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The Role of the Regulator Regarding Non-Government Schools’ Accountability for Government Funding

7/09/16
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This is the second article in a four-part series on the role of the regulator in assessing school compliance. In this series, Craig D’cruz, National Education Consultant at CompliSpace, explores the role of State and Territory education authorities in determining how schools meet their accreditation or registration requirements and the scope of the authorities’ powers. In Part Three of this series, Craig will be asking the question: ‘What are the Regulators really looking for when undertaking a registration review of a school?’

Government regulators are tasked with ensuring that non-government schools meet, at a minimum, the requirements of the Australian Education Act (2013), any relevant State or Territory education laws and the related registration standards and guidelines, if any, as determined by the Minister for Education in each jurisdiction. The requirements of the legislation are not negotiable. However, the interpretation of the standards and guidelines can vary, both by the schools applying for re-registration and sometimes, by the auditors sent out by the regulators to assess the schools' compliance with them.

The regulators are usually given powers to register or re-register not-for-profit non-government schools through an enabling Act or Regulation. These Acts and/or Regulations can be found in nearly all States and Territories. For example, in WA it is the School Education Act (1999), in the NT it is the Education Act (2016), and in NSW it is the Education Act (1990), just to name a few. Furthermore, in NSW, it has been reported that the Education Minister Adrian Piccoli recently announced that the Board of Studies Teaching and Educational Standards (BOSTES) will become the NSW Education Standards Authority and undergo a number of changes and an increase of its powers on the basis of a recent Review. Given that the vast majority of not-for-profit non-government schools in Australia are funded to some degree by the relevant State or Territory and/or by the Commonwealth Government, it would be difficult for any school to mount an argument against having formal regulations and a system of accountability for meeting the regulations. After all, the schools are receiving government funding.

Whenever government funding is involved, schools must expect that there will be a level of accountability for the use of the funds. In general, the funds must be used to meet the general recurrent costs of providing education programs for the students in the school and each school needs to meet the minimum standards as set by the State or Territory regulator that is tasked with ensuring that the funds are being used as intended. Some jurisdictions are reviewing the way non-government schools report on how the funds are used. There have been recent cases where government funds have been incorrectly used or misappropriated – often resulting in negative media coverage and occasionally leading to fines and prison terms.

However, School Governance recently noted: "the Australian education industry is consistently bombarded with new legislation, regulation and guidance almost every month. It would not be surprising to find schools suffering ‘regulation-fatigue", or, as this has been described in the Independent Schools Council of Australia (ISCA) (2015) Independent Update: "the burden of compliance."

Independent schools have a greater range of accountabilities than any other type of school in Australia. Independent schools are increasingly concerned about the effect of greatly increased government regulation and reporting that is now required as a condition of public funding."

Nonetheless, it is generally agreed that non-government schools operate in a diverse accountability environment that includes:

  • financial accountability;
  • governance accountability;
  • professional accountability of teachers and administrators; and
  • educational accountability.

And this is further affected (and some may say exacerbated) by evolving environmental factors such as:

  • increasing public expectations of accountability (especially for government funding);
  • international trends and results of National and International testing such as NAPLAN and PISA; and
  • increased pressure or intervention from political parties and organisations who question the validity of government funding of non-government schools.

According to Independent Schools Victoria, there are several initiatives and requirements for non-government schools under the Australian Education Act (2013) for accountability for government funding. These include, for example:

  • implementing the Australian Teacher Performance and Development Framework;
  • implementing the Australian Curriculum/AusVELS or an alternative curriculum formally approved by ACARA;
  • participating fully in the National Assessment Program;
  • completing a School Improvement Plan that satisfies the Commonwealth Government’s criteria, including having regard to the Aboriginal and Torres Strait Islander Education plan 2010-2014 and the National Safe Schools Framework;
  • providing School Performance Data (to ACARA); and
  • financial reporting.

The Federal Minister may seek repayment of an amount or reduce other amounts payable to a school or system authority, or delay making any further payments, if the school or system authority does not fulfil one or more of the list of specific conditions. Of course, in addition, there may be other Federal, State or Territory regulations and conditions that also apply.

The Australian Charities and Not-for-profit Commission (ACNC) also sets clear guidelines regarding the charitable status and financial management of not-for-profit non-government schools that are registered as charities. As was reported in School Governance, in 2014, the NSW Government introduced a new Bill the NSW Education Amendment (Not-for-Profit Non-Government Funding) Bill 2014 (the new Act). This Act provided new powers to the Minister and highlighted two categories of non-compliance including a declaration of a school as for profit or, a lesser breach, declaring a school as non-compliant with not-for-profit conditions.

Most State or Territory regulators would expect to review at least the following items with regards to a school’s ongoing financial accountability. Below is a list based on the Department of Education Services (WA)(DES) requirements. Note that this list is by no means exhaustive and it is only representative of the information that may be sought:

  • audited financial statements for the previous year of operation and an independent audit report;
  • the annual operating financials (profit and loss statement), cash flow accounts and any other management accounts including debt per student ratios;
  • information regarding any loan agreements and the servicing arrangements for these loans;
  • any property lease or rental agreements including the tenure of the lease and annual costs;
  • a summary of staff remuneration and remuneration, if any, of board members (this is usually the single greatest expense in any school’s annual budget);
  • a copy of the most recently completed Commonwealth financial (Financial Health) questionnaire;
  • a copy of the school’s current budget with forecast or projected budgets of at least three years; and
  • details of insurance policies that cover these financial and other risks.

Many government bodies, and some of these are the regulators themselves, provide advice and support (for example: FederalACTNSWQLDVICWA) to ensure that non-government schools are given every opportunity to remain compliant with the legislation as well as with the standards and guidelines, and, if applicable for that State or Territory, to remain financially viable with regard to their ongoing registration. Anecdotal evidence indicates that the Federal and most State or Territory governments would be very reticent about closing down a school as they provide advice and assistance to schools that are seen to be financially struggling.

Given that all not-for-profit independent schools receive some form of government funding, and given that under the Act the requirements that need to be met in order to receive this funding are not negotiable, schools should ensure that compliance with the regulations and guidelines as developed by their State or Territory regulator is a major component of their Enterprise Risk Management strategy. In particular, low-fee non-government schools that rely heavily on the per–capita grants received from State or Territory and Commonwealth governments, should make every effort to comply with the requirements of these Acts.

Board members of all non-government schools require a heightened understanding of the regulatory regime in which they operate. They must have a clear understanding of their fiduciary duties and governance requirements to ensure compliance with their role to set the strategic direction, maintain financial health and accountability, oversee overall school performance and manage strategic risk. Of course support for school boards within these areas is one of the key roles of the Associations for Independent schools in each State. This will be explored in more detail in the final article in this series.

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Ideagen CompliSpace

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