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Child Care Provision In Australia. The Impact of the Collapse of a Large Provider. Background. 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:

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child care provision in australia

Child Care ProvisionIn Australia

The Impact of the Collapse of a Large Provider

child care in australia
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).
the growth of a major corporate provider
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.
abc at the time of the collapse
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
what was right with abc
What was Right with ABC?
  • Accreditation standards
  • Staff qualifications
  • Support for staff
  • Building standards
  • Opening hours
  • Services provided
  • Value for money
  • Brand recognition

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
chronology of events
Chronology of Events

March 2008 – Reports Eddy Groves had sold almost all his stake in the company. ABC’s 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.

why did the government need to respond
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.
how did the government respond
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.
what did the car do
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
the court appointed receiver car
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
establishment of not for profit syndicate goodstart
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.
final outcome
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.
post abc collapse
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%)
reducing the risk of a similar corporate collapse
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.