Chapter 3 - Accountability and needs-based funding
99.1
The committee believes, in the light of evidence
presented in the last chapter, that the existing SES funding model needs
augmentation by a needs-based component. It accepts that, over time, problems
arose with the previous ERI model, reducing confidence in its ability to
measure the relative needs of private schools for government funding. This
happened mainly because schools developed means to disguise or minimise their
level of private income and thus to conceal their capacity to raise private
resources.
99.2
This raises the important issue of how to implement a model
that includes a needs-based component, while avoiding the problems that have
caused concern in the past. The committee believes that in determining the
level of need, the extent to which schools are able to raise their own income
from private sources such as fees and endowments becomes a critical issue. The
absence of published data on private schools' income from tuition fees and
other sources presents a significant barrier to determining the true resource
base of schools. This problem must be overcome: private schools should be
required to report publicly on their fee levels and to make this information
formally available to the Commonwealth.
99.3
The committee recognises the importance of ensuring
accountability for all Commonwealth funds expended. The Parliament must ensure
accountability for the proper expenditure of funds it appropriates and passes
on to agencies outside the Commonwealth's administrative ambit. Any move to
increase the formal accountability requirements placed on non-government
schools with respect to Commonwealth funds also has implications for the
broader accountability framework under which schools operate.
99.4
This chapter assesses the claims made by the
government, independent and Catholic schools sectors about the adequacy of the
accountability framework under which they operate for the expenditure of
Commonwealth funds. It identifies areas where reform is needed if the
Commonwealth is to remain faithful to the principle of needs-based funding.
Commonwealth accountability framework
99.5
The committee believes that the Commonwealth and the
states should approach the issue of funding of non-government schools as a
shared responsibility and in a spirit of cooperation. However, as a major
provider of funding support to schools, the Commonwealth does have both
financial and educational accountability arrangements that apply, as conditions
of funding, to its funding contributions to states and territories, and to
non-government schools.
99.6
The financial accountability requirements for
government schools include provision by each school of a certificate to the
effect that funds have been spent, or committed, for the purposes for which
they were provided. Non-government schools are required to submit to DEST a
financial questionnaire which specifies all gross income received in operating
the school and for providing activities for the students enrolled at the
school. The Association of Independent Schools of WA told the committee that
data provided on the questionnaire is published through the Annual National
Report on Schooling (ANR).[85] However, this
data is aggregated and provides no detail about individual schools.
99.7
According to DEST: 'The accountability provisions
applicable to Australian Government funding for schools and Indigenous
education are built on the premise that all schools are equally accountable for
the public funds they receive for the education of the children in their care'.[86]
99.8
In addition to the financial accountability
arrangements, the Commonwealth has in place a range of educational
accountability requirements which focus mainly on reporting designed to
reinforce the link between the funding provided under Australian Government
programs and improved outcomes for students.[87] For example,
the DEST submission states that the educational accountability for Australian
Government funding is provided for in the following ways:
-
Participation in the ANR;
-
Commitment to the National Goals for Schooling
in the 21st Century and to achieve any performance and performance
targets, and to report against any performance measures, incorporated in
legislation;
-
Regular assessment of student outcomes through
MCEETYA's framework for national key performance measures; and
-
Measuring literacy and numeracy at years 3, 5
and 7 through annual, full-cohort skills testing undertaken by each state and
territory.[88]
Views of the independent and Catholic school sectors
99.9
The independent schools sector in its evidence to the committee
expressed satisfaction with the accountability arrangements in place for both
government and non-government schools. The Independent Schools Council of
Australia argued in its submission that:
Independent schools are highly accountable to stakeholders,
governments and regulatory bodies. While the accountability environment of
independent schools differs from that of schools in other sectors, it is no
less stringent and in significant ways is far more extensive.[89]
99.10
With regard to financial accountability of Commonwealth
funding, the Council stressed that the accountability and reporting
requirements in legislation for the 2005-08 quadrennium are expected to be
similar, and possibly more extensive, than for previous legislation.
99.11
It is claimed by the independent schools sector that private
schools receiving Commonwealth funds are both financially and educationally
accountable and must:
-
Provide extensive financial data to the
Australian Government each year;
-
Demonstrate that the funds received under each funding
program have been expended appropriately;
-
Participate in the Annual National Report on
Schooling in Australia by providing extensive data;
-
Participate in evaluations of the outcomes of
programs of financial assistance;
-
Commit to the National Goals for Schooling for
the Twenty-first Century; and
-
Commit to the achievement of performance
measures, including testing for and reporting against literacy and numeracy
benchmarks.[90]
99.12
The Independent Schools Council of Australia cautioned
against any proposals to introduce further accountability requirements for
Commonwealth funding that would:
-
Increase the administrative burden and costs
related to such requirements;
-
Compromise the ability of schools to respond to
the communities they serve;
-
Discourage innovation and excellence in
educational programs and their delivery; and
-
Inhibit the ability of schools to be competitive
both between and within sectors.[91]
99.13
Three themes emerge from evidence provided by the
independent schools. First, the current financial and educational
accountability arrangements are adequate, therefore any further changes are not
necessary. Second, in some respects, non-government schools are more
accountable than their counterparts in the public system. It was pointed out to
the committee that non-government schools are required to undergo a rigorous
registration procedure every five years, a requirement which does not apply to
government schools.[92]
Third, there is a view that any new measures for achieving greater
accountability for the funding that the Commonwealth provides should take into
consideration whether they will result in improved educational outcomes. Each
of these themes is captured in evidence by the Association of Independent
Schools of New South Wales:
Accountability that simply adds to the administrative workload
and does not lead to an improvement in educational outcomes seems to us to be a
waste of good, useful time.Independent schools have been providinginformation
for many years through financial questionnaires and so on. There is no
objection to increased accountability, but we will run every proposal for extra
accountability past the test of its validity for helping us to improve the
quality of education.[93]
99.14
The committee raised the issue of accountability with the
independent schools sector at public hearings. It believes the evidence highlights
serious deficiencies with the current accountability and reporting arrangements
which apply to the non-government sector. Mr
David Robertson,
Assistant Director, Association of Independent Schools of Queensland,
told the Committee that specific information on how Commonwealth funds are
spent is not collected by his association. Although information on Commonwealth
grants to non-government schools is tabled in Parliament every year, the committee
notes that this information, as with virtually all comprehensive data about
private schools' finances, is only an aggregate figure which does not reveal
how individual schools spend public money.[94]
99.15
Similarly, Mr Daniels, Executive Director, Independent
Schools Council of Australia, told the committee that the only data collected
by his organisation relating to how schools spend Commonwealth money is that
which is publicly available and collected either by the Australian Bureau of
Statistics or other Commonwealth agencies.
99.16
The various state Catholic education commissions are of
the view that Catholic schools already adhere to strict accountability and
reporting processes. The Catholic Education Office of WA, for example, told the
committee that it adheres to 'very strict accountability requirements' and that
there is 'very strong financial accountability back to the community and back
to government'.[95]
Criticisms of the accountability and reporting framework
99.17
The issue of accountability has been a constant topic
of debate among the different school sectors. The committee accepts that
non-government schools adhere to various accountability requirements that
relate to implementation curriculum frameworks, teaching and learning programs,
reading and reporting of student achievement and other educational outcomes. It
also notes the concern of the Australian Council of State School Organisations that
the imposition of intrusive and uniform accountability regimes might stifle
creativity and innovation in education, and become bureaucratic ends in themselves.[96]
99.18
However, the main issue before the committee is that of
the level of accountability for the finances that private schools receive from
the Commonwealth. In this regard, the Committee notes that the issue of
accountability of Government funding to private schools has recently been the
subject of close scrutiny. Independent research has called into question many
of the assertions made by those representing the independent school sector.
99.19
The committee takes particular note of a major study by
Dr Chris Aulich and the Mr Terry Aulich which concludes that while Australian
Government per capita funding of private education is high in comparison with
other countries' funding, Australia has one of the lowest levels of accountability
and regulatory control: 'the way in which government funding is spent by
private schools is not subject to the same rigorous analysis and reporting
common not only to most other OECD countries but to comparable areas of public
expenditure in this country'.[97]
99.20
A number of submissions to this inquiry expressed major
concerns with the current accountability arrangements surrounding the public
subsidy of private schools, and highlighted a number of areas in which
accountability needs to be improved. The AEU identified at least eight areas
which require significant improvements. These include: public transparency and
parliamentary reporting of accounts; admission and exclusion criteria;
salaries; curriculum and professional accountability; expenditure on promotion,
marketing and advertising; fee regulation; auditing of rolls; and capital
funding.[98]
99.21
For the purpose of this inquiry, the committee is
mainly concerned about issues relating to the transparency and reporting of
Commonwealth expenditure on non-government schools. According to the AEU
submission, the current reporting requirements are inadequate for two reasons.
First, DEST's financial questionnaire is applied and treated on a
commercial-in-confidence basis. Second, the auditing procedures do not account
for schools which have a capacity to 'two pocket account', which means
substituting government money for private expenditure and spending private
money in areas not allowed within the Commonwealth funding arrangements.[99]
99.22
The committee notes the view of the Queensland Teachers
Union that an important obstacle to achieving adequate levels of accountability
is the absence of an independent mechanism to establish a consistent and
comparable base for analysing and comparing the income and expenditure of
government and non-government schools. The implication is that much of the
current debate over the accountability of Commonwealth schools funding is
unproductive because there are no agreed data in relation to school income and
expenditure.[100]
99.23
Union concerns are summarised by the AEU (WA Branch)
submission: 'Funds provided by the Federal Government are given to
no-government schools and they are allowed to spend that money as they see fit,
but they do not tell the public how their taxpayer dollars are being spent'.[101]
99.24
The Independent Education Union of Australian (IEUA)
expressed similar concerns to the AEU. It argued that any funding model needs
to measure the actual resources of a school, including fees and other sources
of income. It argued further that government schools should also be required to
provide information about the level of resources available from sources such as
fees and fund raising.[102]
99.25
The committee finds it unsatisfactory that there is no
complete and comparable data set relating to the income and expenditure of
government and non-government schools. Research published by the Institute for
Social Research, Swinburne University of Technology, shows how difficult it is
to make sense of recent developments in Commonwealth funding of schools. To
begin with, states and territories do not report their data in the same format
as the Commonwealth Government does. There are differences in the terminology
and accounting concepts which underpin states' published financial data. There
is the additional problem of non-government schools using accounting concepts
which are not used in the public sector.
99.26
The cash-based system of reporting used by the state,
territories and the Commonwealth Government was replaced in 2001 with a system
of accrual accounting. The moved was premised on the claim that accrual
accounting would make public finances more transparent, drawing on accounting
systems used widely in the private sector. However, the move to accrual
accounting has actually produced the opposite result. Not only is it impossible
to reconcile the new data with the old, thereby abruptly ending the very useful
cash-based time series, each of the jurisdictions employs slightly different
methods of reporting. The committee finds that there is less transparency in
the financing of Australia's
education system than there was five years ago. According to Hayward
and Esposto, this is 'a remarkable development given that several hundred
millions of dollars were spent on consultants to help move to this new system'.[103]
99.27
The committee believes that in the light of these
deficiencies, more needs to be done to strengthen the processes of data
collection and dissemination of information about the public funding of
schools. In particular, it agrees with the view of David
Hayward and Alexis
Esposto that there is an urgent need for
additional resources to be allocated to rectify this situation, preferably
through MCEETYA. The committee believes that a dedicated secretariat with
expertise in financial reporting should be established within MCEETYA to
collect timely and accurate data on education funding for government and
non-government schools. The data should include:
-
Operating expenses, including superannuation and
interest;
-
Operating income, including income from private
sources such as fees, donations and bequests, and money raised from fund-raising,
sponsorships and the like;
-
Capital expenditures; and
99.28
The committee considers the different accountability
and reporting standards which apply to the government, non-government and
Catholic school sectors to be a major stumbling block to achieving adequate
accountability. The committee suspects that these different arrangements may be
the result of the political negotiations between the Australian Government and each
of the school sectors on their level of Commonwealth funding. The NSW Teachers
Federation highlighted in its submission that public schools in NSW are subject
to minute scrutiny with respect to their financial arrangements, including all
forms of income (government grants, fund raining, donations and fees). With
respect to private schools in NSW:
There is no such requirementThey are not required to account
publicly for monies received from governmentPrivate schools hide behind
'commercial-in-confidence' excuses at the same time as they are treated as
not-for-profit charities under the Taxation Act. No scrutiny is applied to the
accumulation of assets, much of which is subsidised by the public.[105]
99.29
The committee notes that the Government's new
legislation for implementing its funding policy does not appear to incorporate
broader accountability principles across all school sectors. According to Mr
Terry Aulich:
In regard to any systemic funding from the Commonwealth, why is
there no formula which is transparent to everyone as to how, for example, the
bishops or the systems distribute Commonwealth funding within their systems?
What is the basis on which that money is delivered to the schools? Where does
it go? Does it go to their secondary schools and not to primary schools?[106]
99.30
The committee is particularly concerned, in the context
of calls for accountability, about claims repeated by different independent
school associations of the adequacy in this regard of the DEST financial questionnaire
which non-government schools are required to complete each year. To begin with,
because the questionnaire instrument itself is treated by DEST as a
confidential document, the committee is unable to form an assessment of its
effectiveness as an accountability tool.
99.31
Following from this, it appears that the questionnaire
does not include information that relates to the amount of money independent
schools spend on teachers' and principals' salaries, on remuneration packages,
capital works or money spent on reducing debt. It does not gather information
about movement in fee levels. None of this financial data can be found on the
public record. The committee also questions whether the annual National Report
on Schooling, referred to earlier, is an adequate form of accountability when
these reports contain aggregated information only and are usually, at best,
three years out of date. It is noted, however, that the Government has sought
to expedite the publication of the National Report on Schooling in a provision
contained in the Schools Assistance Bill 2004.
99.32
The AEU strongly recommends that accountability requirements
applying to private schools be considerably strengthened. Funding, it says, should
be made conditional on financial reporting to Parliament of all aspects of the
operations of private schools, conducted on the same basis as those in public
schools. The AEU submission states:
Given the levels of funding that private schools receive and the
relevance of knowing and being able to compare the overall levels of resources
of both public and private schools, there seems to be no good reason why these
reports should not be tabled in Parliament.[107]
99.33
The committee agrees with this assessment, and adds
that parliamentary scrutiny of all financial matters related to non-government
schools is not an unreasonable condition to be placed on their Commonwealth funding.
99.34
Fairness and equity in the allocation of scarce public
resources can only be achieved with the full disclosure of schools' financial
capacity. Such disclosure would both facilitate a transparent process for
determining equitable funding for schools, and would ensure that money provided
by the Australian Government is properly accounted for. This is a view endorsed
by the NSW Secondary Principals Council:
If an institution receives public money, we should look at
ensuring that it is publicly accountable. At the moment we do not know what
fees [these institutions] receive, how many properties they own, what sort of
money is left to them in bequests or what sort of investments they have in the
offshore money market. If we are talking about the elite, very wealthy schools,
none of that is on the public recordSurely, if you are entitled to vast
amounts of public money then the income that you already hold, which would
somehow relate to the income that you get, should at least be publicly on the
table.[108]
New schools
99.35
An issue raised on several occasions in evidence to the
committee relates to the funding of new schools. The WA Branch of the AEU
expressed its concern at the provision of resources for new schools and whether
any new inquiry into Commonwealth funding of schools should include a
reassessment of the levels of funding that are currently provided to new schools.
Ms Anne Gisborne, Deputy President, told the committee that during the last
decade there has been an increase in the number of new independent schools that
have not been able to support themselves financially 'because they are not
linked into a system and they therefore require further resourcing to support
them'.[109] Concern
over resourcing of new schools was also expressed by the Queensland Teachers
Union, especially ensuring that new schools are economically viable and that
their impact on existing government and non-government schools is assessed.[110] The
committee notes that this problem is exacerbated in jurisdictions where there
is no minimum enrolment requirement on non-government schools, leading to
problems with viability for some newly-registered, extremely small schools. The
committee would welcome moves by states and territories to establish, where
they do not already exist, minimum enrolment requirements for the registration
of new non-government schools.
Conclusion
99.36
As the evidence before the committee clearly
demonstrates, a major obstacle to any modification to the allocative mechanism
for Commonwealth subsidies to private schools is the absence of published data on
private schools' income, especially from tuition fees. According to Dr
Louise Watson,
while a limited amount of information on the fees charged by some independent
schools in some states is published in the Good
Schools Guide, there is no complete national data set on the fees charged
by independent schools. In addition, while the Commonwealth Government collects
data annually on all private schools' income from tuition fees, this
information is not made publicly available.
99.37
The Parliament has before it legislation that would see
the reach of the Commonwealth, in terms of explicit conditions to be placed on
funding, extend further into the non-government schools sector than previously.
However, the committee does not believe this increasing level of Commonwealth
intervention to be accompanied by adequate reporting and accountability
measures. While the Government and the independent schools sector remind the
community of the stringent educational accountability regime which has been put
into place by the Government, the committee takes the view that the accountability
of the expenditure of Commonwealth funds is an area that has not be adequately
addressed.
99.38
The committee calls for a revised and strengthened accountability
framework which would require non-government schools to fully disclose their
financial position to the Parliament at
least once each year. Any new accountability framework should make full
disclosure a condition of Commonwealth funding.
Recommendation 5
The committee recommends that the
Commonwealth, through MCEETYA, should exercise its responsibility to ensure
that financial data regarding school income and expenditure, whether on an
aggregated or disaggregated basis, is provided and publicly presented and
reported in a standard format, using a single accounting basis and reporting
period. In the case of non-government
schools, this data, both aggregated and disaggregated to the school level,
should be provided to the Commonwealth in a standard format on an annual basis,
and tabled in the Parliament. Provision
of full financial information in this manner should be a condition for receipt
of recurrent funding.
Recommendation 6
The committee recommends that
accountability provisions regarding non-government schools should be
strengthened to require reporting by schools on a range of matters including:
-
enrolment of
students with disabilities;
-
enrolment of
Indigenous students;
-
admission and
exclusion policies;