organisation as an ongoing concern to deliver quality training
and assessment services and outcomes for the duration of its registration, and
the potential of its losing this capacity.
(2) The requirements of this legislative
instrument apply to:
(a) all
organisations seeking registration under the Act and
(b) all
training organisations registered under the Act.
(3) The
requirements may be referred to by the abbreviation ‘FVRAR’. For example, this
is FVRAR 3 (3).
NVR
means the National VET Regulator
Preliminary
Part 1
An
independent qualified auditor is:
a)
the Auditor-General of a State, of the Australian Capital Territory or
of the Northern Territory; or
b)
a person registered as a company auditor or a public accountant under a
law in force in a State, the Australian Capital Territory or the Northern
Territory; or
c)
a member of the Institute of Chartered Accountants in Australia, or of
the Australian Society of Certified Practising Accountants; or
d)
a person approved by the Minister in writing as a qualified auditor for
the purposes of the Higher Education Support Act 2003; and
e)
a person independent from the entity it is auditing.
Note:
For the purpose of this legislative instrument, a qualified auditor will be
considered to be independent from the entity it is auditing if the qualified
auditor meets the independence requirements specified in Part 2M.4, Division 3,
of the Corporations Act 2001 as though the qualified auditor is an
individual qualified auditor or an audit company and the body corporate seeking
approval as a VET provider is the audited body under that Act.
Context and intent of these
requirements Part 2
Part 2 Context and intent of these
requirements
FVRAR 4 Context
The Act in Section 158
requires the National VET Regulator to make the requirements relating to the financial
viability of NVR registered training organisations. The requirements are to be
made by legislative instrument and are to be known as the “Financial Viability
Risk Assessment Requirements”.
The legislative
instrument applies to NVR registered training organisations. Section 24 makes
it a condition of registration that an NVR registered training organisation
must satisfy the Financial Viability Risk Assessment Requirements.
FVRAR 5 Intent
The National VET Regulator requires a NVR
registered training organisation to demonstrate its financial viability at any
point in time, upon request.
The assessment of an organisation’s
financial viability risk is directed at evaluating the likelihood of its
business continuity, and its capacity to achieve quality outcomes. In
particular, the assessment informs a judgement about whether the organisation has
the financial resources necessary to:
a)
acquire the requisite assets and physical resources to deliver all
qualifications on its scope of registration
b)
employ sufficient appropriately qualified staff to cover the courses for
which it takes enrolments
c)
provide appropriate levels of student services to students
d)
remain in business to ensure that each student can achieve completion
e)
meet the above requirements, even in an unsure environment.
Financial viability risk assessment requirements Part
3
Part 3 Financial viability risk assessment requirements
FVRAR 6 Obligation to submit to assessment
at initial registration
(1)
An organisation seeking registration with the NVR must submit to an
assessment of financial viability risk by a qualified independent financial auditor
nominated by the NVR, as part of the assessment of the application for
registration.
(2)
The assessment will include an assessment of the source and reliability
of the evidence supporting the assumptions underlying the projections.
(3)
The obligation to submit to the assessment referred to in (1) applies
also to parent organisations, affiliated companies or organisations that have a
vested interest in the organisation.
FVRAR 7 Obligation to submit to
assessment at any time
(1) An NVR registered
training organisation must submit to an assessment of financial viability risk by
a qualified independent financial auditor nominated by the NVR at other times
during the registration period as determined by the NVR in accordance with the NVR
Risk Assessment Framework.
(2) The obligation to
submit to the assessment referred to in (1) also applies to parent
organisations, affiliated companies or organisations that have a vested
interest in the organisation.
FVRAR 8 NVR may waive requirement
where risk is considered low
(1)
Where the NVR considers the financial viability risk of an organisation is
low, it may waive the requirement for a financial viability risk assessment.
(2) The waiving of the
requirement does not remove the obligation in FVRAR 8 to submit to a future assessment
if required by the NVR.
Form and content of financial
viability risk assessment Part 4
Part 4 Form
and content of financial viability risk assessment
FVRAR 9 Assessment to be in
required form
Financial data and
information must be submitted to the qualified independent financial auditor nominated
by the NVR in a format that is in accordance with Australian Accounting Standards.
FVRAR 10 Assessment
to be against common indicators
The assessment of
financial viability risk will be undertaken by assessing common indicators of
financial performance and position. These may include but are not limited to
the following indicators:
a)
Liquidity– including current ratio and cash flow assessments
b)
Solvency – including debt to assets assessment, debt to equity
assessment
c)
Economic Dependency – for example, reliance upon government funded training,
or reliance on a particular cohort of students (e.g. overseas students)
d)
Revenue, profit and cash flow
e)
Commercial risk
f)
Audit opinion
g)
Contingencies
h)
Compliance with all of its statutory obligations (for example: GST,
taxation, superannuation, Companies Code)
i)
Compliance with accounting standards
j)
Accounting policies – impact of the organisation’s accounting policies
on its financial risk.
FVRAR 11 Reviews to have regard to Standards
Independent reviews of financial
projections will have regard to the Australian Audit and Assurance Standards, AUS
804 The Audit of Prospective Financial Information and ASAE 3000
Assurance Engagements Other than Audits or Reviews of Historical Financial Information.
FVRAR 12 Information
to be assessed
Information that could be used to
assess the common indicators in FVRAR 10 and to make a determination about
financial viability risk may include, but not be limited to:
a)
Independent reviews of financial projections including underlying
assumptions
Form and content of financial
viability risk assessment Part 4
b)
Business planning including forecast income streams and forecast
expenditure
c)
Assets and liabilities
d)
Financial statements audited by an independent qualified auditor
e)
Financial records for the previous 12 months, including profit and loss,
balance sheets
f)
Cash flow and bank accounts
g)
Short term budgets and forecasts, including assumptions
h)
Information on current and projected student enrolments, including
assumptions
i)
Tax records
j)
Information about current debts and debtors, credits and creditors,
loans and repayment
k)
Plans, and information on any legal disputes
l)
Inter-company dealings, transfers, ownerships and loans
m)
Contingent liabilities
n)
Ultimate ownership details
o)
Post reporting activities (includes activities that relate to the period
after accounts have been audited that would have a material impact on the
organisation’s operations, viability or ownership).
FVRAR 13 Assessment to consider size and scope of operations
In
managing the financial viability risk of an organisation, the NVR may
take into consideration the size and scope of its operations.