This week, we look at the requirements for NSW non-government schools to have a Related Party Transactions Register and a Conflicts of Interest Policy. We explain the relationship between the two obligations, mandated under the NSW Registered and Accredited Individual Non-government Schools Manual and the NSW Registered and Accredited System Non-government Schools Manual (NSW Registration Standards or Standards).
It should be noted that where as the 'individual school standards' spell out the new governance requirements in detail (3.9.3.1 - 3.9.3.6) the 'system school standards' simply state that systems schools are required to have policies and procedures in place that are 'similar' to those required for individual non-government schools. Whilst the use of the word 'similar' (defined as 'having a resemblance in appearance, character, or quantity, without being identical') may appear to provide 'system schools' with some latitude with respect to how they approach these new requirements, commonsense would dictate that the best course of action for 'system schools' would be to comply with the requirements as set out in the 'individual school standards'.
Standard 3.9.3.2 states that each ‘responsible person’ for a non-government school must avoid situations in which his or her personal interests, or the interests of a relative or close associate, may conflict, either directly or indirectly, with decisions made by the governing body, whether the conflict is actual, perceived or potential'.
As most company directors will be aware, the obligation to manage conflicts of interest (and RPTs in the case of public companies) is a core legal requirement under the Corporations Act 2001 (Cth) (the Corporations Act).
In the context of school management, a conflicts of interest policy is a key governance tool as, properly implemented, it will ensure probity and proper decision making.
Other steps which are important for schools to take in order to meet their obligations under standard 3.9.3.2, and to manage conflicts of interest generally, include:
A related party transaction is a particular type of conflict of interest that, simply put, relates to conflicts when dealing with 'transactions'.
The term 'related party transaction' used in the Standards is however different from the same term which is used in the Corporations Act to regulate behaviour of public companies. So public company directors and executives, and those familiar with the term from their public company experience, should ensure that they don't confuse the two concepts.
The Standards state that 'in the context of a non-government school, an RPT includes any transaction through which a ‘responsible person’ for the school acting on behalf of the school provides a financial or other tangible benefit to a related party (such as themselves or another ‘responsible person’ for the school or their spouse, other relatives or close associates and other related organisations)'. In this sense, a 'financial or other tangible benefit' is to be interpreted broadly. It includes transactions even if there was no payment or other consideration for a benefit.
What the BOSTES has done in introducing RPTs in non-government schools is to create a new concept that is a creature of the registration standards themselves.
Standard 3.9.3.3 requires a school to have policies and procedures for financial management including a register of all RPTs. As RPTs involve conflicts of interest or material personal interests, a school must comply with the same evidentiary requirements under standard 3.9.3.2, but schools must also:
Although reference to ASIC guidance - such as on the meaning of a 'material personal interest' - can be helpful, there is an unfortunate lack of authority on how these terms are to be properly defined.
If you have more questions on the nature of RPTs, and the requirements of a conflicts of interest policy, CompliSpace will be hosting a live Webinar ‘Raising the bar: meeting new standards in school governance’ on 27 February 2015 at 3pm Eastern Daylight Savings Time. This will be presented by David Griffiths, Managing Director CompliSpace. He will further explain the new governance standards and answer your questions about how to implement robust governance related structures, policies and procedures in your school. For more information and to reserve your webinar seat here click here.