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:



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).
Significant Expansion in
Child Care Places
1989
2008
% change
Child Care
Places
114390
700314
612%
Child Care
Centres
2340
11595
496%
4.8 million
157%
Female
3.1 million
workforce
participation
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.
The Number of ABC Learning Child Care Centres
in Australia
Figure 1: Number of ABC Learning Child Care Centres in Australia
1,200
1084
1037
1,000
905
Number of centres
800
660
600
400
327
187
200
94
43
0
2001
2002
2003
Source: ABC Annual Report 2007; ABC Receiver Update 2008
2004
2005
2006
2007
2008
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?
• 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
• 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.
Australian Government
Response
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?
• 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?
• 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)
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
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, childfocussed early learning organisation.
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
•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%)
Lessons Learnt
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.