Part 5: State-integrated schools
The 330 or so state-integrated schools comprise 13% of all state schools. About 88,000 pupils attend state-integrated schools, former private schools that are now part of the state education system. State-integrated schools provide education within the framework of a religious or philosophical belief.
Elected boards govern state-integrated schools, which are Crown entities, in the same way that boards govern other state schools. The boards are responsible for the governance and operation of their schools, and are publicly accountable.
However, state-integrated schools differ from other state schools in having proprietors that are private entities. Proprietors appoint representatives to boards, provide and maintain the school land and buildings, and are responsible for maintaining the religious or philosophical character of the schools.
The Government funds boards and proprietors, which can also raise money directly from private sources. The Private Schools Conditional Integration Act 1975 sets out which matters boards and proprietors are each responsible for and allows proprietors to set compulsory charges for attending the school ("attendance dues").
The Ministry is responsible for most of the public funding for state-integrated schools and administers the Private Schools Conditional Integration Act. The Government funds boards for the teaching and operating costs of state-integrated schools and for minor maintenance, in the same way that it funds all other state schools. Boards of state-integrated schools receive more than $500 million a year for these purposes.
State-integrated school boards have to work in partnership with proprietors. Different funding streams and split responsibilities between the board and the proprietor make this complex. Therefore, it is not always easy to draw clear lines between publicly and privately funded activities. Because of the different bodies involved, each with different reporting obligations, it can also be difficult to provide clear information and accountability to parents.
Because the Auditor-General is the auditor of all public entities, we audit each board's financial statements, which detail Crown funding and any donations to, or funds raised by, the school. We do not audit the financial statements of private proprietors.
In Education sector: Results of the 2011 audits, (our December 2012 report) we reported on state-integrated schools and the results of a survey we had carried out. This Part provides an update of progress in addressing matters that we raised in 2012.
Relationships between boards and proprietors
In most instances, the relationship between boards and proprietors is handled with proper regard to public accountability, recognising the need to maintain a separation between public and private money.
However, in some instances, the financial relationship between the board and the proprietor is blurred. About 2000 trustees sit on state-integrated school boards. Many trustees are in that position for only a few years and therefore may not know enough about how their boards are expected to operate.
The Ministry has taken several steps to improve the relationship between boards and proprietors. For example, boards no longer provide funding for proprietors' buildings without the Ministry's approval, guidance has been issued on the fees that may be charged to parents, and guidance has been issued on managing conflicts of interest.
However, some matters have yet to be resolved. Most of these matters affect only a minority of boards. However, one of these matters could have more widespread relevance. In 2007, the Ministry commissioned an audit of how proprietors use the property funding it provides. Subsequently, guidelines were issued to proprietors on the accounting and audit of the funds. However, the guidelines did not require proprietors to have an audit of the property funding that they receive. To date, the Ministry has not sought information to account for the use of that funding.
The Ministry has said that its Education Infrastructure Services assurance activities for 2014/15 will include a review of integrated schools' use of (policy 1 and 2) property funding. The review will use internal and external resources and is expected to be carried out in the first half of 2015.
In our February 2010 report, Central government: Results of the 2008/09 audits, we noted that the accountability arrangements for parental donations were of public interest because of concerns about the size of the donations being sought, confusion about whether the contribution is voluntary or compulsory, or a lack of clarity about whether the donation is for the board or the proprietor.
Our December 2012 report summarised some information that we had collected on the accountability arrangements for parental donations and outlined weaknesses in the contemporary arrangements.
Various bodies can ask parents of pupils at state-integrated schools for money:
- The board may seek funds of a similar nature to that requested from the parents of pupils at other state schools (donations and some limited fees).
- The proprietor may require parents to pay compulsory attendance dues.6 The Ministry approves these dues, which can be used to provide land and buildings.
- The proprietor may seek voluntary contributions, which may be used for any purpose.7
- Other bodies, such as trusts that may be connected to the board or proprietor, may ask parents for donations, which may be used for any purpose.
- If a school has a boarding hostel, parents will be charged fees by the body running the hostel (which may be the board, the proprietor, or some other body).
Parental fees and donations can appear in different sets of financial statements. The financial statements of the board, the proprietor's attendance dues account, and the proprietor's voluntary financial contributions account have to be audited. The financial statements of another entity (such as a trust) do not have to be audited.
The Auditor-General appoints the auditors of boards, whereas proprietors appoint auditors to audit the attendance dues and financial contributions accounts. The Auditor-General is responsible for auditing the board's financial statements, including any entities that the school controls, but is not responsible for the other audits.
When a proprietor or another body raises funds from parents, it is a transaction between two private parties, even though the school office often provides administrative support.
In our view, the number of different parties involved and the associated accountability arrangements make it difficult for parents to satisfy themselves about the use to which their fees and donations have been put because:
- the charges and donations can appear in three (or four) different sets of financial statements;
- different auditors can be appointed to audit those financial statements;
- financial statements of some of the entities involved might not be audited or be publicly available; and
- it can be difficult for a parent to access all the financial statements to get an overall picture.
Some of this complexity is inevitable, given the legislated model for state-integrated schools. However, from an accountability perspective, it creates risks. For example, in this type of structure, it might not be possible to detect whether the same expenditure was being charged against more than one source of income.
In June 2013, the Ministry issued updated guidance (Circular 2013/06 – Payments by parents of students in state and state-integrated schools). The substance of the advice contained in the updated guidance has not changed from the previous guidance, because the relevant law has not changed. However, updating the guidance served as a useful reminder of the obligations of boards in relation to parental donations.
In our view, updating the guidance represents an important initiative by the Ministry to address a matter that has been of public concern for some years. We intend to ask our auditors to report any non-compliance with the updated guidance.
6: Section 36 of the Private Schools Conditional Integration Act.
7: Section 37 of the Private Schools Conditional Integration Act.