The non-government school sector has witnessed a significant upturn in litigation in recent times with several high-profile cases attracting significant media attention. Most of those cases centred around a decision of the Minister to recover financial assistance that had been provided to a school, who was later declared to be operating ‘for profit’. In late 2023 the New South Wales government announced that it would be undertaking a review of section 83C of the Education Act 1990 (NSW), and a full report with recommendations is due to be delivered to the Minister by end of June 2024. This article provides insight into the scheme as it currently stands and will provide a benchmark for our analysis of the forthcoming review.
It is worthwhile taking a moment at the outset to consider the framework of the system. The Education Act 1990 (the Act) which serves as the primary legislative instrument governing schooling in New South Wales was enacted by the Parliament based on four fundamental principles, namely that:
- every child has the right to receive an education;
- the education of a child is primarily the responsibility of the child’s parents;
- it is the duty of the State to ensure that every child receives an education of the highest quality;
- the principal responsibility of the State in the education of children is the provision of public education
To make a matters more complex, there are also five principal objects of the Act as well as a list of objects for the administration of education3 which notably includes: assisting each child to achieve his or her educational potential, and mitigating educational disadvantages arising from a multitude of socio-economic factors. The purpose and objects of the Act serve as the cornerstone in judicial review conducted by the courts and can assist non-government schools to frame decision making in a way that is consistent with the statutory framework.
Financial Assistance for Non-Government Schools
Many perusing this article will be familiar, if not well acquainted, with section 83C of the Act. It stipulates that the Minister must not provide financial assistance to schools operating ‘for profit’ and outlines a number of scenarios (which is a non-exhaustive list) in which a school would be considered to be operating for profit. Much of the section turns on the concept of ‘reasonable market value’. Notably, there is a broad coverall provision under section 83C(2)(b)(iii) which allows the Minister to deem any payment made by the school unreasonable, considering that financial assistance is provided by the State.
The term ‘reasonable market value’ is not defined in the Act and is the subject of much consideration and conjecture for non-government schools. Some guidance is provided in the Not-for-Profit Guidelines for Non-Government schools. In the guidelines ‘reasonable market value’ is defined as ‘the price that a knowledgeable and willing third party would pay for property, goods or services in an arm’s length transaction from the seller’.
There is also a strong emphasis in the guidelines on the implementation of appropriate policies, and procedures for maintaining business records, with suggestions made as to what policies should be held in different circumstances. Non-government schools must ensure they have implemented appropriate financial controls and governance systems and hold appropriate business governance policies in order to maintain compliance with the Act.
The terms of reference for the review of section 83C require recommendations to be made to improve the regulation of financial assistance to non-government schools. An area under consideration is the effectiveness and the wording of both section 83C and the associated sections, to determine if there is sufficient clarity for schools to comply with the legislation. We expect to see recommendations being made to the Minister for the improvement of this division of the legislation, along with clarity for the phrase ‘reasonable market value’.
Powers of the Minister
Another topic of interest for non-government schools, which has also been considered by the courts in recent times, is the extent of the power held by the Minister. The Minister, on the advice of the Advisory Committee, has a very broad power to terminate or otherwise restrict the financial assistance given to a school if they are declared to be operating either currently or in the past ‘for profit’.6 However, the Minister my choose not to terminate the provision of financial assistance if, following an investigation the Minister is satisfied that termination is not justified because of the minor nature of the relevant conduct, or more appropriate action can be taken under section 83E of the Act.
It is important to note that should a school be the subject of an investigation, the Minister must provide written notice to the school of any recommendations made by the Advisory Committee and allow 30 days for a response.
Let us help you
Should your school come under investigation by the Advisory Committee, Vocare Law is here to help you carefully consider your response. This is a nuanced area with the potential for severe consequences in the event of non-compliance, and we recommend that you seek our legal assistance should you find yourself in that situation.
We are also passionate about assisting our non-government school clients to ensure that their due diligence is of a sufficiently high standard, well before an investigation is ever contemplated. We support schools in meeting their regulatory requirements, ultimately helping to ensure that educational services remain robust and compliant. Should you require any assistance in this area, please don’t hesitate to contact our office on 1300 862 529.
We look forward to contemplating part 2 to this article as the recommendations from the review are released in due course.
This article was written by Alice Osborne.