This is the first step virtually. As Stefanie (Veal, Deputy CEO Schools) mentioned I will be talking about governance and not-for-profit minimum standards, which I suppose if you're talking about a pyramid, they are based on a pyramid, they are very important, and often set the scene for the rest of the structuring of the school. So I really can't emphasise enough the importance of getting the governance and not-for-profit policies, procedures, instructions, right.
So, as it says in the slide, that we cannot register a school unless we're satisfied that school complies with the minimum standards and that all policies, procedures, measures and practices are in accordance with what we call MO 1359, to replace the Ministerial Order 870 as from the 1st of July last year. The minimum standards are the same in schedule 4 of the Education and Training Reform regulations and you’ll find in schedule 5 of the same regulations, I think, what sets out information by what information that needs to be provided for when you’re applying for the school registration. There are VRQA guidelines you may have heard about, they are on our website, and they set out the information about what's to be provided with your application and also the evidentiary requirements, and they’re quite comprehensive. I encourage you to read them again, comprehensively, because I didn't go into a lot of detail about the sort of information that needs to be provided. So, as I said, they are on our website.
Okay. So, this is from the guidelines, and as Stefanie said at the outset, good governance, strong financial management, effective curriculum, sound teaching practice, safe environments, is what we’re there to try and encourage and make sure that new school applicants are adhering to. So, under the governance minimum standards set out in the guidelines, there are the following items: Democratic principles, governance, not-for-profit status, probity and philosophy.
So just quickly, democratic principles is around publishing a statement which emphasises the school's adherence to six principles, but it’s set out in the VRQA guidelines. Governance and not-for-profit, which I’ll talk about shortly, probity, and that relates to fit and proper person declarations that are signed by each responsible person. So, whether they’re on the board, whether you’re a principal or you're involved in the management of the school, you’re required to provide fit and proper person declarations. And philosophy is about a published statement of the school’s philosophy that's available to all, so we can see how your policies and procedures hang off that.
Okay, the good stuff. Clause 15, schedule 4 of the regs. This is, of course, what we have to do as regulators follow it. We have to ensure that the proprietor is structuring the governance of the registered school to enable effective development of the strategic direction, effective management of the finances and school to fulfill its legal obligations. This is again, from the VRQA guidelines. Some of the information we require, I won’t go through it all, but I just want to highlight where we often need to ask for extra information and that’s around delegation. It's conflict of interest register and policy, and that must cover responsible persons and audited financials, so that would be the most recent financial statements of the entity and the governance charter, and you’d be aware that the governance charter, amongst other things, sets out the roles and responsibilities of the board and also any subcommittees that are under the board. Strategic plan,and also the school's business plan, is certified by a qualified accountant, and where it says estimated funding, that's estimated State and Commonwealth funding and 5-year financial forecast. Again, all this information is in the guidelines.
Minimum standard in the Education and Training reform regulations, clause 17, a registered school must be a not-for-profit school. We once had an applicant who said, oh, we intend to be a not-for-profit school. That's great. You have to be a not-for-profit school. And what that means is, the proprietor must have sufficient controls in place to ensure that school property and assets are not distributed or used for the profit, or gain of another person or entity. So it's a little bit different from the ACNC standard, and I'll explain why in a minute, but it's around what’s in the Education and Training Reform regulations concerning the prohibition against prohibited arrangements and prohibited agreements, so I’ll come to those in a minute. They’re the criteria that must all be satisfied for a not-for-profit school, not established for the purpose of profit or gain, and not conducting it for anybody else's gain. It cannot be distributed to anybody else. This is important, all money and property received by or for a school for the conduct of the school, supplied solely towards the conduct of the school and you’ll see the reference there to prohibited agreement or arrangement, and we'll come to that in a bit more detail.
There's also a requirement, the last point of the slide refers to the winding-up clause, which will be in the school's constitutional rules. So a pretty simple provision to follow, but we often get winding-up clauses that do not follow that requirement, so again, that particular winding-up clause you’ll find in the regulations.
Okay, so what's a prohibited agreement or arrangement? It’s made between 2 or more of the following parties, where the purpose of the agreement or arrangement is to pay or divert profit or gain to the proprietor or another person, where it involves prohibited payment by the school which is excessive, so an agreement or payment made in good faith for goods or services provided to the school is not prohibited. Here are some examples. So, excessive fees, excessive rent, excessive school planning, which is excessive. What we want to see is that when these agreements have been entered into, that the board or whoever is making a decision, has effectively tested or conducted sufficient examination of what's been proposed. So we will look at the agreements, we will look at Board minutes, to see what the discussion was around particular agreements. We may look at other documents, say a rental situation, what was the valuation? You should obtain a valuation at the time you entered into that lease agreement, so we, I must say particularly in this part of the minimum standards, we are pretty rigorous in making sure that there are no prohibited agreements or arrangements, and as I said, pretty rigorous in interrogating the Board as to what work has been done in ensuring that, and ensuring that they're aware of the requirements and ensuring that they haven't contravened those requirements.
Now often, as it says at the bottom of the slide, there are effective arrangements to manage the school assets and conflicts that can assist in avoiding those sort of problems. There is kind of, there are a couple of outs. Here is one of them. So if the proprietor of the school uses the money, other than government funding or property of the school, to conduct an early learning centre that is a feeder for enrolments to the school, a feeder is not defined, but there is some information about that in the guidelines, or provides money to conduct an early learning centre that's a feeder, then you won’t infringe the not-fot-profit requirements. So there is some cross-subsidisation for an ELC (Early Learning Centre) allowed, as long as there is proper accounting. Doesn't mean you need separate bank accounts, but there is a lot of information about what documents are required in the guidelines. I think I’ve covered most of that,
An ELC must be registered, not-for-profit, provide education and care, and there’s the evidence.
More recently, a similar exemption has been introduced for boarding premises. So again, similarly, there will be no infringement of the not-for-profit prohibition or rule, if there is subsidisation of school boarding premises to students who are enrolled or attending that school, where those services are not provided for the purposes of profit or gain. So again, there’s information in the guidelines, there are separate guidelines relating to school boarding premises that set out the evidentiary requirements.
So, what do we want to see? We want executable signed agreements. We don't want to see agreements in draft. We will not give our imprimatur on this because this is signed, would the VRQA be happy with that? No, we are wanting complete, final, executed documents, which includes all contracts, leases, related entities, affiliated entities, any loan agreements, any guarantees and also details around any relationship that the school has with any related party or affiliated entity.
Just quickly, the last slide, what sort of issues do we see or what sort of problems? It is really important on a number of levels to make sure your constitution or your rules are fit for purpose. You know, some applicants might buy them off the shelf, I think that's fine, but I really would encourage you to interrogate for instance, if you do intend at the start or later on possibly opening up an ELC, well there has to be an object in your constitution that allows for that. That's again, that's in the guidelines. So really interrogate the constitution, and also make sure that all the documents that flow from the constitution, so that should be your delegations, your not-for-profit, your governance charter, that they’re consistent. We sometimes see a constitution which allows for example, between 5 and 10 directors, in the governance charter it might say 10 to 15. So I really encourage you to interrogate not only the constitution, but all the governance documents that flow from it.
Okay. We expect that there will be ACNC registration already and will ask for a copy of that. I've already mentioned about documents being incomplete or in draft. It has to be a complete application, has to be submitted by the 30th of June. So therefore if documents are incomplete or in draft, that is not a complete application. Sometimes it's unclear in terms of the membership of the governing body, the legal entity, or the information might be incomplete. There is often the next point, there is often issues with identification and management of conflict of interest, I’ll encourage you to take a wide view of what is meant by conflict. That doesn't necessarily mean that a particular agreement can’t be entered into if the conflict is properly managed. Okay, so I'll encourage you to think actually about what might be a conflict.
I’ve mentioned the winding-up clause not being compliant, delegations is often another common problem.
You know, we sometimes see delegations, policies and registers that really make no sense, and that if you work at that school, you would have no idea what you're actually allowed to do. So again, focus on delegations. I've mentioned about the lack of consistency across documents, and I've also mentioned about related party transactions. So that’s all from me.
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