Financial Viability Risk Assessment Pack

FDV-0001—Financial Viability Risk Assessment Pack

Organisations applying for initial registration as a:

· registered training organisation

· registered CRICOS provider

About the Australian Skills Quality Authority

The Australian Skills Quality Authority (ASQA) is the Australian Government agency responsible for the registration and regulation of most organisations that provide nationally recognised training across Australia’s vocational education and training (VET) sector.

ASQA also registers and regulates organisations that provide VET—and most organisations that provide English-language teaching—to overseas students visiting Australia on a student visa.

About this FVD-0001—Financial Viability Risk Assessment Pack

This pack must be completed by all applicants seeking initial registration with ASQA as either:

· a registered training organisation (RTO)

· a provider registered under the Education Services for Overseas Students Act 2000 (ESOS Act) and listed on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS).

Note
The appropriate persons must complete and submit this pack to ASQA before or at the same time as submitting an application for initial registration.

Financial viability—frequently asked questions

Why do I need to complete this pack?

An organisation seeking initial registration with ASQA must complete this pack to demonstrate that the organisation has been independently assessed as a financially viable business entity at the time its initial registration application is submitted.

ASQA will use this independent assessment as one of a range of regulatory checks when making a risk-based consideration about whether to approve the organisation’s application.

Disclaimer
The provision of the FFV-0001–Chief Executive Officer/Principal Executive Officer Certificate and the FFV-0003—Nominated Accountant’s Certificate for New Business Entities will contribute towards ASQA’s decision to approve an application for initial registration. However, the submission of this pack does not guarantee approval of an application.

Why does ASQA require this information?

Both the National Vocational Education and Training Regulator Act 2011 (NVR Act) and the ESOS Act enable ASQA to assess an organisation’s financial viability risk when considering its registration.

Both Acts require ASQA to apply a risk management approach when making judgements about how financial viability risk may be assessed or benchmarked.

The information provided in this pack:

· helps ASQA manage the financial viability risk of providers that it registers and regulates, and

· informs ASQA’s decision to approve or reject registration of an organisation under the NVR Act and/or ESOS Act.

What is ASQA’s authority for requiring this information?

For registered training organisations:

Section 24 and Section 157(4) of the NVR Act states:

· an NVR RTO must satisfy the Financial Viability Risk Assessment Requirements legislative instrument, and

· the National VET Regulator must apply the Risk Assessment Framework in performing its functions.

Section 22(1) of the NVR Act states that an NVR RTO must comply with the Standards for NVR Registered Training Organisations (revoked by the Standards for Registered Training Organisations (RTOs) 2015). Clause 7.2 of the Standards for Registered Training Organisations (RTOs) 2015 requires that an RTO satisfies the Financial Viability Risk Assessment Requirements.

For CRICOS providers:

Under section 7A of the ESOS Act, ASQA is the designated authority for organisations registered or seeking registration on CRICOS to provide VET courses to overseas students visiting Australia on a student visa.

ASQA is also the designated authority for organisations registered or seeking registration on CRICOS to deliver most English Language Intensive Courses for Overseas Students (ELICOS) to overseas students visiting Australia on a student visa.

Section 9AH of the ESOS Act requires ASQA to ensure that providers have:

· a demonstrated capacity to provide education of a satisfactory standard, and

· have an appropriate business model, including access to adequate financial resources.

Will I be required to submit further information?

ASQA may require your organisation to undergo any additional assessment of financial viability risk that it deems necessary at any time throughout your organisation’s registration period.

As a condition of their registration, organisations approved for initial registration are required to cooperate with ASQA in any ongoing financial viability risk assessment.

Completing the FVD-0001—Financial Viability Risk Assessment Pack

The pack comprises five sections. You must complete each section. You will require the assistance of a Nominated Accountant to complete the pack.

Nominated Accountant
A Nominated Accountant is an external and independent accountant engaged by an organisation applying for registration.
The Nominated Accountant must be:
· a member of one or more of the following professional bodies: CPA Australia, The Institute of Chartered Accountants in Australia or The Institute of Public Accountants, and/ or
· registered with the Australian Securities and Investment Commission as an auditor.

Section 1—Mandatory questions

· The applicant must answer ‘Yes’ to each of the three questions in this section.

· ASQA will not consider your application unless you have answered ‘Yes’ to all three questions.

Section 2—Questionnaire

· The applicant must answer four questions regarding their business and its financial situation.

Section 3—Organisation type

· The applicant must nominate the entity type that best identifies their organisation.

· If you select category ‘c’, you must provide the name of the assessing authority and the date of the assessment, and attach evidence of this assessment.

Section 4—Ratios

· It is mandatory for every applicant to complete and submit ‘Section 4—Ratios’, unless the applicant’s organisation falls into one of the exclusion categories defined on page 5.

· The applicant may be assisted by their Nominated Accountant in filling out this section.

· The applicant must provide financial viability risk assessment ratio calculations regarding the organisation.

· Each Financial viability risk assessment ratio table must be completed. You must include a year-end date for each column and include a ratio, percentage or number in each individual ratio box.

· Given that the applicant is likely to be a new business entity with no financial trading history, the calculations must be based on forecasted financial information for the next 12 and 24 months. In the case of entities with a trading history, actual financial information should be used.

Exclusion categories
All applicants for initial registration must complete each section of this form and provide completed and signed copies of the certificates in Section 5. The exception to this is those applicants which fall under one of the following exclusion categories:
· an organisation that is fully owned and operated by an Australian Government, or a state, territory or local government department or agency
· a university, school or institute established under Australian Government, or state or territory government legislation, or
· an organisation that has been formally assessed within the last six months by ASQA, or another Australian Government department or agency, as being ‘financially viable’. You must provide evidence of this assessment when completing Section 3.
Organisations which meet at least one of the above criteria need only to complete Section 1, 2, 3 and the
FFV-0001—Chief Executive Officer/Principal Executive Officer Certificate.
However, the organisation types listed above are not ‘exempt’ from any future financial viability risk assessment and may, at any time prior to or during registration, be required to undertake any financial viability risk assessment that ASQA deems warranted.

Section 5—Certificates

· This section contains two certificates that must be submitted, where applicable, as part of this document:

o FFV-0001—Chief Executive Officer/Principal Executive Officer Certificate

o FFV-0003—Nominated Accountant’s Certificate for New Business Entities

Submitting the FFV-0001 certificate

· It is mandatory for every applicant to complete and submit the FFV-0001 certificate, regardless of their organisation entity type.

· The FFV-0001—Chief Executive Officer/Principal Executive Officer Certificate is to be completed and signed by the Chief Executive Officer or the Principal Executive Officer of the applicant organisation on a date prior to, but no more than 30 days prior to, the application for registration being submitted.

Submitting the FFV-0003 certificate

· It is mandatory for every applicant to complete and submit the FFV-0003 certificate, unless the applicant’s organisation falls into one of the exclusion categories defined above.

· Organisations that fall into one of these exclusion categories need only to complete Sections 1, 2 and 3 of this pack and the FFV-0001—Chief Executive Officer/Principal Executive Officer Certificate. However, the organisations shown above are not ‘exempt’ from any future financial viability risk assessment and may, at any time prior to or during registration, be required to undertake any financial viability risk assessment that ASQA deems warranted.

· Only a Nominated Accountant can complete and sign the FFV-0003—Nominated Accountant’s Certificate for New Business Entities.

· The FFV-0003—Nominated Accountant’s Certificate for New Business Entities is to be completed and signed by the Nominated Accountant on a date prior to, but no more than 30 days prior to, the application for registration being submitted.

· The certification of financial viability requires the professional judgement of a Nominated Accountant

· Given that the applicant is not likely to have financial trading history, the Nominated Accountant will certify in the FFV-0003—Nominated Accountant’s Certificate for New Business Entities that the entity should be financially viable based on the forecasted financial information provided for the next 12 and 24 months.

Submitting the FVD-0001—Financial viability risk assessment pack

Once you have completed all sections of this pack, scan and submit by email to ASQA at

If you are required to provide evidence of an assessment at Section 3, ensure you have scanned this evidence and included it with your completed FVD-0001 - Financial viability risk assessment pack.

Retain the hardcopy signed originals of the pack for your records.

More information and help

References

ASQA website

National Vocational Education and Training Regulator Act 2011

Financial Viability Risk Assessment Requirements 2011

Standards for Registered Training Organisations (RTOs) 2015

Risk Assessment Framework

Education Services for Overseas Students Act 2000

National Code of Practice for Registration Authorities and Providers of Education and Training to Overseas Students 2007

ELICOS Standards 2011

ASQA Info line

For further assistance, please call the ASQA Info line on 1300 701 801 between Monday and Friday, 9.00am to 7.00pmAEST, or email your enquiry to .

Definitions

The following definitions are provided to assist applicants and their Nominated Accountants to populate the
FVD-0001—Financial viability risk assessment pack and ensure consistent understanding and application of the financial statement information in the preparation of the ratio calculations.

Term / Definition
Financial Viability / A business’s ability to generate sufficient income to meet its operating expenses and financial obligations, as well as providing the potential for future growth.
Financial Year End / Generally 30 June for Australian entities, but may differ.
The Financial Year End should be used to identify the date for submission of Annual Compliance Statements.
Stand Alone Financial Statements / Financial statements that relate to the applicant entity only, in that they do not form part of another entity as a subsidiary or parent entity.
Annual Turnover / Income/revenue generated by the business that is shown in the financial statements as Sales/Income/Revenue.
Net Profit Before Tax / Revenue minus Expenses, excluding Tax.
Total Income / The total income of an entity from all sources for the financial year.
Total Sales and Service Income / Income derived directly from core business training activities.
Current Assets / The sum of cash and cash equivalents, accounts receivable, and other assets that could be converted to cash in less than one year.
Current Liabilities / An entity's debts or obligations that are due within one year.
Non-Current Liabilities / An entity’s long-term debts or obligations that are not due within one year.
Total Assets / The value of all tangible and intangible assets owned by an entity.
Total Liabilities / The sum of all short and long-term obligations that an entity is liable to repay.
Total Equity / The sum of the owner’s investment in the entity which is equivalent to net assets of the business.

Section 1 Mandatory questions

Name of Legal Entity
Australian Company Number
Australian Business Number
Question 1
Accounting system / Each applicant is required to have a commercially recognised accounting software package or outsourced accounting arrangement in place, which can:
· regularly reconcile management accounts
· prepare management reports on a monthly basis, and
· prepare financial statements on an annual basis.
Does your organisation meet this requirement? / Yes / No
Question 2
Business plan / Each applicant is required to have a current business plan, which sets out its:
· business objectives
· analysis of markets
· basic strengths, weaknesses, opportunities and threats (SWOT) analysis, and
· financial projections for at least the next 12 and 24 months.
Does your organisation meet this requirement? / Yes / No
Question 3
Budgetary process / Each applicant is required to have a comprehensive financial budgetary process in place that forecasts profits for at least the next 12 months.
Does your organisation meet this requirement? / Yes / No

If your organisation cannot meet all of these three requirements, do not continue with this assessment.

ASQA will not accept any organisation that poses an unacceptable financial viability risk for registration.

Section 2 Questionnaire

Question 4
Date of applicant start-up
Question 5
Financial year-end
Question 6
Does the applicant prepare standalone financial statements? / Yes / No
If No, what is the name of the entity from which the applicant’s financial ratios (per Section 4 of this application) have been calculated?
What is the applicant’s relationship to this entity?
Is there a formal cross-guarantee between the applicant and this entity?
Yes / No
Question 5
Forecast annual turnover / $500,000
$500,001 to $2,000,000
> $2,000,000

Section 3 Organisation type

Organisation category
Select one category that best identifies your organisation:
a) Fully owned and operated by an Australian Government, or state, territory or local government department or agency
b) University, school or institute established under Australian Government, state or territory government legislation
c) An organisation that, within the last six (6) months, has been formally assessed by ASQA or another Australian Government department or agency as being ‘financially viable’
d) None of the above.
If you have selected category ‘c’ from the above list, please provide the following information:
Assessing organisation name:
Date of assessment:

ë If you have selected category ‘c’, attach documentary evidence of this assessment and submit with this pack.