CPL boss: Collapsed not-for-profit FSG wasn’t prepared for the NDIS, but we were

THE COMPANY who has taken over many of FSG’s clients says there’s a key reason the service provider went under, and it could have been avoided

CPL CEO Rhys Kennedy with long time client Joan Leonard and her carer.

FAILED disability service provider Freedom, Social Justice, Growth (FSG) Australia did not prepare for the upheaval that came with introduction of the National Disability Insurance Scheme, says its successor.

Disability service provider Choice, Passion, Life (CPL), headed by CEO Rhys Kennedy, took over FSG’s disability clients almost overnight when FSG announced it was going into voluntary administration in late June.

A short time later creditors, owed $25 million, voted to put FSG into liquidation. The liquidation is still underway and is expected to continue, possibly for years.

CEO of disability provider Choice, Passion, Life Rhys Kennedy, seen here with longterm client Joan Leonard, took over FSG almost overnight.

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In a letter to employees at the time, CEO Vicki Batten blamed “government’’ for a lack of support, but Mr Kennedy said this week Ms Batten and the FSG board had known what was to come for more than five years yet failed to act in time.

“About five or six years ago we were looking at the NDIS coming in and saw that it was a huge transition and transformation. We knew we would go from being paid in advance, a quarter in advance, to then being paid after the delivery,” Mr Kennedy said.

“So you have to set your business up to a point where you’ve got money to keep paying the bills and paying staff while that money stops and you’re waiting for the other money to come in.

“For CPL we knew that we needed about $9 million in the bank, in cash, ready to go.

“So we spent the next four years optimising our business model.”

Mr Kennedy said CPL began downsizing, cutting costs wherever it could and squirrelling away savings for the period of time when the organisation would have zero income.

To contrast, he said FSG asked the Government for $10 million and when it was told no, applied for a $10 million bank loan from Westpac.

FSG reportedly requested a loan for $10 million from both the government and Westpac. Photo by Richard Gosling

When Westpac denied their loan, the State Government was tipped off and FSG was investigated.

Mr Kennedy said FSG had even asked CPL for a loan before its collapse.

He said major cost cuts came through downsizing staff.

“Cut out extra management, not because there wasn’t the jobs there, it’s just that the managers all agreed to take on more responsibility,’’ he said.

“So as people resigned or went for other opportunities, we didn’t replace them.

“We were able to get our overhead right down so if we had any surplus we were able to invest it back into our business.”

Mr Kennedy said by the time FSG realised what was happening, it was too late and thousands of vulnerable community members and 900 staff were left hanging.

“Compared to FSG, when I looked at what they had been trying to do, I just think they left it too late,” he said.

“They started to look at selling off their corporate office, trying to do the same thing to generate cash, but they left it to the year of transition.

“I think that’s too late.

“Maybe they didn’t understand where it was going.”