School boards are confronted by multiple sources of risk which can threaten the effective operation of a school and those risks can be distinguished as being financial or non-financial. Although risks to the financial security of a school may have once been regarded as more significant than non-financial risks due to their capacity to hurt the bottom line,  school boards can not ignore the importance of non-financial risk detection and disclosure as part of their governance processes.

The safety of students, for example, is a paramount consideration that falls within the responsibility of board members. A school's registration - which it requires to carry on as a business - is also a major risk that the board must be aware of. Neither of these sources of risks are (immediate) financial risks and school boards must have access to, and understand, measurable non-financial information relating to such risks to help them in their decision-making processes.

What is measurable non-financial information?

Measurable non-financial information is information based on metrics that come from a school's operations, other than financial information. This information, in a sense, provides indications of performance. It can come from many sources and will vary depending on the size, nature and complexity of a particular school. Such indicators are essential information for boards.

The following categories of non-financial information might arise from a school's operations:

• Enterprise Risk Management;
• Compliance;
• Complaints;
• Human resources / staff management;
• Workplace Safety;
• Student Safety;
• Student Attendance;
• ICT;
• Curriculum and Learning Outcomes;
• Key Stakeholder Engagement;
• Facilities; and
• Project Risk and Compliance.

This article will discuss non-financial board reporting with respect to some of these important functional areas.

Enterprise Risk Management

Enterprise Risk Management (ERM) reports are, of course, premised on an Enterprise Risk Management program being in place.

It is preferable that an ERM program follows the International/Australian Risk Management Standard ISO 31000-2009 'Risk Management' (see our previous articles on this standard).

ERM should be implemented throughout the entire school management and boards usually have ultimately responsibly for approving such programs. As a general rule, although boards should not be dealing with the fine details of such programs, they should be across at least the top 5-15 general 'macro risks'.

A basic ERM board report will prioritise the risks from Extreme to Low and from highest level of 'control effectiveness' to the lowest. From time to time, a board can ask for ad hoc reports, which might further drill down into particular risks that concern board members.

Compliance

As with ERM, compliance reports flow from a compliance program once it's established. ISO 19600 is the current international compliance standard. It is based on the Australian compliance standard AS 3806 which it has recently superseded.

With the myriad of laws, regulations, registration standards, funding agreements and school community obligations that schools are faced with, schools may want to take a risk-based approach to compliance. That is, they may want to only look at those risks that are likely to affect the school most in the event of a breach. These may include:

• school registration standards;
• other educational regulatory regimes, including:
  • The Early Childhood National Quality Standards;
  • The National Code relating to International Students;
  • The Vocational Education and Training (VET) Quality Standards;
• Workplace safety;
• Student safety based on common law principles of negligence;
• privacy;
• organisational compliance (i.e. compliance by a school with its own internal policies and procedures; and
• contractual compliance.

At a minimum, it is recommended that a school board receive a quarterly compliance report which highlights:

• any significant upcoming compliance obligations and/or changes to registration standards;
• any legal & regulatory compliance breaches;
• any complaints received with respect to a particular compliance area (e.g. privacy); and
• status of any corrective actions arising from the last report.

Complaints Handling

Complaints handling is a key governance tool. If managed effectively, it will highlight key risks that are present within a school community and enhance the decision-making capacity of the board.

A proper complaints handling system should receive complaints from key stakeholders including parents, members of the wider school community and members of the local community. Again, there is an International Standard (ISO 10002-2014) in this area. Reports should be provided at least quarterly, summarising complaints received by key stakeholders, and analysing any particular trends or systemic issues.

See our paper on Complaints Handling in Australian Schools for more information about your complaint handling obligations and steps to implement an effective complaints handling program.

Human Resources/Staff Management

A school's staff is often described as its biggest asset, and it's biggest risk. It is therefore incumbent upon a school's board, not just the principal and senior management, to monitor common measurable data with respect to staff management including data arising from:

• staff turnover/retention;
• staff internal grievances (bullying/harassment incidents should be captured and reported on separately);
• staff remuneration against industry benchmarks;
• staff training and professional development;
• completion of staff performance appraisals;
• staff satisfaction levels; and
• staff cultural surveys.

Things to consider

This article has just touched upon some of the key areas of a school's operations which can generate important non-financial reporting information for a school board.

Collecting data, and effectively reporting, on areas of non-financial areas of a school not only enhances a school board's knowledge of key risk areas, but also ensures that the board can respond to areas which are susceptible to risk.

While it is not a requirement for schools to publicly disclose how they manage non-financial risks, unlike publicly-listed companies, school stakeholders would undoubtedly appreciate the transparency of a school that does.