Australia’s VET regulator, ASQA, appears to be failing the fraud prevention test.

A recent audit by the Australian National Audit Office (ANAO) has cast a spotlight on significant weaknesses within the Australian Skills Quality Authority (ASQA).

ASQA's role is to safeguard the integrity of the vocational education and training (VET) sector. It regulates about 90 per cent of providers in Australia, over 3,800 providers. 

However, the ANAO report indicates that ASQA’s systems for preventing, detecting, and responding to fraud lack sufficient rigour, putting the entity and the broader VET sector at potential risk of misuse of public funds and reputational harm.

The ANAO has dubbed ASQA’s approach to fraud control “partly effective”, with critical gaps in its Fraud Control Plan for 2022–2024. 

The plan is reportedly limited in scope, covering primarily internal fraud risks while overlooking the broader regulatory fraud landscape. 

Despite having undertaken a risk assessment, ASQA was found to have identified only a single external fraud risk - false or misleading information from external providers. 

This limited identification of risk does not sufficiently address potential threats to the integrity of ASQA’s regulatory functions, the ANAO suggested.

The regulator was also found to lack a systematic process for testing fraud control measures. 

The ANAO noted that, over the 2022–2024 period, testing occurred only once, with no ongoing system for regular evaluations. 

The absence of a systematic testing framework could undermine ASQA’s capacity to ensure fraud controls are effective and leave potential vulnerabilities unexamined.

But the audit showed ASQA has made some efforts towards establishing fraud awareness and detection mechanisms. These include an internal tip-off line and outreach programs intended to engage the VET sector on fraud awareness. 

However, the ANAO report underscores that ASQA has not assessed the effectiveness of these mechanisms. 

In particular, ASQA reportedly lacks documented evaluation procedures for assessing whether its fraud awareness programs or detection mechanisms function as intended. The auditors said oversight suggests that ASQA's existing controls may not be adequately equipped to handle cases of regulatory fraud that could arise from the large and diverse provider base under its purview.

The audit also criticised ASQA's lack of preparation for the revised Commonwealth Fraud and Corruption Control Framework, effective from July 2024. 

This new Commonwealth policy mandates a comprehensive approach to fraud and corruption, requiring entities to conduct regular assessments, develop thorough control plans, and establish governance structures. 

Although ASQA has drafted an updated Fraud and Corruption Control Policy for 2024 to 2026, it remains incomplete and lacks an implementation plan. 

Additionally, the draft policy does not fully address ASQA’s regulatory fraud control environment, raising concerns about the agency’s readiness under the updated framework. 

Without a coherent strategy to align with these requirements, the ANAO says ASQA’s fraud control framework risks falling behind contemporary standards for Commonwealth entities.

The audit made three recommendations to strengthen ASQA's fraud control capacity. 

First, it advised ASQA to clarify roles and responsibilities for fraud control, ensuring they are aligned with the agency’s governance structure. ASQA accepted this recommendation, noting ongoing efforts to update its framework. 

The ANAO also recommended that ASQA expand its fraud control policy to encompass all regulatory activities, supported by comprehensive risk assessments. ASQA agreed to this recommendation in part, suggesting that its regulatory context poses unique challenges that may affect its adoption of ANAO’s suggested measures. 

The third recommendation calls for ASQA to formalise processes for evaluating fraud controls, a suggestion ASQA fully endorsed, recognising the need for consistent monitoring.

In response to the audit, ASQA expressed a commitment to enhancing its fraud control framework and aligning more closely with the revised Commonwealth requirements. 

“ASQA places a high value on review and improvement,” the agency stated, adding that it intends to finalise its updated fraud policy in light of the ANAO’s insights. 

However, the agency’s partial acceptance of recommendations aimed at addressing regulatory fraud could raise questions about its preparedness to meet the heightened standards set forth by the Commonwealth’s 2024 framework.

The full report is accessible in PDF form, here.

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