By Lucy Carroll
Private schools will be given new rules governing how they can spend public funding to limit costly legal challenges that have already resulted in $47 million of misspent money being returned to the state government.
The NSW government on Friday released its review into section 83c of the Education Act which states taxpayer funds cannot be provided to private schools that operate for profit.
The King’s School was ordered to stop the planned construction of a plunge pool after a government investigation found it would be an improper use of the school’s money.Credit: Rhett Wyman
Under new guidelines, independent and Catholic schools will be given “more clarity” on how they can spend public funding, while also shifting regulatory powers and oversight to the NSW Education Standards Authority and away from the Department of Education.
Tom Alegounarias, the former chair of NESA and one-time president of the Board of Studies who led the review, said the state government and schools were “ending up in too many legal disputes arising from a lack of clarity with the legislation”.
“A lack of communication about the rules appears to have resulted in too many legal challenges and unnecessary investigations which cost schools time and the public money,” he said.
The report recommends “a graduated scheme of sanctions … that are appropriate and proportionate to any non-compliant activity”. It also proposes giving schools timeframes for investigations and more information to help them respond to non-compliance issues, Alegounarias said.
“The rules are clearer in that schools aren’t doing the wrong thing simply by running canteens or supporting parents associations, for example. But rules are tighter on expenditure that is not needed to educate students.”
The recommendations were welcomed by independent and Catholic school associations, and are in line with measures proposed by private school principals in their submissions.
The Association of Independent Schools of NSW argued there was “an inherent conflict of interest” in the NSW Education Department deciding what is acceptable expenditure by private schools. That view was echoed by the head of Ascham, Andrew Powell, in his submission.
Principal at Shore School, John Collier, said because the department was “in direct competition with non-government schools”, it was inappropriate for [them] to have responsibility for the regulatory functions.
Tom Alegounarias, the former chair of the NSW Education Standards Authority and one-time president of the Board of Studies, conducted the review.Credit: Steven Siewert
In a submission from the King’s School, principal Tony George said “being an independent school requires that schools use their income and assets in different ways”.
“Schools should not suffer from persistent anxiety that such use could constitute a breach of section 83c because it doesn’t conform to a narrow ‘cookie-cutter’ model the department considers is for the operation of the school,” George said.
“Attracting the best staff to a school may require that school funds (generated from fees paid by parents) are spent in ways other schools would not wish or be able to do. For example, by renovating an on-site residence to bring it up to an executive standard.”
George said schools like King’s “feel they are being held to ransom... in that they must comply with the strict terms of section 83C or forfeit their state funding.”
Last year, the boys’ school in North Parramatta was ordered to stop the planned construction of a plunge pool at its headmaster’s residence after a government investigation found it would be an improper use of the school’s money.
The school was also declared non-compliant after a department investigation into business class flights taken by the headmaster and his wife to attend a British rowing regatta.
The review examined the effectiveness of section 83C and assessed the role of the not-for-profit advisory committee that was set up in 2014 under former education minister Adrian Piccoli.
NSW private schools that receive state government funding must operate on a not-for-profit basis, with the act stating a school’s income and assets must only be used for the operation of the school.
In the past decade, 136 audits of non-government schools’finances have been undertaken, while five non-government schools have been declared for-profit and 17 non-compliant.
Four private schools – Malek Fahd Islamic School, Rissalah College, Al Amanah College and The Lakes Christian College – were declared for-profit or non-compliant. Those schools were required to repay a total $46.9 million in government funding.
Al Amanah College returned $19.4 million in public money after it breached not-for-profit rules by running a hotel.
The review makes sixteen recommendations to improve the regulation of non-government schools in NSW. Guidelines on trusts and foundations have been included, with rules that schools can’t move resources into a trust or foundation that is run independently.
“The school can accept money from them, but the school cannot transfer money to a foundation,” Alegounarias said.
In their submission, the Association of Independent Schools NSW recommended that the Education Minister repeal Section 83c completely, but Alegounarias said that was not considered.
Catholic Schools NSW chief executive Dallas McInerney said NESA was “the right home” for the regulatory powers.
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