In our previous article we described how sections 83C to 83L of the Education Act 1990 (NSW) (Education Act) provide the legislative basis that to be eligible for funding, non-government schools must not operate for profit. Section 83L of the Education Act allows the Minister to publish guidelines to assist schools and proprietors to comply with this part of the Education Act. The Not-For-Profit Guidelines for Non-Government Schools (NFP Guidelines) were first published in September 2015 and have since been updated in December 2018 and now, June 2019. The June 2019 NFP Guidelines are available here .
The 2019 changes to the NFP Guidelines reflect changes to the Education Act as amended by the Statute Law (Miscellaneous Provisions) Act (No 2) 2018 No 68 (NSW). The NFP Guidelines now reflect the following amended definitions in section 83C:
- asset: means an economic resource that may depreciate in value over time
- income: means money or other forms of consideration received periodically from the provision of property, goods or services, investments, gifts, donations, grants, financial assistance or any other gain obtained from the use of a school’s assets or its proprietor’s assets.
The expanded definition of "income" is significant as it now expressly includes income received from the provision of property, investments, gifts or donations or "any other gain obtained from the use of the school’s assets or its proprietor’s assets". The new definition of "asset" is relevant to understanding the application of that last phrase.
Both these definitions are relevant to various obligations in section 83C in particular, the provision in section 83C(2)(a) that a school operates for profit if the Minister is satisfied that any part of its proprietor’s assets (in so far as they relate to the school) or its proprietor’s income (in so far as it arises from the operation of the school) is used for any purpose other than for the operation of the school.
Other changes include:
- re-ordering of some sections of the NFP Guidelines (section 8.1 Related Party Transactions was section 8.2 in the 2018 NFP Guidelines)
- a shorter definition of "intellectual property" at section 8.8: intellectual property is intangible property which is protected by law relating to patents, trademarks, copyright or, in some circumstances, common law
- expanded guidance in section 8.13 regarding Compensation, Settlements and Other One-Off Payments: where such payments are made a school should ensure that it has received legal advice that such payment is reasonable and not excessive in the circumstances. Previously schools were only required to ensure settlements and one-off payments were consistent with any professional legal advice
- New definitions of "joint use" and "shared use" which are relevant to the new sections 9.1 and 9.2 of the NFP Guidelines.
New sections 9.1 and 9.2
The introduction of new sections 9.1: Shared or Joint Use of Assets and 9.2: Use of Income or Assets for Onsite Ancillary Services target how schools choose to use their "assets" for community activities. They address, for example, providing school playgrounds, arts centres or meeting halls for activities such as dance/music lessons, electoral activities, community productions, childcare and Out of School Care. The addition of these new sections is significant as, on the face of them, they appear to contradict the operation of section 83C(2)(a). In other words, the NFP Guidelines have introduced some exceptions to the Education Act provisions. Consequently, all schools should not just rely on the wording of the Education Act but should also read the NFP Guidelines to ensure that they have the ‘full picture’ of what arrangements may, or may not, result in them being seen to operate "for profit."
Sections 9.1 and 9.2 now impose several principles to be considered by schools when electing to share or use their assets, even for a commercial profit. Importantly, the sharing of assets and provision of ancillary services should be "lawful and meet all relevant legal, regulatory and policy requirements" including child protection, WHS and student and staff welfare. This means that the school and those who have liabilities under child protection and WHS legislation, in addition to common law duty of care obligations, must understand what their duties are when deciding to offer school assets and provide ancillary services. The Non-Government Schools Not-for-Profit Advisory Committee is releasing a newsletter soon which will include “multiple case studies for context on these areas”.
What Should Schools Do Now?
Schools should be aware of these changes and implement policies and procedures in time for their next registration review. If schools do not already have policies and procedures regarding how they share their assets and use them for ancillary services, steps should be taken now to develop these helpful materials. These policies should then be fully implemented within the school to avoid the consequences of non-compliance with the Education Act and NFP Guidelines.