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Australian Education Act 2013—National School Resourcing Board—Annual review of state and territory compliance with section 22A of the Australian Education Act 2013—Report for 2018


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National School Resourcing Board Annual review of state and territory compliance with section 22A of the Australian Education Act 2013

2018 funding year

National School Resourcing Board Annual review of state and territory compliance with section 22A of the Australian Education Act 2013

2018 funding year

Board members

Mr Michael Chaney AO (Chair) Professor Natalie Brown Professor Greg Craven AO Ms Audrey Jackson AM Professor Stephen Lamb Professor Ken Smith Dr Alison Taylor

Mr William (Bill) Daniels (whose term ended 31 January 2020) and Emeritus Professor Denise Bradley AC (who resigned as Deputy Chair on 20 February 2020) also contributed to this report.

Annual review of state and territory compliance with section 22A of the Australian Education Act 2013 © Commonwealth of Australia 2020

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Disclaimer

As this is an independent review authored by the National School Resourcing Board, the report does not necessarily reflect the views of the Australian Government.

This document, when attributed, must be titled as Annual review of state and territory compliance with section 22A of the Australian Education Act 2013

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Letter of transmission from Board Chair to the Minister for Education

The Hon Dan Tehan MP Minister for Education Parliament House CANBERRA ACT 2600

Dear Minister

In October 2019 you commissioned the National School Resourcing Board (the Board) to undertake its first annual review of state and territory compliance with section 22A of the Australian Education Act 2013 (s.22A) for the 2018 calendar year.

The Board considers its legislated responsibility to conduct an annual review of state and territory compliance with s.22A to be critical in providing confidence to the Australian Government and the broader community that schools are being funded at the levels agreed by all governments.

In conducting its review, the Board examined states and territories’ certified financial reports, completed desktop research and received expert financial audit advice. The Board is pleased to advise that based on its analysis it found all states and territories were compliant with s.22A for the financing of both the government and non-government sectors for the 2018 calendar year. In its report the Board has also made some findings regarding improvements to assurance and reporting processes for your consideration with state and territory ministerial colleagues.

The terms of reference asked the Board to consult with states and territories and Education Council in the course of its review. Whilst it had initially intended to meet with jurisdictions and stakeholders, the Board reconsidered its approach to consultations due to restrictions relating to the COVID-19 pandemic. For this reason, consultation with jurisdictions was limited to writing to state and territory education departments confirming that the Board had determined that all states and territories are compliant with s.22A for 2018 and giving them the opportunity to raise any issues or concerns before the Board finalised its report.

I thank my colleagues on the Board for their contribution to this important review, particularly given the unusual circumstances. I note with sadness the passing away of our former Deputy Chair, Emeritus Professor Denise Bradley AC in March 2020. Professor Bradley resigned from the Board in February 2020 due to ill health and her presence and contributions will be greatly missed.

On behalf of the Board, I commend to you the Board’s first annual review of state and territory compliance with s.22A for the 2018 calendar year.

Yours sincerely

Michael Chaney AO Chair, National School Resourcing Board

2 June 2020

ii

Contents

Glossary iii

List of exhibits iv

Executive summary v

Findings vi

Part 1: Introduction 1

1.1 The task 1

1.2 The review process 2

1.3 Background 2

Part 2: Compliance 5

2.1 Assessment 5

2.2 Measuring contributions 5

2.3 Strengthening assurance requirements 8

Part 3: Reporting processes 9

3.1 Reporting minimum funding contributions 9

3.2 s.22A reporting requirements are fit for purpose 10

3.3 Streamlining reporting by aligning assurance activities 11

Appendix A—Terms of reference 12

Appendix B—Review Process 15

Appendix C— Guidance to reporting: state and territory funding contribution requirements 16

Appendix D—References 27

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Glossary

Term Definition

Approved authorities Legal entities that can receive Australian Government recurrent funding for one or more schools. 

Approved system authorities Approved authorities for more than one school that distribute funding according to their own needs-based funding arrangement. This includes state and territory governments.

Australian Curriculum, Assessment and Reporting Authority (ACARA)

An independent statutory authority which provides advice on national curriculum, assessment and reporting to all Australian education ministers.

Australian Government Department of Education, Skills and Employment (DESE)

Commonwealth department which oversees national education, skills and employment policies and programs.

Bilateral agreements Agreements under the National School Reform Agreement between each state and territory and the Commonwealth that sets out state-specific actions to improve student outcomes.

The bilateral agreements also set out minimum state and territory funding contribution requirements as a condition of receiving Commonwealth school funding.

National School Reform Agreement A joint agreement between the Commonwealth, states and territories to lift student outcomes across Australian schools.

Net Recurrent Income Per Student (NRIPS)

The base instrument for measuring state and territory contributions to schools.

Schooling Resource Standard (SRS)

An estimate of how much total public funding a school needs to meet its students’ educational needs.

Year T The calendar year on which funding is being reported. For the purpose

of this report, Year T is 2018.

Year T+1 The year following the T year. For the purpose of this report, Year T is

2018 so Year T+1 is 2019.

Year T+2 The year two years after the T year. For the purpose of this report,

Year T is 2018 so Year T+2 is 2020.

iv

List of exhibits Exhibit 1. The SRS determines total public funding for schooling review process 3

Exhibit 2. Summary of certification approaches for state and territory annual reports 7

Exhibit 3. Map of key reporting milestones 11

v

Executive summary

1. Australian Government Department of Education and Training, National School Reform Agreement, viewed on 8 April 2020, www.education.gov.au/national-school-reform-agreement-0.

The Australian Education Act 2013 (the Act) requires the National School Resourcing Board (the Board) to undertake an annual review of state and territory compliance with section 22A of the Act (s.22A). This section of the Act states that, as a condition of Commonwealth financial assistance, states and territories are required to meet minimum school funding contributions for the government and non-government sectors.

States and territories’ minimum school funding shares are set out in s.22A and are standard unless the jurisdiction’s bilateral agreement under the National School Reform Agreement specifies otherwise. All states and territories have entered into individual funding arrangements with the Commonwealth, set out in their respective bilateral agreements, which are included as appendices to the National School Reform Agreement1.

The terms of reference for this review require the Board to consider and provide its assessment relating to the compliance of a state or territory with s.22A, subject to the terms of its bilateral agreement, including:

1. whether the reported state funding for the given year equals or exceeds the minimum funding contribution requirements under s.22A for both government and non-government sectors 2. contributing or mitigating circumstances 3. suggestions for adjustments to current reporting processes that impact the ability of states to

comply with the requirements under s.22A.

The full terms of reference are at Appendix A.

The Board’s review of state and territory compliance was based on certified annual reports and accompanying information provided by each state and territory to the Australian Government Department of Education, Skills and Employment (DESE). It also commissioned expert audit advice to support its analysis.

The Board found that all states and territories complied with the s.22A requirements for the 2018 calendar year.

Given this, the Board did not need to consider any contributing or mitigating circumstances related to non-compliance.

The Board found that the current reporting requirements for states and territories, for the purposes of compliance with s.22A are reasonable, but there may be an opportunity to increase efficiency and consistency within the reporting process. In particular, the significant overlap between assurance activities for Net Recurrent Income Per Student (NRIPS) data required for both s.22A requirements and My School reporting to the Australian Curriculum, Assessment and Reporting Authority (ACARA) creates an opportunity for aligning the assurance activities of these processes.

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Findings

Finding 1

The Board found all states and territories are compliant with their minimum funding contribution requirements under section 22A of the Australian Education Act 2013 for the 2018 calendar year.

Finding 2

While assurance requirements allow flexibility for jurisdictions, they do not provide a consistent level of assurance. Requiring all states and territories to conduct assurance engagements in line with the Australian Auditing and Assurance Standards would still allow flexibility while providing a consistent level of assurance.

Finding 3

The current reporting requirements for states and territories for the purposes of section 22A of the Australian Education Act 2013 compliance are reasonable given the significant funding involved.

Finding 4

As states and territories are required to provide assurance both for My School reporting to ACARA and section 22A of the Australian Education Act 2013 reporting to the Department of Education, Skills and Employment, there is an opportunity for efficiency and economy if these two processes are aligned to avoid duplication.

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Part 1: Introduction

1.1 The task

The Board is responsible for reviewing different parts of the Australian Government funding model under the Australian Education Act 2013 (the Act). These reviews help ensure public confidence in the funding model.

Under section 128(6A) of the Act, the Board is required to conduct an annual review of state and territory compliance with section 22A of the Act (s.22A). This section states that, as a condition of Commonwealth financial assistance, states and territories are required to meet minimum school funding contributions.

States and territories are required to report annually on the funding they provide to schools to the Department of Education, Skills and Employment (DESE) for the purposes of compliance with s.22A and to the Australian Curriculum, Assessment and Reporting Authority (ACARA) to enable the publication of school level financial data on My School.

On 4 October 2019, the Hon Dan Tehan MP, Australian Government Minister for Education (the Minister) commissioned the Board to undertake its first annual review of state and territory compliance with s.22A for the 2018 calendar year. The terms of reference for the review ask the Board to consider three key elements.

First, the Board was asked to consider if reported state funding for the 2018 calendar year equals or exceeds the minimum funding contribution requirements for both government and non-government sectors, as described in s.22A. States and territories have agreed to individual funding arrangements in bilateral agreements, included as appendices to the National School Reform Agreement. The Board will make an assessment of each state and territory’s compliance with s.22A, subject to the terms of its bilateral agreement, and taking into account immaterial shortfalls in funding.

With respect to this first element of the Board’s work, it is important to note that the Board does not have a role in providing recommendations on potential compliance action by the Minister. Under the Act, the Minister has the discretion to determine compliance and any sanctions.

Secondly, the Board was asked to consider mitigating factors that may have contributed to any non-compliance. A non-exhaustive list of factors to consider were included in the terms of reference.

Thirdly, the Board was asked to make suggestions for adjustments to the current reporting process that impacts the ability of states to comply with the requirements under s.22A.

The Australian Government and state and territory governments are the public funders of government and non-government schooling in Australia. Under the Act, s.22A requires states and territories to meet minimum school funding contributions and sections 35A and 35B (s.35A and B) require the Australian Government to meet minimum school funding contributions. As such, the review is focussed on state and territory funding obligations and does not consider any reporting required by the non-government sector.

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1.2 The review process

To undertake its review the Board considered each state and territory’s certified annual report and any additional information provided. It also commissioned expert audit advice to inform its assessment.

The terms of reference required the Board to consult with states and territories and Education Council in the course of its review. Whilst it had initially intended to meet with jurisdictions and stakeholders, the Board reconsidered its approach to consultations due to restrictions relating to the COVID-19 pandemic. For this reason, consultation was limited to writing to state and territory education department Directors-General, or their equivalents, in early April confirming that the Board has determined that all states and territories are compliant with s.22A for 2018 and providing them with the opportunity to raise any issues or concerns before the Board finalised its report.

Based on the Board’s review of the certified annual reports, expert advice and revised consultation approach, the Board determined it could complete its review according to the terms of reference.

1.3 Background

Public funding for schools in Australia State and territory governments are responsible for delivering school education in their jurisdictions. The Australian Government has a role in supporting the delivery of education through the provision of funding; this role is shared with state and territory governments. It is the majority funder for the non-government sector and the states and territories, the majority funder for the government sector.

Total public funding to schools is provided by both the Australian Government and all state and territory governments, as agreed through the National School Reform Agreement. Funding is calculated through the use of Schooling Resource Standard (SRS), which is an estimate of how much funding is required for a school to meet the education needs of its students.

The Schooling Resource Standard The SRS was a recommendation of the 2011 Review of Funding for Schooling-Final Report2. It is designed to help overcome educational disadvantage and ensure that schools are adequately resourced to cater for the needs of all students. The Australian and state and territory government contributions are set as a percentage of the total SRS to account for annual fluctuations based on enrolment numbers, indexation and student or school characteristics.

The SRS estimates funding at the individual school level and includes:

• a base amount for every primary and secondary student • six loadings to provide extra funding for disadvantaged students and schools. The formula to calculate a school’s SRS is outlined in Part 3, Division 2 of the Act.

2. Gonski, D., Boston, K., Greiner, K., Lawrence, C., Scales, B., Tannock, P. (2011) Review of Funding for Schooling—Final Report, Australian Government Department of Education, Employment and Workplace Relations: Canberra, p. 53.

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Exhibit 1. The SRS determines total public funding for schooling review process

This exhibit depicts the base per-student amounts and loadings that comprise the Schooling Resource Standard.

The Schooling Resource Standard provides:

• a base amount for every primary and secondary student, discounted for non-government schools according to the school community’s capacity to contribute

• six loadings that provide extra funding for disadvantaged students and schools - Five of the loadings are expressed as a percentage applied per student for a school or system and include loadings for:

ƒ Students with disability, students with low English proficiency, Indigenous students, students with socio-educational disadvantage, students in regional and remote areas

- A set dollar amount per school based on school size.

Source. Developed by the National School Resourcing Board based on the Australian Education Act 2013

Australian Government funding arrangements The Act is the mechanism through which the Commonwealth provides funding to state and territory treasury departments to distribute to approved authorities. Approved authorities are legal entities who receive Australian Government recurrent funding for one or more schools. This funding is allocated based on the SRS.

In line with the requirements of s.35A and B of the Act, the Australian Government is moving towards consistently funding:

• 20 per cent of the SRS for government schools • 80 per cent of the SRS for non-government schools. There are transition arrangements in place up to 2029 to ensure Commonwealth funding for schools is allocated on this basis. Funding for schools funded below their target Commonwealth share of the SRS in 2018 will transition to the target by 2023. Those schools that are funded above their target Commonwealth share in 2018 will have their funding transition to the share by 2029 at the latest.

Separate primary and secondary amounts

For non-government schools, the base amount is discounted according to the school community’s capacity to contribute

Students with disability

Aboriginal and Torres Strait Islander students

Students with socio-educational disadvantage

School location

School size

Loadings

Set dollar amount

Base amount for each student

Loadings expressed as a percentage of the base amount

4

State and territory governments funding arrangements The Act requires state and territory governments to contribute their share of the total SRS to schools in order to receive the relevant Australian Government contributions. States and territories have all agreed with the Australian Government how their required shares will be calculated in their bilateral agreement.

The bilateral agreements with each state and territory include an agreed funding transition pathway for each calendar year from 2018 until 2023. By 2023, unless otherwise agreed by the Australian Government, states and territories are expected to contribute minimum funding equal to or exceeding:

• 75 per cent of the SRS for government schools • 15 per cent of the SRS for non-government schools. The Act provides flexibility for the Australian Government to take into account state differences and varying economic circumstances when agreeing state funding contribution requirements. State and territory governments have discretion to fund above these requirements.

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Part 2: Compliance

2.1 Assessment

Based on certified annual reports and accompanying information provided by states and territories, the Board’s assessment is that each state and territory complied with s.22A requirements for their minimum funding share for the 2018 calendar year, as set out in their bilateral agreements. In determining compliance the Board found that, for each state or territory, the:

• application of the adjusted methodology in measuring its reported minimum funding share was sound • reported minimum funding contribution met its required funding share • assurance of its annual report was compliant with requirements.

2.2 Measuring contributions

Measuring state and territory funding contributions to school education across jurisdictions is not a straightforward matter. The states and territories have significant differences in their overall schooling structures, their accounting processes and their approach to budgeting. These differences notwithstanding, each state and territory has agreed a nationally consistent method of measuring funding contributions that also allows for small adjustments for each jurisdiction.

Base methodology With a view to avoiding duplication, the instrument for determining s.22A contributions leverages the existing ACARA My School framework for reporting school financial data. The base instrument, Net Recurrent Income Per Student (NRIPS), for measuring state and territory contributions to schools funding for 2018 was the ACARA My School Financial Reporting: key principles and methodology3 (ACARA methodology).

The ACARA methodology was developed to enable nationally consistent reporting of school income information, which is available on My School. Importantly, the ACARA methodology has been developed over a number of years and is now mature. States and territories have been involved in its development through the ACARA Finance Data Working Group, which includes a representative of each of the government education departments and a representative from the Catholic and Independent sectors. This is a positive and essential element in both understanding individual requirements and obtaining buy-in from states and territories.

Adjusted methodology For the purposes of measuring state and territory contributions under s.22A, the ACARA methodology has been adjusted to take account of differences in the delivery of education nationally (adjusted methodology). These adjustments differ between jurisdictions and are set out in their bilateral agreement.

3. Australian Curriculum, Assessment and Reporting Authority, My School Financial Reporting: key principles and methodology (2019, version 8.3), viewed on 20 April 2020, www.myschool.edu.au/technical-and-statistical-information/financial-reports-assurance-letters-and-additional-information (see 2018 Financial reports and letter tab)

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The adjusted methodology uses the state and territory component of the NRIPS for school years Year 1 minus 1 to Year 12, as calculated under the ACARA methodology, with the following modifications:

• exclusion of funding for Year 1 minus 2 and full fee paying overseas students • inclusion of allocated (budgeted) funding as well as school expenditure for the government sector • inclusion of additional expenditure which may include one or more of the following: - reform costs

- education regulatory costs - other costs up to four per cent of the SRS for the government sector, which can include, for example—capital depreciation, direct student transport, Year 1 minus 2 and/or early childhood.

The requirements for the adjusted methodology are set in the Guidance to Reporting: state and territory funding contribution requirements, developed by DESE. This guidance material is by necessity detailed and comprehensive. It sets out what expenditure can be included in calculating states and territories’ reported contributions and the certification requirements for each expenditure amount. A copy of this reporting guidance is at Appendix C.

The adjusted methodology is sound, complex and provides the necessary clarity. It assists in reporting, but also plays an important role in providing assurance that reported amounts comply with the requirements of s.22A.

Based on the annual reports provided to DESE, the Board considers that each state and territory has accurately applied their adjusted methodology, as per their bilateral agreement, to determine their final reported minimum funding contribution.

Reported minimum funding contributions A state or territory’s minimum funding contributions for a funding year is calculated based on its required share of the SRS for that year, as outlined in its bilateral agreement, and final student enrolments.

Under the terms of all bilateral agreements except for the Australian Capital Territory (ACT), a state or territory is not considered non-compliant if its reported contribution falls short by an immaterial amount, currently agreed at 0.6% of the total SRS. The ACT does not have an immaterial shortfall clause included in its bilateral agreement.

The immaterial shortfall is included to account for the timing of state budget processes being finalised in advance of the year and the required contribution for the reporting year being finalised at the end of the year following the annual School Census. For example, budgeted funding for the 2018 calendar year is based on 2016 and 2017 enrolment data; in January 2019, final 2018 enrolment data are used to determine state and territory minimum contributions.

Certification of reported funding contributions Both accounting for, and providing assurance on, this funding is complex. The accounting advice provided by states and territories to their nominated assurer is, by necessity, detailed and comprehensive.

The Board found that states and territories had devoted significant effort to providing assurance, and the assurance provided was sound and compliant with requirements. Whilst different approaches have been used, all certification is consistent with requirements in the bilateral agreements.

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States and territories have provided annual reports to DESE and ACARA, certified by different entities, offering different levels of assurance. While the majority of states and territories engaged the same auditor as ACARA, Deloitte Touche Tohmatsu (Deloitte), some have used different approaches.

Six jurisdictions provided reports noting they were reasonable assurance engagements conducted under Australian Auditing and Assurance Standards. Reports from the remaining two jurisdictions did not specify the standards followed in providing assurance.

The term ‘reasonable assurance’ has a specific meaning in this context. The Auditing and Assurance Standards Board (AUASB) defines reasonable assurance as a high, but not absolute level of assurance and contrasts this with the lesser ‘limited assurance’. Importantly, compliance with AUASB standards such as Standard on Assurance Engagements ASAE 3100 Compliance Engagements (ASAE3100) also carries a range of very detailed obligations addressing issues such as evidence, ethics, independence and quality control.

Deloitte assurance reports for five jurisdictions all note clearly that they are reasonable assurance engagements conducted in accordance with AUASB standards.

One jurisdiction provided assurance in the form of an audit conducted by its state audit office of a special purpose financial report, prepared in accordance with the bilateral agreement. Essentially, these were adjustments to ACARA net recurrent income. The audit report results from a reasonable assurance engagement conducted in accordance with AUASB standards.

Two jurisdictions used other firms to provide the assurance required under their respective bilateral agreements. In each case, these jurisdictions engaged independent firms and the outcomes produced seem fit for purpose, but are silent on compliance with standards. Both certification reports note that a review has been undertaken, but it is not possible to determine from these reports whether any particular standards were followed.

Exhibit 2. Summary of certification approaches for state and territory annual reports

Assurance Practitioner

Standards Followed

Level of Assurance Type of Assurance Number of jurisdictions

ACARA auditor AUASB Reasonable assurance Compliance ASAE3100 5

State audit office AUASB Reasonable assurance Audit under Australian Auditing Standards 1

Independent auditor Not specified Not specified Not specified 2

Source: Developed by the National School Resourcing Board.

Finding 1.

The Board found all states and territories are compliant with their minimum funding contribution requirements under section 22A of the Australian Education Act 2013 for the 2018 calendar year.

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2.3 Strengthening assurance requirements

Through bilateral agreements, states and territories have agreed that the annual reports they provide to DESE must be consistent with the agreed adjusted methodology and certified by one of the following:

• the Auditor-General of the state or territory • an independent qualified accountant • an independent qualified accountant engaged by ACARA for NRIPS funding • the Director General or equivalent of the education portfolio for the state or territory, but only

up to 0.1 per cent of the SRS for the state or territory for all reported funding.

States and territories’ different approaches to the task of assuring annual reports for compliance with s.22A does raise a question as to whether improved requirements in future bilateral requirements could provide a more consistent approach and provide the Board and Government with a consistent level of assurance.

Whilst there is value in allowing flexibility for jurisdictions, including the selection of a preferred assurance practitioner, the Board’s view is that requirements in this regard could be strengthened to ensure the desired level of assurance and consistency. This comment should not be seen as critical of assurance achieved to date but identifying an opportunity for future reporting.

As the majority of states and territories have specified they provide assurance through a reasonable assurance engagement, conducted in accordance with Australian Auditing and Assurance Standards, this would not seem an unreasonable basis for seeking that level of assurance from all jurisdictions. Such a standard would provide the Board with a consistent level of assurance in making its assessment.

Department of Finance issued guidance to Commonwealth entities through RMG210 entitled Clarification of the terms ‘Audit’ and ‘Assurance’ 4 notes that:

While the words audit and assurance are commonly used words, in professional auditing and assurance standards they have strict definitions and audit professionals are bound by standards and ethical requirements. Using the wrong terminology to describe a process could lead to a difference in expectations between entities and stakeholders.

Where an independent external services are required that would ordinarily be performed by an audit or assurance professional, entities need to ensure that the description and scope of the requirement accurately reflects the services required and is consistent with standards and ethical requirements. Effective initial communication with experts (for example, the professional accounting bodies or AUASB) is encouraged to ensure that expectations are met and to avoid the possibility of misleading users.

Finding 2.

While assurance requirements allow flexibility for jurisdictions, they do not provide a consistent level of assurance. Requiring all states and territories to conduct assurance engagements in line with the Australian Auditing and Assurance Standards would still allow flexibility while providing a consistent level of assurance.

4. Australian Government Department of Finance, Clarification of the terms ‘Audit’ and ‘Assurance’ (RMG 210) , viewed on 8 April 2020, www.finance.gov.au/government/managing-commonwealth-resources/clarification-terms-audit-assurance-rmg-210 .

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Part 3: Reporting processes The Board found that current reporting requirements to ensure compliance with s.22a are reasonable given the significant funding involved.

In examining the current reporting processes for state and territory compliance with s.22A, including how these impact the ability of states and territories to comply, the Board considered:

• whether these reporting requirements are fit for purpose and appropriate to the level of funding involved

• whether reporting processes could be better aligned to assurance processes.

3.1 Reporting minimum funding contributions

The reporting processes for provision of financial data to DESE and ACARA by states and territories are separate but interrelated, as both include NRIPS data (calculated using the ACARA methodology). The duration and inter-governmental processes involved in the reporting process for a given calendar year-over almost fifteen months-provides an indication of the complexity involved. The DESE and ACARA guidelines for reporting prescribe the timeframes for reporting and the assurance activity that is required for each process.

States and territories report NRIPS for government schools for the calendar year (Year T) to ACARA by 31 August of the year following the funding year (Year T+1). DESE reports NRIPS data for the non-government schools sector to ACARA at the same time. Assurance processes follow, with ACARA’s assurance practitioner providing a final report to ACARA in February of the next year (Year T+2).

There are two key dates for state and territory reporting on s.22A compliance.

The first is 31 October of the year following the funding year (Year T+1), by which states and territories are required to provide an annual report to DESE, which includes:

• NRIPS data, at this stage uncertified, for the government and non-government sectors • certified data on additional inclusions and regulatory costs. The second and final reporting date is the following 31 January (Year T+2), by which states and territories must provide evidence of certification of the adjusted methodology for the government and non-government sectors.

The key reporting milestones for both processes are summarised in Exhibit 3.

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Exhibit 3. Map of key reporting milestones

The exhibit depicts reporting activities for year T (a particular funding year) for:

• states and territories (S&T), for both s.22A and My School • the Department of Education, Skills and Employment (DESE), the ACARA assurance practitioner (APP) and ACARA for My School reporting.

The activities are outlined in the table below:

Timeframe Activity required Responsibility Provided to For s.22A For My School

Jan. Year T+1 Provide Year T final enrolment data S&T DESE Yes No

Jan. Year T+1 Provide Financial Estimation Tool DESE S&T’s Yes No

Jan. Year T+1 Calculation of Year T SRS S&T Not applicable Yes No

June T+1 Provide Block Allocation Report (BAR)* S&T DESE No No

July to Sept. T+1 Prepare financial data S&T DESE and ACARA Yes Yes

31 Aug. T+1 Provide National Recurrent Income per

Student (NRIPS) for government schools

S&T ACARA No Yes

31 Aug. T+1 Provide NRIPS for non-government schools DESE ACARA No Yes

Sept. to Mid Nov. T+1 NRIPS data validation APP Not applicable No Yes

31 Oct. T+1 Provide uncertified adjusted NRIPS and

certified other funding data

S&T DESE Yes No

31 Dec. T+1 Provide letter of accounting advice APP ACARA No Yes

31 Jan. T+2 Provide final finance data submissions S&T ACARA No Yes

31 Jan. T+2 Provide certified adjusted NRIPS data S&T DESE Yes No

Early Feb. T+2 Provide compliance report APP ACARA No Yes

Late Feb-early Mar.

T+2

Publish data on My School website ACARA Public No Yes

Source: Developed by the National School Resourcing Board

Note: *The BAR involves state or territory certification that the financial assistance paid by the Australian Government, under the Australian Education Act 2013 has been spent, or committed to be spent, in accordance with relevant provisions of the Act.

3.2 s.22A reporting requirements are fit for purpose

The extent and timing of requirements were key elements in the Board’s consideration of the current reporting process. To achieve quality reporting, the Australian Government seeks comprehensive and timely information from states and territories. Jurisdictions may seek to reduce the reporting burden and to ensure timelines are adequate. These requirements are competing and they require negotiation.

Current timelines provide for the progressive production of reports and for assurance to follow. Jurisdictions have demonstrated their capacity to meet these obligations. The Board’s view is that existing reporting requirements and timelines for s.22A are reasonable and appropriate for the level of funding reported.

The Board notes that any opportunities to improve alignment between My School and s.22A reporting should be pursued.

Finding 3.

The current reporting requirements for states and territories for the purposes of section 22A of the Australian Education Act 2013 compliance are reasonable given the significant funding involved.

Jan T+1 Jun T+1 Jul T+1 Aug T+1 Sep T+1 Oct T+1 Nov T+1 Dec T+1 Jan T+2 Feb T+2 Mar T+2

DESE

Provide FET to S&T following receipt of final enrolment data for year T from S&T

S&T—Jan T+1 Calculate Year T SRS S&T—31/8 T+1

Provide NRIPS for gov. schools to ACARA

S&T—July to Sept T+1 Prepare financial data for DESE & ACARA

AAP—Sept - Mid-Nov T+1 NRIPS data validation (on-site analysis visits)

S&T—31/10 T+1 Provide uncertified adjusted NRIPS and certified other funding

data to DESE

S&T—31/1 T+2 Provide certified adjusted NRIPS data to DESE

S&T—31/1 T+2 Provide final finance data submissions to ACARA

AAP—31/12 T+1 Letter of accounting advice to ACARA

AAP—Early Feb T+2 Compliance report to ACARA

ACARA—

Late Feb T+2 - early March T+2 Publish data on My School website

S&T—30/6 T+1 Report BAR* to DESE

DESE—31/8 T+1 Provide NRIPS for non-gov. schools to ACARA

DESE

States and territories (S&T)

ACARA assurance practitioner (AAP)

ACARA

Reports • FET – Financial Estimation Tool • BAR – Block Allocation Report • NRIPS – Net Recurrent Income Per Student • Other funding – expenditure other than recurrent

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3.3 Streamlining reporting by aligning assurance activities

ACARA is required to provide reasonable assurance of the NRIPS data as part of the My School reporting process described in Part 1. As discussed earlier, states and territories have agreed relatively few adjustments to the ACARA methodology to calculate their funding contribution required under s.22A.

Assurance processes logically follow the collection and reporting processes, with separate assurance provided to ACARA for My School reporting, and further separate assurance required for the annual report provided to DESE in October, Year T+1.

Deloitte, the assurer for My School data for ACARA in 2018, also assured most state and territory annual reports for s.22A. This may be due to the significant overlap between the My School reporting under the ACARA methodology and the s.22A reporting under the adjusted methodology, as well as timeframes.

Due to the overlap, it appears that the assurance task for s.22A may be largely one of providing assurance on the relatively few adjustments required to the ACARA methodology to arrive at the final state or territory contribution amount for s.22A. While the number of adjustments is not the sole determinant of the extent of assurance effort required, it does suggest that the majority of assurance effort needs to be devoted to assuring ACARA methodology.

The Board’s view is there is a clear opportunity to better align these assurance processes between the activities undertaken for both My School and s.22A to increase efficiency. As the timing for reporting for s.22A is agreed through the bilateral agreements, there may be scope for the timing of ACARA reporting to be slightly adjusted to align with s.22A reporting.

Finding 4.

As states and territories are required to provide assurance both for My School reporting to ACARA and section 22A of the Australian Education Act 2013 reporting to the Department of Education, Skills and Employment, there is an opportunity for efficiency and economy if these two processes are aligned to avoid duplication.

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Appendix A—Terms of reference The Australian Education Act 2013 (the Act) sets out conditions of financial assistance for state and territories (states) to receive Commonwealth financial assistance for government and non- government schools in that state or territory. This includes default requirements for minimum state funding contributions for the government and non-government sectors under section 22A of the Act.

Section 22A of the Act provides that a payment of financial assistance under the Act to a state is subject to the total amount of funding provided by the state for a year for:

• government schools located in the state equalling or exceeding the state contribution amount for government schools in the state for the year.

• non-government schools located in the state equalling or exceeding the state contribution amount for non-government schools in the state for the year.

Bilateral school education reform agreements (bilateral agreements) have been agreed as part of the new national schooling reform arrangements. Bilateral agreements take account of states’ individual circumstances, and each bilateral agreement outlines the state’s commitments to the implementation of reforms. The agreements include agreed minimum state funding contributions, as well as the agreed approach to measuring these contributions and treatment for immaterial shortfall, for the government and non-government sectors where arrangements vary from the default calculations set out in section 22A of the Act.

The total amount of funding provided by the state for a year will be calculated in accordance with the methodology set out in a state’s bilateral agreement.

The National School Resourcing Board (the Board) has been established under section 128 of the Act. Subsection 128(7) requires an annual independent review of compliance by states with section 22A of the Act.

Consistent with the Act, the annual review will assess total funding for the government and non-government at the sector level, not school level. States will continue to have the discretion to allocate funding to schools according to their own funding distribution models.

Scope

The Board will consider and provide its assessment relating to compliance by a state subject to the terms of its bilateral agreement, including:

1. Whether the reported state funding for the given year equals or exceeds the minimum funding contribution requirements under section 22A of the Act for both government and non-government sectors;

2. Contributing or mitigating circumstances; 3. Suggestions for adjustments to current reporting processes that impact the ability of states to comply with the requirements under section 22A of the Act.

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Contributing or mitigating circumstances

The Board is to take into account mitigating factors that have contributed to non-compliance. This may include, but is not be limited to, the following:

• fluctuations from year-to-year in funding which could be assessed through, for example, the application of a three year rolling average if funding has fallen below the required amount. This may include consideration of funding in the previous or subsequent year, to the assessment year, where funding provided or budgeted for schools is above minimum requirements. The additional funding provided in the previous years could be considered a mitigating/contributing circumstance for the shortfall experienced in the assessment year. Evidence of future Budgets could also assist the Board in assessing compliance

• unintended and unforeseeable budget pressures in the state budget process • other unforeseeable circumstances (e.g. such as natural disasters) • fluctuations in enrolment numbers or student characteristics that exceed what could have been reasonably anticipated

• significant differences in funding provided to schools compared to actual school allocation or school expenditure, that is outside the control of state governments

• financial accounting impacts (e.g. actuarial assessment and timing of expenditure due to reporting dates)

• mitigation or rectification processes proposed by the state or territory • other relevant circumstances, supported by data and information from the relevant jurisdiction. The Board should also have regard to the timing of state budget processes and recognise jurisdictions may set budget appropriations for schools in advance of the state funding contribution amount being finalised based on actual data for the year.

The Board may make a finding of compliant or non-compliant taking into account immaterial shortfalls and mitigating factors.

The Board does not have a role in providing recommendations on potential compliance action by the Minister. Under Section 110 of the Act, the Minister has discretion to determine compliance and any sanction action.

Consistent with the terms of reference, the Board will produce a final report containing assessments of overall compliance for each state.

Information to support the reviews

The bilateral agreements require states to provide the Australian Government Department of Education with annual reports demonstrating their compliance with section 22A of the Act for a year for the government and non-government sector by 31 October of the following year (unless otherwise set out in the bilateral agreement).

States may also provide any additional information they wish to have considered in the assessment of compliance.

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This information will be provided to the Board along with any additional information on context and mitigating factors that the Board requests to support its deliberations.

States will not usually be required to report separately to the Board. If the Board seeks additional information from states, a formal request will be made by the Australian Government Department of Education, consistent with the arrangements outlined in section 65 (1)(aa) of the Australian Education Regulation 2013.

Consultation

The Board will consult with states and territories in undertaking its review, including consultation with the Education Council, and may also consult with other parties as required.

The Board will provide relevant sections of the draft review report to each state and territory, who will have the opportunity to provide further information for the Board’s consideration. States and territories may request that their response, if any, is included as an annexure to the final report.

Timing

The Board is expected to provide its final report to the Australian Government Minister for Education by April two years following the reported year.

Noting the 2018 assessment will be the Board’s first review of states and territories’ compliance with Section 22A of the Act, the final report will be provided by June 2020 to allow establishment of arrangements and consultation processes. The Minister will invite the Chair of the Board to present the report to the Education Council.

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Appendix B—Review Process On 4 October 2019 the Hon Dan Tehan MP, Australian Government Minister for Education, tasked the Board to undertake the review.

To complete its assessment, the Board reviewed each state and territory’s annual report and any additional information provided and considered expert financial audit advice.

Whilst it had initially intended to meet with jurisdictions and stakeholders, the Board reconsidered its approach to consultations due to restrictions relating to the COVID-19 pandemic. For this reason, consultation with jurisdictions was limited to writing to state and territory education department Directors-General, or their equivalents, in early April confirming that the Board had determined that all states and territories are compliant with s.22A for 2018 and providing them with the opportunity to raise any issues or concerns before the Board finalised its report.

ACARA and DESE also gave background presentations to the Board to support its review.

National School Resourcing Board members

Mr Michael Chaney AO (Chair)

Professor Natalie Brown

Professor Greg Craven AO

Ms Audrey Jackson AM

Professor Stephen Lamb

Professor Ken Smith

Dr Alison Taylor

Expert financial audit advisor

The Board acknowledges and thanks Mr Colin Murphy PSM for his invaluable advice and assistance with the conduct of this review.

Review Secretariat

A secretariat from the Australian Government Department of Education, Skills and Employment supported the Board in the conduct of its business and the review process. The secretariat operated independently of the department and reported directly to the Chair.

Mr Jeff Willing, Assistant Secretary

Ms Rachel Feeney, Director

Ms Sandra Chamberlain, Assistant Director

Ms Aysha Osborne, Assistant Director

Ms Anne Perusco, Assistant Director

Ms Leah McCourt, Policy Officer

Ms Fiona Ngai, Policy Officer

Mr Damian Prendergast, Policy Officer

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Appendix C—Guidance to reporting: state and territory funding contribution requirements

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Appendix D—References Australian Curriculum, Assessment and Reporting Authority, My School Financial Reporting: key principles and methodology (2019, version 8.3), viewed on 20 April 2020, https://www.myschool.edu.au/technical-and-statistical-information/financial-reports-assurance-letters-and-additional-information .

Australian Government Department of Education, Guidance to Reporting: state and territory funding contribution requirements, viewed on 31 March 2020, https://docs.education.gov.au/documents/ guidance-reporting-state-and-territory-funding-contribution-requirements.

Australian Government Department of Education and Training, National School Reform Agreement, viewed on 8 April 2020, www.education.gov.au/national-school-reform-agreement-0.

Australian Government Department of Finance, Clarification of the terms ‘Audit’ and ‘Assurance’ (RMG 210), viewed on 8 April 2020, https://www.finance.gov.au/government/managing-commonwealth-resources/ clarification-terms-audit-assurance-rmg-210 .

Gonski, D., Boston, K., Greiner, K., Lawrence, C., Scales, B., Tannock, P. (2011) Review of Funding for Schooling—Final Report, Australian Government Department of Education, Employment and Workplace Relations: Canberra, p. 53.

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